The President-elect's Choices
By Leo Brown
[President Obama's Weekly Address]
In the last decade, the Russian government has expanded their web of gas and oil pipelines to such a degree that domestic production will soon be unable to maintain full export capacity. This problem will worsen as western Siberian oil fields, the wellspring of Russian oil since the 1970s, run dry. But instead of investing in new technology to extract oil from other regions, the government will continue to funnel resources into the state-owned pipeline operator, Transneft, and ambitious expansion projects. Though new pipelines will be born, they might well sit underutilized and decrepit.
The muddy economic rationale for these projects caves under the realities of Russia's rising energy needs and finite production capacity. These pipelines are built primarily to allow Russia greater geopolitical leverage and flexibility. The idea is that when a 'transit nation' hosts a Russian pipeline, that nation profits as Russian energy flows. But if Transneft and the government have options of simply doing business elsewhere and rerouting through a different pipeline, the transit nations have much less political leverage. They have a choice of either not dealing with Russia at all, or doing so according to Russia's political, economic, and military conditions.
For these strategic reasons, Russia has, and will continue to have, more pipelines than are economically viable. However, it is still possible for Russia, the world's leading oil producer, to have it both ways.
The Russian economy is quite energy intensive compared to other European nations, and its rapidly expanding auto market is a major contributing factor. Regulation of Russian auto industry standards are lax and, as a result, the potential to fill the new pipelines with oil exports is lost to domestic consumers driving inefficient vehicles. If President-elect Putin sees to fruition President Medvedev's modernization program, the Russian market might be able to function on significantly less oil and gas, thereby freeing up Russian reserves to be strategically exported.
President Obama notes that American fuel efficiency standards are tighter than ever, and the Big Three auto makers are building vehicles that produce many more miles to the gallon. This may bode well for American efforts to develop energy independence while investing in alternatives to fossil fuels. But if President-elect Putin is serious about growing the Russian economy while maintaining a sophisticated network of energy security, he will make a case to his people that the push for energy efficiency is not a Western plot connected with a global warming hoax, but rather a vital component of national security and geopolitical influence.
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For a full analysis of Russia's energy choices, refer to Adnan Vatansever's Russia's Oil Exports (or the abstract), published in 2010 by the Energy and Climate Program of the Carnegie Endowment for International Peace.
Reminded again...
ReplyDeleteThe world is waiting for your debut as a guest blogger!
ReplyDeleteLeo how strong is the Russian auto industry? Is there much manufacturing that happens inside of Russia, or are the vehicles mostly imported from Japan, China, and the US? It seems like having a strong control over domestic auto production would give any country an edge in the energy war. I'd be curious to compare different countries by their import/export rates, efficiency regulations, and the power of the government within the industry.
ReplyDeleteSato hello! I had to do a bit of research, but it seems that the Russian auto industry is quite robust - in a sense. In the late 80s, about half of all cars were domestically produced. Then, when the Soviet Union collapsed, many people went and bought Japanese and German cars because the Soviet cars weren't of a very high quality. So this was a crisis for the industry in the 90s, just as most of the economy was in crisis for one reason or another - all related. And now, the industry is rebounding, largely the result of Putin's newly stabilized economy. So at the moment, the Russian auto industry is the fastest-growing in the world - which is a misleading statistic, in a way, because it's rebounding from a crisis, so quick growth (relative to its size) is to be expected. But several sources predict that in the next few years, Russia will have the largest European auto production.
ReplyDeleteBUT to get back to the energy-efficiency point: it would seem that with such a developed production model, Russia could use energy more efficiently. I think the real problem - I referred to this towards the end of my post - is that energy efficiency is not considered a priority by the ruling elite or the public at large. A big part of this is that global warming is widely believed to be a Western lie, or at best, perhaps a reality but not a pressing danger. And if you think about it, what really gets Americans riled up about energy efficiency? Sure, national security is a big part of it, especially for some people, but environmental protection is also a huge factor, especially in politics and the media. So if you subtract that factor, you might end up with a fairly anemic push towards energy efficiency - as we have in Russia right now.