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Natural Gas in Putin’s Russia: The Reconstruction of Energy Geopolitics

Gazprom’s CEO Alexey Miller and Vladimir Putin
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After the dissolvement of the Soviet Union in 1991 and the systematic collapse of communism in Eastern and Southeastern Europe, all the new democratic emerging states had to remodel and reconstruct their economies based on the new demands of a globalized world. Such was the case with the Russian Federation, the de facto successor of the old Soviet Union. A complete transformation occurred in the country in every sector of the economy, including the energy sector. Over the years, since the presidency of Vladimir Putin, Russia has emerged as a steady supplier of natural gas in Europe while supporting various projects that help secure its influence towards the West but also towards the East. The high demand and supply for Russian gas have created a new form of geopolitical struggle in Europe and abroad, and Russia has emerged as a major key player in the 21st-century geopolitical “chessboard”.

Energy politics during the era of communism

During the period of the Soviet Union, the country’s energy sector was one of the most important features of its planned economy. Although the Soviet Union had relatively achieved a status of self-sufficiency in energy, major problems started to appear during the late ‘70s, in a period known as the Brezhnev stagnation (1975-1985). This term was first used by Mikhail Gorbachev, in an effort to present his negative views on the socio-political and economic status of the Soviet Union that started by Leonid Brezhnev and continued under Yuri Andropov and Konstantin Chernenko. Also, this stagnation was characterized by the lack of energy demand from the West, which created a difficult situation in the supply-side economic aspect. This stagnation was inevitable, not only because of macroeconomic reasons but also because the political situation inside the Soviet Union did not allow for the appropriate technological innovation regarding the energy sector. Instead, the sheer focus and energy of the leadership in the Soviet Union were concentrated in competing with the United States in the Cold War, mostly in militaristic expansion. As a result, one can speculate that this was the reason why the Soviet Union was effective on a domestic level, but not on an international one, where it was clear that the capitalist nations had the upper hand in terms of technological advancements and innovation.

Vladimir Putin and the geopolitics of natural gas

Ten years after the dissolvement of the Soviet Union, a new era of political and economic stability came after the 2000 Presidential elections, when Vladimir Putin became the new President of the Russian Federation. Alongside many economic and socio-political reforms that began, major transformations occurred in the energy sector, especially in the natural gas sector. It became clear that the preservation of the natural gas sector became the top priority in Russia.

Some analysts argue that, especially in the natural gas sector, the Russian Federation under Vladimir Putin follows the same USSR policy as guidance. Marshall Goldman, the author of the book, Petrostate: Putin, Power, and the New Russia, argues that Putin has followed a similar line of thinking when it comes to the cancellation of exports towards buyers who might have gone against national objectives, putting forward a plan of total dependency over Russian gas, especially towards its neighboring states. The Russian state has effectively put this plan in motion for years with the increased natural gas production since the beginning of the presidency of Vladimir Putin. The main and most important asset that contributes to this plan is the Russian majority state-owned energy corporation Gazprom. Following the end of the USSR, the Natural Gas Industry was converted into the private company Gazprom, under the CEO and former deputy Minister of the natural gas industries of the Soviet Union, Viktor Chernomyrdin. Although there were objections from many politicians at that time, this politically driven decision was approved in December 1992, by the new President of the Russian Federation Boris Yeltsin.

However, the situation changed just a few months after Vladimir Putin succeeded Boris Yeltsin in 2000. In a fast and methodical way, Putin managed to suppress the overgrowing power of the oligarchy in Russia, and soon business oligarchs like Chernomyrdin were set aside from Putin’s political agenda. Chernomyrdin was fired from the position of CEO of Gazprom. The increased government stocks in Gazprom, allowed Putin to replace Chernomyrdin with Alexei Miller and Dmitry Medvedev. The new majority state-owned Gazprom was under the National Champions program, a program that was advocated by Vladimir Putin himself where corporations would remain technically private but would serve as instruments of the Russian government in order to be efficient and competitive on a domestic and international level. This mix of traditional capitalist systems with some aspects of the old Soviet Union grip over businesses could only be successfully operated in Russia. The fact that Russia has large amounts of natural gas reserves inside its territory allows it to effectively control the natural gas industry for the benefit of the state. Any sort of attempt to privatize Gazprom or exclude the Russian government to support a more laissez-faire system would collapse simply because the era of oligarchy in Russia and forced privatization resulted in an economic and societal collapse.

As of today, Russia is considered to have the world’s largest natural gas reserves, with a steady increase in both natural gas and oil since the presidency of Vladimir Putin. In addition, Gazprom is the world’s largest energy major in terms of natural gas reserves and production. According to the company, its hydrocarbon reserves have amounted to 34.899 billion cubic meters of gas, while analysts predict that by 2030 Russia will double its gas exports in Europe and at the same time Europe’s gas demand will increase by 100 bcm over the next ten years. The latest information regarding natural gas exports in Europe allows us to investigate even further to what extent the Russian government uses Gazprom and natural gas as a geopolitical tool to expand its influence. The fact that Russia has the largest natural gas reserves in the world gives it leverage of economic and political influence, especially over the post-Soviet states. One country that has been influenced the most by Russia, is Ukraine. It is estimated that at least 80% of the exported natural gas to the West is transitioned from Ukraine, allowing Russia to promote its political agenda to the country. However, after the Maidan events of 2014 in Kyiv, the relations between the two states have deteriorated, to a point where Russia tries to find other routes and projects that could boost its influence in Europe.

The new era natural gas projects

The latest statistics show that Russia’s gas production has reached its highest-ever level, producing at least 725 billion cubic meters. Also, Russia’s liquified natural gas has become a significant power tool and a global force, with the possibility of further expansion in the coming years. With that being said, Russia has acquired a status of an energy superpower, and as a superpower, it aims to spread its influence in a more realpolitik strategy. To achieve this, Russia has invested in numerous gas pipeline projects. The most significant projects are the TurkStream gas pipeline and the Nord Stream II gas pipeline.

The TurkStream gas pipeline is running from Russia to Turkey. Starting from Anapa in the region of Krasnodar, it crosses the Black Sea, ending up in the terminal of Kıyıköy in Turkey. The project was announced back in 2014, and the official construction started in 2017. In 2020 the first gas deliveries to Bulgaria officially began. Although Southeast Europe as a regional gas market is often overlooked because of its relatively small size, a project like TurkStream could change this dynamic. Researcher Julian Bowden makes two good points about the significance of the project. First of all, it will change the regional gas flows into Southeast Europe by diverting the transit from Ukraine. It is estimated that at least 19 billion cubic meters per year will be removed from the Ukraine transit in 2020. Secondly, this project has the potential to transport 31.5 billion cubic meters of gas per year, which can be equal to the energy demands of 15 million households. All in all, Russia is expected to be able to divert 19 bcm away from Ukraine. Also, the AKP, the ruling party in Turkey has seen this project more positively, saying that it will eliminate transit risks for Turkey’s security of supply and decrease external dependency by replacing the Western Line.

The other most significant project and by far the most controversial one is the Nord Stream II gas pipeline. The pipeline is part of an offshore natural gas pipeline system in Europe, crossing the Baltic Seas and ending up in Germany. The recent project of the Nord Stream II pipeline began in 2015 and as of June 4, 2021, the first section of the project has been fully completed despite numerous sanctions that were imposed by the U.S. For Alan Riley, an expert in energy and environment issues, the Nord Stream II has divided the West. Supporters of the group might argue that the project will bring the much needed natural gas supplies to Western Europe, while opponents of the project argue that it is only masquerading as a commercial project and in reality, it is used as a political “weapon” to undermine the European Union and give Russia political leverage over the EU countries in Eastern and Central Europe. Some European countries are concerned that the recent disputes with Ukraine and the general foreign policy of Russia towards Eastern Europe, are strong indications of the Kremlin’s intentions to use the Nord Stream II pipeline as a political tool of influence. Although Russia and Germany have expressed their opinions about the project saying that it is purely commercial, it is certain that for whatever reason this project might be used in the end, the geopolitics of Europe has drastically changed and in the short-term, it seems that Russian has the upper hand in energy politics in Europe.

The struggle for international political influence

The projects that were mentioned, surely have the potential to change the geopolitical structure of Europe. This statement cannot be seen as an exaggeration. According to Eurostat the Russian Federation is the largest exporter of natural gas in the European Union. The total imports of energy products from Russia account for at least 60%. From that 60%, at least 39% represents the natural gas imports. This is an important figure, not only for economic reasons but because it also represents a geopolitical struggle between Russian and the United States. The previous American administration under Donald J. Trump has accused Russia of holding the EU as a “captive” due to its energy reliance. His administration and the current administration of Joe Biden have imposed sanctions on the project but with no results as the project seems to be almost done. However, there are still efforts to convince the EU to diversify its energy sources to stop the energy dependency from Russia. One country that can be a potential energy supplier for the future is Qatar. The U.S is very keen on seeing one of its closest Middle East allies as the main energy supplier for the EU to halt the economic and political influence of Russia. According to Reuters, there is a possibility for the creation of a liquefied natural gas pipeline towards Germany in the next five years. As of now, Qatar has promised to invest at least $10 billion to strengthen its ties with Germany who currently is the biggest energy consumer in Europe.

The energy politics of Russia, combined with the ongoing projects that affect Europe and the external pressure from the United States of America, is a great example of how natural gas and energy play a significant role in the reconstruction of the geopolitical map. What can be seen at first glance, as purely economical and commercial projects and energy trade policies, hides underneath it the core essence of the international struggle for political influence. Since the 2008 financial crisis, global natural gas production has been boosted by new innovative technologies and besides the traditional Cold War rivals, other countries like Norway or Qatar seem to climb the “ladder” of natural gas producing countries. Qatar and Norway are producing at least 124 billion cubic meters and 112 billion cubic meters of natural gas respectively. Generally speaking, natural gas markets globally are becoming more integrated. This is because the costs of the liquefied natural gas transportation have fallen significantly over the last few years. This can be interpreted as an important factor not only to the diversification of energy imports in the EU but also to the geopolitical changes in Europe and beyond.

The energy sector in Russia, especially natural gas production, will play a significant role in the following years to come. Russia is entering a new era of energy production and energy exportation, significantly increasing its influence and political power to the West but also the East. One can expect that the ongoing rivalry between Russia and the United States will not stop as both countries are applying a more realistic approach towards their foreign policies and re-evaluating their existent energy diplomacy and trading tactics.

Bachelor's Degree in International Relations & Political Science. Columnist focusing on Global Affairs

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Azerbaijan seeks to become the green energy supplier of the EU

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image source: azernews

Recently, Georgia, Azerbaijan, Hungary and Romania signed an agreement to build a strategic partnership regarding green energy.   According to the document of the text, these four countries will be working together to develop a 1,195 kilometer submarine power cable underneath the Black Sea, thus effectively creating an energy transmission corridor from Azerbaijan via Georgia to Romania and Hungary.   For Europe, this is a golden opportunity that must be seized upon.

According to the International Monetary Fund, “Europe’s energy systems face an unprecedented crisis. Supplies of Russian gas—critical for heating, industrial processes and power—have been cut by more than 80 percent this year.  Wholesale prices of electricity and gas have surged as much as 15-fold since early 2021, with severe effects for households and businesses.  The problem could well worsen.” 

For this reason, Europe should switch as soon as possible to green energy supplies, so that they will rely less upon Russian gas and oil in the wake of the Ukraine crisis.   This will enable Europe to be energy independent and to fulfill its energy needs by relying upon better strategic partners, such as Azerbaijan, who are not hostile to Europe’s national security and the West more generally.  

By having this submarine power cable underneath the Black Sea, Azerbaijan can supply not only Hungary and Romania with green energy, but the rest of Europe as well if the project is expanded.   Israel, as a world leader in renewable energy, can also play a role in helping Azerbaijan become the green energy supplier of the EU, as the whole project requires Azerbaijan to obtain increased energy transmission infrastructure.  Israel can help Azerbaijan obtain this energy transmission infrastructure, so that Azerbaijan can become Europe’s green energy supplier.    

According to the Arava Institute of the Environment, “Israel, with its abundant renewable energy potential, in particular wind and solar, has excellent preconditions to embark on the pathway towards a 100% renewable energy system. Accordingly, Israel has already made considerable progress with regard to the development of renewable energy capacities.”   The Israeli government has been pushing hard for a clean Israeli energy sector by 2030.   Thus, Israel has the technical know-how needed to help Azerbaijan obtain the infrastructure that it needs to become the green energy supplier of Europe following the crisis in the Ukraine.

Given the environmental conditions present in Azerbaijan, which has an abundance of access to both solar and wind power, with Israeli technical assistance, Azerbaijan can help green energy be transported through pipelines and tankers throughout all of Europe, thus helping to end the energy crisis in the continent.   In recent years, Europe has sought to shift away from oil and gas towards more sustainable energy.     

With this recent agreement alongside other European policies, these efforts are starting to bear fruits.   In 2021, more than 22% of the gross final energy consumed in Europe came from renewable energy.   However, different parts of Europe have varying levels of success.   For example, Sweden meets 60% of its energy needs via renewable energy, but Hungary only manages to utilize renewable energy between 10% and 15% of the time.    Nevertheless, it is hoped that with this new submarine power cable underneath the Black Sea, these statistics will start to improve across the European Union and this will enable Europe to obtain true energy independence, free of Russian hegemony.  

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Energy Technology Perspectives 2023: Opportunities and emerging risks

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The energy world is at the dawn of a new industrial age – the age of clean energy technology manufacturing – that is creating major new markets and millions of jobs but also raising new risks, prompting countries across the globe to devise industrial strategies to secure their place in the new global energy economy, according to a major new IEA report.

Energy Technology Perspectives 2023, the latest instalment in one of the IEA’s flagship series, serves as the world’s first global guidebook for the clean technology industries of the future. It provides a comprehensive analysis of global manufacturing of clean energy technologies today – such as solar panels, wind turbines, EV batteries, electrolysers for hydrogen and heat pumps – and their supply chains around the world, as well as mapping out how they are likely to evolve as the clean energy transition advances in the years ahead.

The analysis shows the global market for key mass-manufactured clean energy technologies will be worth around USD 650 billion a year by 2030 – more than three times today’s level – if countries worldwide fully implement their announced energy and climate pledges. The related clean energy manufacturing jobs would more than double from 6 million today to nearly 14 million by 2030 – and further rapid industrial and employment growth is expected in the following decades as transitions progress.

At the same time, the current supply chains of clean energy technologies present risks in the form of high geographic concentrations of resource mining and processing as well as technology manufacturing. For technologies like solar panels, wind, EV batteries, electrolysers and heat pumps, the three largest producer countries account for at least 70% of manufacturing capacity for each technology – with China dominant in all of them. Meanwhile, a great deal of the mining for critical minerals is concentrated in a small number of countries. For example, the Democratic Republic of Congo produces over 70% of the world’s cobalt, and just three countries – Australia, Chile and China – account for more than 90% of global lithium production.

The world is already seeing the risks of tight supply chains, which have pushed up clean energy technology prices in recent years, making countries’ clean energy transitions more difficult and costly. Increasing prices for cobalt, lithium and nickel led to the first ever rise in EV battery prices, which jumped by nearly 10% globally in 2022. The cost of wind turbines outside China has also been rising after years of declines, and similar trends can be seen in solar PV.

“The IEA highlighted almost two years ago that a new global energy economy was emerging rapidly. Today, it has become a central pillar of economic strategy and every country needs to identify how it can benefit from the opportunities and navigate the challenges. We’re talking about new clean energy technology markets worth hundreds of billions of dollars as well as millions of new jobs,” said IEA Executive Director Fatih Birol. “The encouraging news is the global project pipeline for clean energy technology manufacturing is large and growing. If everything announced as of today gets built, the investment flowing into manufacturing clean energy technologies would provide two-thirds of what is needed in a pathway to net zero emissions. The current momentum is moving us closer to meeting our international energy and climate goals – and there is almost certainly more to come.”

“At the same time, the world would benefit from more diversified clean technology supply chains,” Dr Birol added. “As we have seen with Europe’s reliance on Russian gas, when you depend too much on one company, one country or one trade route – you risk paying a heavy price if there is disruption. So, I’m pleased to see many economies around the world competing today to be leaders in the new energy economy and drive an expansion of clean technology manufacturing in the race to net zero. It’s important, though, that this competition is fair – and that there is a healthy degree of international collaboration, since no country is an energy island and energy transitions will be more costly and slow if countries do not work together.”

The report notes that major economies are acting to combine their climate, energy security and industrial policies into broader strategies for their economies. The Inflation Reduction Act in the United States is a clear example of this, but there is also the Fit for 55 package and REPowerEU plan in the European Union, Japan’s Green Transformation programme, and the Production Linked Incentive scheme in India that encourages manufacturing of solar PV and batteries – and China is working to meet and even exceed the goals of its latest Five-Year Plan.

Meanwhile, clean energy project developers and investors are watching closely for the policies that can give them a competitive edge. Relatively short lead times of around 1-3 years on average to bring manufacturing facilities online mean that the project pipeline can expand rapidly in an environment that is conducive to investment. Only 25% of the announced manufacturing projects globally for solar PV are under construction or beginning construction imminently, according to the report. The number is around 35% for EV batteries and less than 10% for electrolysers. Government policies and market developments can have a significant effect on where the rest of these projects end up.

Amid the regional ambitions for scaling up manufacturing, ETP-2023 underscores the important role of international trade in clean energy technology supply chains. It shows that nearly 60% of solar PV modules produced worldwide are traded across borders. Trade is also important for EV batteries and wind turbine components, despite their bulkiness, with China the main net exporter today.

The report also highlights the specific challenges related to the critical minerals needed for many clean energy technologies, noting the long lead times for developing new mines and the need for strong environmental, social and governance standards. Given the uneven geographic distribution of critical mineral resources, international collaboration and strategic partnerships will be crucial for ensuring security of supply.

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How is Venezuela benefiting from the sale of Petroleum Coke to India

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Production and Supply of Venezuelan Oil

Venezuela, a nation on South America’s northern coast, has long been recognised for its oil output and demand; in 2016, Venezuela produced 2,355,423,55 barrels of oil per day, putting it 12th in the world. Venezuela, a nation where oil continues to have a dominating and fundamental role in fortunes. Oil sales account for more than 99% of export revenues and one-quarter of GDP. In 2013, the price of oil barrels sold by Venezuela was $100 per barrel, but it dropped to $30 per barrel in 2016. Venezuela has supplied oil to several nations, including the United States, China, and others. In 1959, India established diplomatic ties with the nation. Only a few nations, such as India and Venezuela, trade in a single commodity, and that is exactly what the relationship between India and Venezuela is. Although 75% of India’s oil imports come from the Middle East area, the Middle East has provided just 59% of oil since 2014, which is 16% less than in 2017 as the remainder was supplied exclusively by Venezuela, which can be seen as a result of the diversification strategy by the Indian government. Although the Indian market has been critical for the Northern country in Latin America because it is the second-largest cash-paying customer yet when the United States imposed sanctions on Venezuela in 2019, Venezuela was forced to look to other countries such as Russia and China when it ceased oil exports to India.

Venezuela, India, and Petroleum Coke

Petroleum coke which is a carbonaceous substance produced during the oil refining process. Venezuela has supplied petroleum coke to a number of nations, including China and Bolivia. Even before Covid19, the biggest exporter of Petroleum Coke from Venezuela was Bolivia, and by 2020, Venezuela was the world’s 107th largest exporter of Petroleum Coke. Although the Supreme Court has banned the use of Pet Coke in the states of Haryana, Uttar Pradesh, and Rajasthan in 2017, the CPCB (Central Pollution Control Board) directed for its use in all states, despite the fact that a tonne of Pet Coke is more expensive than coal and produces more energy when burned, and Pet Coke can also be used as a replacement for coal because when Pet Coke is turned into fuel, the calorific value is at 8000 Kcal/Kg, which is twice the Kg which is twice the value of average coal which is used in the generation of electricity, not only that but Pet Coke also has a low volatile matter and when evaporated there are no losses, it is also easy to transport when compared to the liquid fuels. For the first time, Indian companies started to import significant volumes of Petroleum coke from Venezuela since the beginning of 2022, as for the past couple of months and since March 2022, India has been suffering from electricity shortage due to coal crisis, as there has been a surge in coal prices globally to record high prices ever since the Russia-Ukraine war began, many countries such as India and even many of the developed countries in Europe have also been suffering because of the conflict as Russia which controls the Nord Stream which supplies gas to Europe has been shut down by Russia giving excuses such as “maintenance of the pipeline” this conflict could be disastrous for countries like UK, Germany and many other which directly depend on the Russian gas supply to not just run factories but which also helps to keep people homes warm enough, many countries are worried that this may lead to a winter recession in European countries and due to this many countries have started to open their coal plants, in times like these the supply of Pet Coke from countries like Venezuela to countries like India could be a major helping factor and for the past few months, Indian companies have been importing significant amounts of Pet Coke from Venezuela in massive quantities, as using Pet Coke can be beneficial for India as the Russia Ukraine war, which is affecting so many countries, with the supply of Pet Coke, India will not have to rely on the supply of coal to run its energy plants. Many cement factories in India got 1,60,000 tonnes of Pet Coke between April and July, with another shipment of at least 80,000 tonnes sent in August. Prior to buying from Venezuela, the Asian behemoth had to depend on nations such as the United States or Saudi Arabia.

Conclusion

Both countries understand that if Venezuela continues to export huge amounts of Pet Coke to India, it will benefit not only India but also the South American country because when India used to import oil from Venezuela, India was the second largest importer of oil for Venezuela, and now if India starts importing the same amount of Pet Coke from Venezuela, it could provide relief to the country that has been suffering for the past three years ever since the USA has pu The nation has been selling Pet Coke at a $50-$60 discount compared to the US stuff. Venezuela has been stockpiling Pet Coke for a long time because it may help the Latin American country solve its infrastructure woes and is making strides by supplying not only to the Indian market but if Venezuela could supply more to the global markets as it has been producing more than 25 million tonnes of Pet Coke on a daily basis. If the commerce between Petroleum Coke continues, India will not have to depend on any country such as the US or Russia, since the Russia-Ukraine conflict has made it difficult for countries such as India to side with any of the nations, and for Venezuela, it will assist the country to grow its economy again.

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