PUTIN PROPOSES OPEC-TYPE ASSOCIATION FOR CASPIAN GAS EXPORT.

On January 21 in Moscow, Russian President Vladimir Putin proposed to his visiting Turkmen counterpart Saparmurat Niazov an alliance of “Eurasian” natural gas exporting countries under Russian control. The plan envisages using Gazprom’s pipeline system for the export of Central Asian gas to Europe via Russia.

While details of the proposal have yet to be disclosed, Putin summed it up on Russian television as follows: “The alliance would make it possible to exert effective control over the volumes and directions of Central Asia’s gas exports, would create a unified balance of production and consumption of gas, and would ensure its export through a single export channel.”

Three elements stand out explicitly or implicitly in Putin’s formulation. First, a characteristic emphasis on “effective control,” the avowed object of which would be the Central Asian countries directly, and Europe’s consumer countries indirectly. Second, the goal of routing current and prospective Caspian gas exports through Russia as a “single channel”. And, third, the concept of using some of the Central Asian gas, within a “unified balance,” for the internal needs of some Russian regions, so as to free more Russian gas for export to lucrative European markets.

Putin proposed to include Turkmenistan, Kazakhstan and Uzbekistan, alongside Russia, in this association. He omitted Iran, which is not linked to Russia’s gas pipeline system. In a further remark, he predicted that the pooling of gas resources could become an incentive for Western countries to invest in these “Eurasian” gas development projects (Russian Television, Interfax, January 21; Moscow Times, Financial Times, January 22).

The proposal seeks to exploit the Central Asian countries’ and the West’s failure, or at best lateness, in developing gas export routes other than the existing, Soviet-era “Central Asia-Center” main pipeline to Russia. Proposals to lay gas pipelines from Central Asia to or via Turkey, Iran, Pakistan (via Afghanistan) or China have variously been thwarted by political or economic considerations. Niazov has inflicted severe damage on his Turkmenistan–the region’s largest gas producer and exporter by far–and on its neighbors by his refusal of the Trans-Caspian pipeline project.

Some initial Russian comments have dubbed Putin’s plan “an OPEC for gas.” Whatever similarities may emerge down the line between the existing oil cartel and the proposed gas cartel, the differences are immediately apparent. While OPEC, operating within the world oil market, has nowhere near a monopoly, the Russian-led association would operate within the European gas market and would be in a position to exercise a quasi-monopoly there. Whereas OPEC’s exports originate in many producing countries, the would-be Eurasian group’s export would very largely–even if in diminishing measure over time–originate in Russia. While the OPEC oil moves freely to world markets along a variety of routes, Putin’s scheme would send all of the “Eurasian” gas through Gazprom’s pipelines via Russia, before it reaches the consumer countries. And while no OPEC country can determine that group’s policies through domination or intimidation, Russia is overwhelmingly stronger than the Central Asian countries in a would-be “gas OPEC,” and has a track record of domination and intimidation there.

Putin’s proposal reflects an intent to grab the lion’s share of Caspian gas. Russia already controls an overwhelming share of present Caspian oil exports–a share that dramatically increased at last year’s end with the commissioning of the Tengiz (Kazakhstan)-Novorossiisk (Russia) oil pipeline, while Baku-Ceyhan is still on the drawing boards. Within the international economic and political system, Russian control of Caspian gas would have even more disturbing implications than would its control of Caspian oil. But while no importing country or region depends critically on Caspian oil, Europe depends heavily on gas from Russia. That dependence would heighten if Moscow were to amalgamate Caspian gas with the Russian gas for export to Europe via Russia. Control over the aggregate gas pool, together with its monopoly over the main export pipeline, would enable Moscow to set–as Putin suggested–the terms of gas deliveries. Therein lies a potential source of political leverage on European countries and European Union policies.

From the standpoint of energy security, it has all along been considered imperative to avoid a disproportionate concentration of export-oriented fuel resources and/or outlets under the control of one supplier. That is also the ultimate reason behind the policies of not routing Caspian oil via Iran and avoiding Russian monopolization of Caspian oil export routes. Putin’s plan for gas, if carried out, has far greater implications, because it would concentrate the bulk of the world’s known gas resources into a single pool under Russia’s control.

Moscow’s strategy regarding Caspian oil transit and, now, also the gas transit, may be taken as its answer to the years of Clintonian postulates about multiple pipelines, no zero-sum games, and certainly no “great games” in the Caspian basin and Central Asia. September 11 struck before the Bush Administration had a chance to complete its reassessment of that policy and turn it around. Meanwhile, Putin is playing those games to win. With regard to gas, he has now issued a challenge to a game of winner-take-all.

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