Russia attempts to use energy supplies as political tool; fails
Some folks — take, for instance, me — have argued that the whole hubbub over "foreign oil" is a bit of a red herring. Generally speaking, energy commodities are fungible, sold on the world market. If one producer (say, Saudi Arabia) suddenly refuses to sell to us, they’ll just sell to someone else, and we can buy from that someone else. If we’ve got the money, eventually we’ll get the oil.
(The world’s declining oil and natural gas reserves are, of course, a problem, but there’s no need to add the sheen of xenophobia, however satisfying.)
Others — for instance, Bart in comments — argue that as energy reserves decline, those who have oil and natural gas will start using them as political weapons. In effect, their political value will exceed their economic value. (And since the U.S. has much domestic demand and little domestic supply, we’ll be screwed.)
Right now the discussion is mostly theoretical, but in the past week we’ve had a bit of a test case. As you may have heard, Russia cut off natural gas supplies to the Ukraine. Supposedly, the move was a response to Ukraine’s refusal to sign a new contract and pay much higher, Western-Europe-style prices. (Ukraine wants a three-month phase in of new prices.)
But the subtext is political: Russia is ticked off about the Orange Revolution and Ukraine’s desire to join the E.U. and NATO. While Ukraine is being asked to suddenly pay $230/cubic meter (up from $50), the more Russia-friend Belarus pays just $47/cubic meter.
The U.S. State Department said this:
Such an abrupt step creates insecurity in the energy sector in the region and raises serious questions about the use of energy to exert political pressure. As we have told both Russia and Ukraine, we support a move toward market pricing for energy, but believe that such a change should be introduced over time rather than suddenly and unilaterally.
On its face, this would seem to bolster Bart’s argument. Here’s a clear case of "the use of energy to exert political pressure" (though rather the reverse of what’s typically predicted, which is small oil-rich countries holding big ones hostage).
So one might equally well argue that this is evidence that attempts to play political games with energy are doomed to fail.
I’ll guess we’ll find out soon enough.
(More discussion on Oil Drum.)