Russia’s Great Energy Power Profile is Curtailed, For Good – Pavel K. Baev
Only a year ago,
Russia was perceived by its many neighbors as both a superior military power
and a peerless energy power, the former ensured by massive investments in
modernizing the armed forces, and the latter – by huge export of every energy source,
from coal to nuclear plants. Presently, however, those perceptions are
undergoing serious corrections. The Russian army failed to deliver a decisive
defeat to the technically inferior but highly motivated Ukrainian forces, experienced
several humiliating setbacks, and is stuck in frozen trenches suffering from
dreadfully poor logistics. While this unstable stalemated continues, Russian energy
positions are steadily undermined and the instruments that Moscow used to wield
with skill and confidence – like the cuts in oil and gas supply to Europe – are
backfiring.
Winter has arrived
to Europe, but against President Vladimir Putin’s expectations, there are no
signs of eroding political unity, and Germany has recently pledged additional
50 million euro in winter support for
Ukraine. Storages for natural gas are full
as never before, and the mild weather in
November made it possible to start using these reserves later than usual, so the
threat
of freezing eagerly amplified by
Russian propaganda is effectively minimized. Prices on gas for households and
industry keep fluctuating, and the debates on enforcing a price
cap has proven to be more divisive than the
EU bureaucracy can manage, but there is hardly any consolation for Moscow in
this discord. Gazprom has lost its reputation of reliable supplier and most of
its share on the lucrative European market, and has to resort to significant production
cuts.
There is no way for
Russia to redirect the gas flow from the European market anywhere else, and the
proposition for organizing
in Turkey a gas hub, which Putin advanced in
October and discussed again in the phone conversation
with President Recep Tayyip Erdogan on December 11, may appear interesting, but
the implementation is certain to take more time than Gazprom has at its
disposal in the current crisis. Similarly, the plan for establishing a trilateral
“gas alliance” with Kazakhstan and Uzbekistan, which Putin surprised President Kassym-Jomart
Tokayev with in late November, is a rather far-fetched idea with dubious
rationale. Russia may be interested in increasing gas export to Iran, and
Uzbekistan is currently experiencing energy shortages, but it
is not keen at all to explore this
proposition, Turkmenistan is hardly going to join any such alliance.
The dynamics on
the oil market is even less positive for Russia, as the EU has moved forward
with the decision
to stop all import of Russian oil delivered
by sea and is set to ban import of refined petroleum products from February 5,
2023. Many experts predicted turmoil on oil markets caused by the enforcement
of this ban together with the price
cap on sea-transported Russian oil set by the
US and its coalition partners on the moderate level of $US 60 per barrel. Putin
was outraged with this sanction and instructed the government to develop
counter-measures that would cancel the cap; the ministers are
still working on a meaningful plan,
but the market has remained unperturbed, and the price on the Urals blend has
slipped to $US 50 per barrel. Russian companies have managed to increase oil
shipment to India, but only at a significant
discount, and this short-term opportunity cannot compensate for the losses in
the traditional European destinations.
The oil market will
certainly experience much volatility in the months to come as the predictions
of shifts in demand
from China are swinging widely. What
matters for Russia, however, is that its energy policy decision-making makes
diminishing impact on this oscillating supply-demand balance. Moscow hoped to
reinforce this impact by closer cooperation with Saudi Arabia in the OPEC+
format, and the controversial
agreement in October to cut down oil
production quotas appeared to answer those hopes. The disappointment came in December,
when the cartel opted not
to make further cuts, leaving Russia quite
unable to deliver on its quota. Saudi Arabia may not like the precedent of
enforcing the price cap, but it likes the pattern of expanding
military cooperation between Russia and Iran
even less.
Beyond these
current developments lurks the prospect that Moscow may not be able to
translate its energy might into political influence in any foreseeable future.
Europe is moving faster than it planned with reducing energy imports from
Russia to a minimum, and other customers learn to take advantage of Moscow’s
desperate need to sell its oil and gas. Gazprom and Rosneft are compelled to
execute production cuts, and shutting down productive assets for the winter
means that the wells may never be rehabilitated. Russia possesses unique
reserves of gas and considerable – of oil, but turning them into instruments of
policy will be quite impossible for any future Russian leader.
Pavel K. Baev, Dr., Peace Research Institute, Oslo (PRIO)
Dr. Pavel K. Baev is a Research Professor at the Peace Research Institute, Oslo (PRIO). He is also Senior Non-Resident Fellow at the Center for the U.S. and Europe at the Brookings Institution (Washington D.C.), Senior Associate Researcher at the Institut Français des Relations Internationales(IFRI, Paris), and Senior Associate Research Fellow at the Italian Institute for International Political Studies (ISPI, Milan). His research interests include the transformation of the Russian military, the energy and security dimensions of the Russian-European relations, Russia’s Arctic policy, Russia-China partnership, post-Soviet conflict management in the Caucasus and the Caspian Basin, and Russia’s Middle East policy, which is supported by the Norwegian Foreign Ministry. He writes a weekly column in Eurasia Daily Monitor.
To cite this work: Pavel K. Baev, Russia’s great energy power profile is curtailed, for good”, Panorama, Online, 16 December 2022, https://www.uikpanorama.com/blog/2022/12/16/pb-2/
Copyright@UIKPanorama. All on-line and print rights reserved. Opinions expressed in works published by the Panorama belongs to the authors alone unless otherwise stated, and do not imply endorsement by the IRCT, Global Academy, or the Editors/Editorial Board of Panorama.