Russia and Gas Supply

January 17, 2009

One of the issues that is often discussed with other fellow strategic foresight practitioners is the future of resource wars.  As Peak Oil emerges, demand for fossil fuels and energy prices increase so too does the political pressure to guarantee supplies for a nation’s population.  This is more critical in the countries surrounding Russia that are reliant on it for supply of gas, particularly for heating during winter.

Geopolitical tensions are re-surfacing with Ukraine which has recently sided more closely with the West and wishes to engage more with the EU.  Current economic difficulties caused by the GFHF (Global Financial Hissy Fit – thanks Kim) are creating slowdowns across the Ukraine economy, increasing this tension.

The recent gas wars are multi-layered across international, national, political and economic segments.  Internationally, Europe has had their gas supplies from Russia reduced as about 80% of Russian supplies pass through Ukraine.  Russia wishes to increase its price of gas to Ukraine (which is currently heavily subsidised) and seek recompense from Ukraine for past debts for gas supplies.  In the meantime, Ukraine siphons off some of the gas for Europe for its own purposes ( which it does not pay for).  While there are some other supply routes to Western Europe through Belarus, these are not as large as those through Ukraine.  And the ante gets upped from this regional geopolitical standoff with Ukraine when it seeks to enlist Western Europe and the US in its dealings with Russia, while Russia in comparison is not seeking to elevate the issues.  The Ukraine is very important politically for Russia as a beach-head against Europe and for access to Russian bases on the Caspian Sea and wishes to keep the problem local and not internationalised.

Compounding all of this further is the location of new growth markets for Russian gas – and they do not lie in Europe but east towards Japan and China.  Why bother with providing gas to Europe when there are exciting possibilities to the East?  And so Russia is building new gas supply lines to China and potentially to India if and when Afghanistan becomes stable.

Perhaps this is a foretaste of what is to come.  Regional conflicts escalating into international confrontations with the initial cause associated with energy supplies (or water).  And perhaps also a weak signal of further tensions between new powers (Russia, India, China) as compared with those of yesteryear (Western Europe and the US).  In particular, it could mean that relationships transform so that enemies of the past are economic allies of the future.