Russia reasserts its role in international geopolitics

This has been reflected in the recent past by Russia's statements delivered during the Shanghai Cooperation Organisation Summit on June 15, in their interventions during the just concluded meeting of the G-8 Finance Ministers held in Saint Petersburg and in the latest meeting between Russian President Putin and Finnish President Halonen.

Over the past year, Russia has been slowly emerging as a power, with a mind of its own. Russia at times, contrary to its role in international affairs, during the latter part of the nineties and the beginning of this decade, is quite often disagreeing with proposals put forward or suggested by the EU or United States. In a manner of speaking, it is asserting its independence. To many, this is reflection of the strength that it has discovered in its vast oil and gas deposits. Energy availability and a fast growing foreign exchange reserve are creating this inner might.

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Russia, not long ago a land of rationing, being kept afloat by IMF, is now not only accelerating its debt repayments but also taking a lead in canceling 700 million US dollars in debt owed to Russia by poor countries, particularly from Africa.

An analysis of the recent history of the Russian energy industry will indicate the reasons. After a decline at the end of the 1980s, this sector has been reorganised and production has risen from an 8 percent share of the world market in the 1990s to more than 14 percent in 2005. This "revival" has helped to balance world oil supply by compensating for the decline in non-OPEC sources. This, by itself, has brought additional national prestige.

Russia's profile as a global supplier of energy has also been enhanced because of short-and medium-term disruption of oil supplies and consequent triggering of a rise in prices. Hot spots like Nigeria, Venezuela, Iraq, Iran, sub-Saharan Africa and the Caspian Basin have also raised its importance in the EU and in the USA as a potential and steady supplier of energy.

Russia realises the significance of this scenario and is taking special care to build on this current opportunity. To do so, astutely, it is addressing itself in removing some of the existing mid-term challenges, particularly in its oil industry. For the first time, Russia understands that financial shortfalls, coupled with legal and relative political insecurity, will make it difficult for her to open up new oil reservoirs. Consequently, President Putin is himself taking active interest in reforms on the ground. The president's personal involvement has raised the stakes.

The EU over the past year has been watching the evolving Russian scene with great care. For them, Russia continues to be a large potential energy source near at hand, despite latent difficulties. They know that Russia is taking steps to modernise, but they also know that more attention is being paid to the oil industry than gas. This is making them slightly nervous, as both components are critical for Europe.

It is true that Russia's gas industry, unlike its oil sector, is not showing any sign of major reorganisation. This market is still dominated by the Russian company Gazprom. The Russians do not appear to be very bothered with this sector because there is high domestic demand and almost all of Russia's current exports are guaranteed in terms of the EU. They also know that, over time, this EU dependence will only grow. They are also aware that in the coming years, Russia is bound to play a bigger role in the world market when 'stranded' gas resources in the Barents Sea and eastern Siberia come on stream. This factor is generating its own confidence level.

Strategists within the EU, particularly Brussels and the European Commission, for obvious reasons, are not really feeling very comfortable about this growing vulnerability and dependence on Russian oil and gas. Some have been suggested that the Union should diversify its energy sources and suppliers.

This perception of vulnerability has gained momentum over the past few months with the emergence of a more independent Russia, not always willing to agree with Western interests. Russia's role in ensuring Western energy security is now coming under discussion.

It has led to an open debate in the EU on this issue. However, questions are also being asked whether diversity will solve all problems. They have argued that this measure will not guarantee energy security (as different EU member states already get their supplies from diverse sources), but will only alienate Russia. They have also pointed out that diversification could also prove expensive where it involves constructing new transit lines. This lobby has instead suggested that a better solution for the EU would be to emphasise "domestic energy security," with greater energy efficiency and reduced consumption.

In my opinion, Russia does not alone hold all the cards. The consumer versus producer definition appears to be superficial. It also tends to overlook the mutual inter-dependence of both parties.

The EU and the USA in their own way are also crucial for the Russians, who know that the EU, unless handled with care, might be tempted to look for other suppliers instead of investing in modernising the ageing energy infrastructure within the Russian energy industry. They also understand that this vast western market could end up using the energy dialogue to press for changes within Russia. This is something, which Russia naturally wants to avoid.

The EU-Russia energy dialogue launched in 2002, has taken a three-pronged approach. In this context, the dialogue partners are trying to work towards greater domestic efficiency, common policy strategies for transit states, and bringing the EU-Russia energy relationship within the ambit of the EU's Common Foreign and Security Policy. This is being done to make it consistent with geopolitical reality. It is within the ambit of geopolitics that Russia is now beginning to flex its strength.

The European Commission has prepared a Green Paper on energy. This has set out the key challenges: increasing energy efficiency; creating open and competitive energy markets; making long-term investments in energy; and diversifying the energy mix, including low-level of renewable resources. This has been done to ensure that EU has coherent external and internal energy policies within an integrated market of the 25 member states.

It is now generally agreed that more intensive efforts should be made in the coming months by the EU and Russia to further streamline their dialogue about investments, infrastructure and trade. Both parties realise that their relationship needs to be further developed to create security and predictability for themselves. It is also being undertaken on the premise that there should be non-interference within Russia's sphere of influence. This approach is being sought on the premise that energy security exists both in terms of supply as well as demand.

Many polite expressions of cooperation and concern regarding energy are coming out of Brussels and Moscow, but the situation continues to be complex. Several European analysts support the 'energy charter' drawn up to integrate Russia and eastern European countries' energy into European and world markets, but argue that a bilateral EU-Russian relationship is also necessary, specially to cope with emergencies and interruptions of supply.

I believe that as a net energy supplier, in the near future, Russia will continue to gain strategic importance within the international geopolitical framework. Despite many latent hesitations on the part of the EU and the USA, it will grow in strength as it acquires more innovative technologies and investment to help to solve its problems within the field of energy security. This will create a separate dynamics that will enable it to play a more meaningful role in its neighbourhood.

Muhammad Zamir is a former Secretary and Ambassador who can be reached at mzamir@dhaka.net