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No. 4, 2012

Stanislav Zhiznin ,
D. Sc. (Econ.), Professor Of Moscow State Institute (University) Of International Relations, President of the Center for Energy Diplomacy and Geopolitics

THE MERIDIAN OF OIL DEVELOPMENT


On Russias energy diplomacy priorities

Situated in a unique geographic location and occupying a strategically important place in Eurasia, Russia also possesses the largest supplies of primary energy resources in the world, a developed industrial infrastructure, and substantial intellectual potential in the fuel and energy complex. At the same time, the significant deterioration in the fixed assets and technical state of the country's energy complex and related branches prevents Russia from tapping its full potential in the world energy industry as a supplier of state-of-the-art energy technology and equipment.

Formation of Russia's energy diplomacy

One of the main components of a state's strength in the contemporary world is its fuel and energy complex. The role of the fuel and energy complex in the strength of any country is largely defined by its supplies of energy resources, the level of their production and consumption, the technological state of the relevant infrastructure, and the existence of modern transnational corporations.

After the energy crisis of the mid-1970s, energy began to play just as an important role in world politics as the military factor. Guaranteeing energy security, ensuring access to resources and sales markets abroad, implementing energy projects, maintaining stability in the energy markets, and so on all belong to the sphere of competence of foreign policy and diplomacy. Some states have formed a foreign energy policy and energy diplomacy that occupy a key position in their general foreign policy and diplomatic activities. Close cooperation between foreign policy departments and energy companies, as well as the active role of the latter on the international arena as independent players are important features of today's energy diplomacy.

After the collapse of the Soviet Union and the subsequent significant geopolitical and economic changes, Russia, which has set its strategic course toward integration into global economic relations and the world energy industry, was faced with the need for establishing its cooperation relations anew with the main entities of world energy policy and diplomacy, i.e., states, international organizations, and transnational companies. In the mid-1990s, an energy vector began to form in Russia's foreign policy and diplomacy called upon to assist its promotion as one of the most important and authoritative participants in international energy cooperation at the global and regional levels. All of this is creating objective prerequisites for Russia to assume the role of a leading energy nation capable of having a serious impact on the world economy and geopolitics.

It is important in this respect to note that today Russian operators occupy a more prominent place in the international energy market and are gradually acquiring the attributes of contemporary transnational companies. However, when carrying out foreign economic activities, Russian energy companies are having to deal with large transnational corporations that have a significant advantage not only with respect to financial-economic, technological, and managerial potential, but also in terms of diplomatic experience at the corporative level. This is posing Russian diplomacy the task of learning not only to systematically and efficiently uphold the foreign economic interests of the Russian fuel and energy complex, but also to use the energy factor as a foreign policy tool keeping in mind the geopolitical and foreign economic realities.

The priorities of Russian energy diplomacy are determined by our country's unique position in the world energy industry and world energy policy. On the one hand, Russia is an active participant in the countries that belong to the Group of Eight and are net importers of energy resources. The global energy interests of these countries boil down to ensuring long-term and reliable deliveries of imported energy resources at reasonably low prices.

On the other hand, Russia also belongs to the group of leading net exporters of energy resources, the global energy interests of which boil down to ensuring the long-term and stable receipt of revenue for the export of these resources at reasonably high prices.

It stands to reason that the interests of these groups of countries do not always coincide, which is evidenced by the recent developments in the world energy markets. So Russia, by primarily upholding its own interests in the energy vector of foreign economic policy, objectively takes both of these factors into consideration, which promotes an increase in the country's international authority.

Global and regional priorities

When considering the global priorities of Russia's multilateral energy diplomacy, it should be noted that since 1998, Russia has been participating as an observer in regular sessions of the OPEC Conference of Oil Ministers. Since 2001, Russia has been cooperating with the leading gas producers by participating in the Gas Exporting Countries Forum (GECF), which was established as a full-fledged international organization in 2008. Since 1994, our country has been developing cooperation with the International Energy Agency (IEA). On Russia's initiative, the energy problem has been occupying an important place on the agenda of the G-8, G-20, and BRICS. Russia is participating in the energy resources producer-consumer dialogue within the framework of regular sessions of the International Energy Forum (IEF). In 2014, the IEF ministerial meeting will be held in Russia.

Russia's regional energy diplomacy priorities are largely determined by the prospects for significantly expanding energy cooperation in the northwesterly, easterly, and southerly directions. Special emphasis is being placed on the development of energy cooperation in the post-Soviet space. The energy factor is playing a key role in Russia's policy in the CIS, the Russia and Belarus Union State, and the Eurasian Economic Community.

The country's energy strategy is oriented toward wide-scale incorporation of the hydrocarbon resources of the Central Asian countries of the CIS, including the Caspian countries, into Russia's fuel and energy balance.

In the near future, the European region will continue to be the main sales market for Russia's oil and gas resources. One of the ways to uphold the interests of Russia's fuel and energy complex in the region is through the Russia-EU Energy Dialogue. The Energy Charter Treaty, if it is reformed to meet Russia's interests, could form an important component in the legal framework of energy cooperation in the Eurasian space.

The Asia-Pacific Region (APR), which is among the priorities of Russia's foreign energy policy, is playing an important role in Russia's energy policy. The energy sphere is one of the key elements in relations with the APR countries within the framework of Asia-Pacific Economic Cooperation (APEC). Russia will chair the next APEC summit in September 2012 in Vladivostok. Great prospects for the export of Russian oil and gas are opening up in this region owing to the significant increase in demand for these resources in several countries of Northeast Asia. The energy factor is playing an important role in the activities of the Shanghai Cooperation Organization (SCO), within the framework of which an energy club is being formed.

The regional priorities of Russia's energy diplomacy include diplomatic support of international projects affecting the country's foreign economic and geopolitical interests in the European and Asian vectors. Attention is focused on several international projects in the Caspian region and Central Asia that affect Russian interests. Regulating the legal status of the Caspian is a strategically important task of Russian diplomacy.

The energy factor in many respects influences the nature of Russia's bilateral relations with 90-95 countries in the foreign economic and foreign political spheres. The US, France, Germany, United Kingdom, Italy, several small and medium countries of Western Europe, the CIS and Baltic countries, Turkey, the Central and East European countries, China, Japan, Korea, and other APR countries can be singled out among the energy importer countries. In this respect, it is worth noting the higher level of activity in bilateral energy cooperation, including in the form of energy dialogues, as well as formation of a regulatory and legal framework and mechanisms for carrying out energy cooperation with several of these countries. Bilateral relations are developing with exporter countries, among which the Persian Gulf, North African, and Latin American countries, as well as Norway, can be singled out.

Resource and technological aspects

Until recently, the main priorities of Russia's energy diplomacy have been determined more by raw material than technological factors, such as resolving foreign economic and legal problems of energy resources production and transportation, ensuring stability in international sales markets for these resources, and so on. This particularly applies to rendering diplomatic assistance to expand the export of Russian oil, gas, and the petroleum and gas products and to implement large international projects. It also applies to encouraging the participation of our companies in developing fields abroad; choosing the most acceptable routes from the viewpoint of Russian interests for transporting hydrocarbons to foreign markets; ensuring free passage of tankers carrying Russian oil through the Black Sea straits, and so on.

Nevertheless, due to the need to modernize or rather re-industrialize Russia's fuel and energy complex, which is inconceivable without international partnership, technological matters are finding their way onto the agenda of Russia's bilateral and multilateral cooperation. This primarily refers to an energy dialogue with the EU countries. At the Russia-EU summits held in 2010-2011, the Russian and European Union leaders focused their attention on cooperation issues in energy. When discussing the energy theme at the mentioned meetings the practical aspects of the activities of the Partnership for Modernization were examined. New opportunities for cooperation with the EU within the framework of the Partnership could open up due to the plans of the Russian leadership to resolve the problems of raising energy efficiency and improving the situation in energy savings, which presumes solving large-scale tasks to renovate outmoded equipment in the fuel and energy complex and its related branches. The technological aspects of mutual energy security occupy an important place in the work of Russian and European experts in preparing a Road Map of Russia-EU Energy Cooperation until 2050.

Russia is developing energy cooperation with several EU countries, among which Germany should be singled out. In particular, a Russian-German Energy Agency has been established and is actively functioning, within the framework of which cooperation is being carried out in energy efficiency and the development of alternative energy.

Energy issues, including those relating to modernization of the fuel and energy complex, are among the priorities in relations with several APR countries. This primarily applies to the Russia-PRC Energy Dialogue, within the framework of which technological aspects of energy cooperation are being discussed. There are also good prospects for developing relations with Japan, the Republic of Korea, Australia, Canada, and other countries of the region.

Russia's energy relations with the Unites States should be given special attention. As we know, the Russia-US Energy Dialogue began in 2001 and two business energy summits were held within its framework (October 2002 in Houston and October 2003 in St. Petersburg). However, this Energy Dialogue later ground to a halt and went no further. When the Barack Obama administration came to power, an agreement was reached between the leaders of the two countries to form a Russian-American Bilateral Presidential Commission in which a Working Group on Energy would function with a focus on energy efficiency and new energy technology issues. Taking into consideration the previous experience for raising the efficiency of the Working Group's activity, it was suggested that a permanent business forum on cooperation in energy be organized that could serve as a tool for putting the plans and ideas elaborated by the Group into practice. It was proposed that the Chambers of Commerce and Industry and other business associations of both countries be involved in its formation.

When evaluating the technological aspects of Russia's bilateral energy cooperation with several countries that have a modern industrial base, it is worth noting that its practical efficiency would be much higher if it boasted permanent institutions for partnership between foreign and Russian business in modernizing the Russian fuel and energy complex. So far the main interest of foreign partners in Russia is limited to the raw material branches, as well as to the implementation of pilot projects in the environment and energy efficiency largely financed by the budget of a few countries. The matter has still not gone as far as participation in projects to develop the production of state-of-the-art equipment.




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Oil of Russia, No. 4, 2012
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