Expanded from the European Tribune
As you guess, it's no longer Iran or Syria, who are our friends now.
Nope. We have bigger fish to fry.
Nato fears Russian plans for `gas Opec'
Nato advisers have warned the military alliance that it needs to guard against any attempt by Russia to set up an "Opec for gas" that would strengthen Moscow's leverage over Europe.
A confidential study by Nato economics experts, sent to the ambassadors of its 26 member states last week, warned that Russia may be seeking to build a gas cartel including Algeria, Qatar, Libya, the countries of Central Asia and perhaps Iran.
Last week, the International Energy Agency warned of "the possibility of major gas-exporting countries co-ordinating their investment and production plans in order to avoid surplus capacity and to keep gas prices up."
I understand the IEA worrying about this - that's explicitly its job, and such an alliance could indeed have consequences on energy prices and supply patterns of its member countries. That they follow the situation, and warn about possible alliances between gas providers is fully legitimate.
But NATO? A military organisation? How can it get involved in that topic? Surgical strikes against the Gazprom headquarters? All out war? Invasion of Algeria?
We've had a number of discussions on ET about what the point of NATO is, because it's increasingly hard to know what it's supposed to do. It used to be about providing for collective security against the Soviet threat - with a dominant US military helping out its weaker (by design or by choice) European allies on their territory. But now that the Soviet threat is no more, it's become an institution in search for a role.
The past few years seems to have provided the role: that of supplemental executioner of the White House's most excellent military adventures when the US Army is stretched too thin.
So to have NATO talking today about 'guarding' against an attempt by Russia to unite with Algeria sounds pretty ominous to me.
And to have that tripe printed on the front page of the main European newspaper is deemply worrying. These things do not happen without a purpose.
This is all the more frustrating that the Financial Times publishes the reasonable view on the same topic, but it's buried deep in their interios pages:
The hurdles for Moscow on path to `gas cartel'
Concerns that Russia is trying to form a natural gas cartel along the lines of the Organisation of the Petroleum Exporting Countries may be misplaced, according to analysts and energy executives.
Despite the warning by Nato economists, it is far from certain that Moscow could persuade countries to join any such alliance. In many gas producing countries, the sector is far less-developed than their oil industries and needs greater input of foreign cash and expertise. Norway, Qatar, Nigeria, Trinidad and Tobago, Libya and even the much mooted Algeria would find it difficult to attract the huge sums of private-sector investment and know-how needed if the threat of future cutbacks under a cartel arrangement loomed.
If Russia managed to find participants, it would face considerable difficulty in creating a cartel along the lines of Opec because gas is traded very differently to oil. Gas is mainly priced on long-term contracts, often linked to the oil price. This makes manipulating prices by altering supply - in the way Opec does - far tougher.
Even for Moscow, playing such an adversarial game would be dangerous. Because domestic Russian prices are capped and Gazprom's customers are at present only in Europe, the Russian monopoly is at least as reliant on Europe as Europe is on Russia.
Nevertheless, there is a way Russia and major gas producers could - and are - substantially influencing future prices.
The energy industry is more worried about Russia's under-investment in the gas sector driving up prices than the possibility of a cartel doing so. If Moscow persuaded other countries to do the same, the problem would be compounded.
The International Energy Agency, the developed countries' energy watchdog, in a recent report, said: "Another source of uncertainty concerns the possibility of major gas exporting countries co-ordinating their investment and production plans in order to avoid surplus capacity and to keep gas prices up."
That article is a lot more reasonable, in that it makes a series of very real arguments:
- gas chains are a lot tougher to build, and still require the expertise and coordination provided by the Western oil majors. It's not just the massive cost, but the requirement to simultaneously push several projects in different countries that is beyond the capacity of most countries. Thus it is hard for any of the producing countries, except perhaps Russia, to snub Western investors. The example of Iran, which has tried to go it alone for the past 10 years and has failed miserably (despite no shortage of willing buyer in Asia for its gas and willing suppliers of technology from Europe or Japan) is quite striking in that respect;
- linked to the above, gas contracts are a lot more rigid than oil contracts, and there is little flexibility for deviations, whether on price or volume. So market manipulation is indeed harder - and that applies to buyers as much as to sellers. Outside of the continental US, market prices apply only marginally to the gas world.
- the corollary is that the dependency is mutual. Focusing on one side (like the alarmist front page article) or the other (like this more dismissive article) misses the big picture, i.e. both sides need the other, and there simply is no gas business unless BOTH the buyer and the seller are happy over long term arrangements;
The fact remains that we are indeed becoming increasingly dependent for our gas supplies on the investment decisions (whether to do or to let do) in a small number of countries.
But even if we take the extremist view that we have no control over our supply from increasingly assertive suppliers like Russia (something which is not true), there is something over which we have control: our demand.
So, if it is so fucking important not to depend on Russian (or Algerian) gas, why don't we make the SLIGHTEST FUCKING EFFORT to use less gas?
You know, by pushing energy savings. Or by pushing power companies to use other generation modes (wind, nuclear, etc...).
Nah. Let's go to war. It's smarter. It's our God given right to waste resources as much as we want to, and it is out of the question to change our ways. No, let's waste money on weapons, rain death and destruction on those insolent countries that are unwilling to entertain our needs, and blame them for international unstability.
Our policies are truly insane, and we ARE ALL TO BLAME because the reason why our politicians do not even want to think about demand reduction is because they know that it's politically lethal, because WE make it so. It's true in the USA, it's true in Europe, it's true in China.
Think about it. War and death are easier to sell than energy savings.