Sakhalin Island, once famous as the most remote, far-flung, environmentally hostile Gulag in the Soviet Union, has gained special recognition in recent years for its vast reserves of natural gas. These are so great, and the effort to extract them so massive, that the Discovery Times channel recently broadcast a documentary of the incredibly large structures Dutch energy giant Shell Oil was building to extract, process, and ship the stuff.
More recently, over the past several years on this blog I’ve postulated that Vladimir Putin had closely studied the ways the Chinese Communist Party decided to marginally open up their country’s economy while keeping its political system closely locked down. The efforts of Deng Xiaoping, Jiang Xemin, and even the recent “Peacefully Rising China” policy of Hu Jintao, all have played a role in influencing Putin’s political calculations. But Putin is also charting his own course, having slain many of his more outspoken political opponents in recent months and successfully intimidated several neighboring countries.
Around the end of 2005, when Russia and Germany announced their plans for the Vyborg-Griefswald pipeline (good background here), I speculated that it was the beginning of Russia making a major move against European energy interests, possibly cutting unabashedly pro-American Eastern European countries out of the pipe so Germany and/or Russia could overcharge them in exchange for fealty—mirroring Russia’s behavior toward its former vassal countries in the Caucasus.
Just yesterday, Shell agreed, after significant pressure from the Kremlin, to sell its $20 billion stake in the Sakhalin gas fields. Or, if you want to put it into the context of the Kremlin’s behavior over the last three years, Russia unceremoniously siezed it. Gazprom, the Russian state oil monopoly that dominates energy markets in Europe, is squeezing its way into Asian markets, most particularly Japan and China. Should the deal go through (which it will) Gazprom will be literally the largest corporation on earth in terms of assets, and the most powerful single provider of energy on the planet. And it is essentially run by Putin’s old friends from the KGB. Is this the behavior of a benevolent neighbor? Or a resurgent proto-Soviet?
Russia has made its move, and it is completely cornering global gas markets. It is a remarkably clever strategy—conquest through economics—and the U.S. had best be getting up to its old tricks again if it hopes to retain anything approaching a useful degree of influence over global capital flows. Or, it could wait for Putin to switch Russian energy trading into Euros and crash the dollar. Or any number of things. Putin cornering the global LNG market places the U.S. in a very weak position, and unless we either play nice or play a lot dirtier, we, and our allies, will be left at Gazprom’s whim.
This post was written by...
Joshua Foust – author of 1801 posts on Registan.net.
Joshua Foust is a Fellow at the American Security Project and the author of Afghanistan Journal: Selections from Registan.net. His research focuses primarily on Central and South Asia. Joshua is a correspondent for The Atlantic and a columnist for PBS Need to Know. Joshua appears regularly on the BBC World News, Aljazeera, and international public radio. Joshua is also a regular contributor to Foreign Policy’s AfPak Channel, and his writing has appeared in the New York Times, Reuters, and the Christian Science Monitor. Follow him on twitter: @joshuafoust
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