IRAN-RUSSIA A TEAM TO WATCH

While the US and EU huffed and puffed about Iran in 2007, Moscow established closer energy links with Teheran that will be well worth watching in 2008 and possibly for the next two decades.
Much of the credit for the developing ties between the two energy giants can be attributed to outgoing Russian president, Vladimir Putin, who has been determined to forge an alliance with Iran, thereby giving both countries control of 50% of the world’s gas reserves, and as much as 20% of the world’s oil. Putin was shrewd enough to see that an energy pact was possible because the state machinery in both countries exercised total control over energy matters, making it easier for their respective governments to reach agreement on a way forward. The implications of this are enormous for Washington and for its future relations with the EU and NATO countries that are highly reliant on gas and oil imports. It is estimated that within two decades European nations will be importing 90% or more of their oil supplies and gas needs.
And where are Europeans likely to turn to for their energy supplies in the years ahead? The answer is already clear. It will be Russia and Iran, much to the consternation of Washington that fears Russia will exploit energy as a weapon to detach Europeans from America’s embrace. Last year, there was evidence some EU governments were not prepared to tow the US line to avoid dependence on Russian gas supplies. In May 2007, Austria, much to the consternation of the White House and US corporate energy giants, signed a deal with the massive Russian conglomerate, Gazprom, to build a routing center for Russian gas supplies into the EU. Italy and Germany have since come on board, making it clear that the three countries regard Russia as a reliable energy partner and supplier. Germany appears willing to follow suit. Gazprom plans to send its gas through a pipeline stretching from Russia into the Bulgarian port of Bourgas on the Black Sea and onwards to Greece and Italy. An offshoot of the pipeline will snake through Rumanian to Austria.
Western energy experts have warned Washington that as more EU countries become reliant on Russian energy, the greater the likelihood will be that Russia will seek to use its gas and oil monopoly to expand its influence into Europe, and particularly into those East European countries that were once part of the Soviet Union but are now EU members. Others like Ukraine, Georgia and Belarus are swiftly learning that Russia links energy to its foreign policy.
But it is not just Russia that will be a major player in the energy game in 2008 and in decades to come. Iran stands to make similar inroads into Europe with Russia’s help. That will specifically benefit Russia because, as a partner with Iran, it will not have to compete with the Iranians for the growing energy needs within the EU. Russia has also bolstered Iranian plans to supply China with oil and gas via a pipeline through Pakistan and India. Washington has, however, cleverly stymied that plan by using its new strategic relationship with India to block the proposed route through its territory. Consequently, Russia has angrily accused the US of trying to prevent China acquiring the energy supplies it needs in its onward march to superpower status.
The energy battles may be occurring behind the headlines but they have the potential for making headlines in the year ahead and for decades to come. In 2007, the US did not fare well in the energy wars across the globe, except perhaps in Iraq where US oil giants, with backing from the White House, worked hard to negotiate a deal whereby they will control a large slice of that country’s reserves long after US troops have been withdrawn. Elsewhere, Washington has been outmaneuvered by Russia. Vladimir Putin’s historic visit to Teheran on October 16, 2007, was less about the Iranian nuclear debate and more about cementing a significant energy relationship. It came in the middle of four official meetings between the energy ministers of both nations. Then there was the Turmenistan gas debacle in which Washington lost out to Moscow for the rights to Turkmen supplies. In that part of the world, US companies trying to negotiate deals with nations that have oil and gas rights within the Caspian Basin have found the going tough because Russian energy giants like Gazprom have been prepared to outbid US companies like Chevron and Exxon Mobil. Some critics in the West see the Russian bear at work, building an energy monopoly in order to win back gains it lost at the end of the Cold War. Others say Russia is doing what capitalists always wanted it to do. It is allowing the market to determine energy prices. One thing is clear. When Vladimir Putin came to power he quickly understood that if Russia was to resume its place on the world stage it had to exploit the monetary and political power its massive energy resources offered. Now, he has gone further by forging a partnership with Iran, which will make Russia joint controller of a large slice of the world’s energy resources.