Friday, 5 October 2012

Only the exit of dictator Putin will bring back Russia to the camp of energy winners


Russia's propaganda radio, The Voice of Russia, is to be congratulated for publishing an (almost) objective article about the game changing shale gas and oil revolution: 

Ten years ago, it was impossible to imagine that the United States would become a major producer of natural gas and overtake Russia for first place in volume of production. Now, it is a fact. Many countries have begun to develop shale gas, including Poland, Ukraine, Australia, the UK and China. According to media reports, by 2032 the United Kingdom will be able to meet a quarter of its needs with this type of fuel.
New technologies have been developed that make it feasible to extract shale oil in many countries. For example, according to available information, Japan is betting on it. Japan Petroleum Exploration Company has managed to extract liquid shale oil, which may solve the country’s acute power shortage, exacerbated by Tokyo’s decision to abandon nuclear energy in the future.
The shale revolution, if it happens, will inevitably have a major impact on international relations. Imagine a purely theoretical scenario: the USA, Western Europe and China stop importing oil and gas, or at least dramatically reduce imports. It is safe to say that the oil monarchies of the Persian Gulf would be among the biggest losers in such a scenario. Demand for their products would plummet, and they would have to significantly scale back their geopolitical ambitions.
The United States would become less interested in Central Asia, and pipeline projects bypassing Russia would likely come to a halt. The future of Caspian Sea development would be in question. Perhaps, instead of trying to gain access to foreign energy reserves, Washington would focus its efforts on other areas, such as restoring its position in the Western Hemisphere (i.e. Latin America), which has weakened in recent years.
China, which is also planning to start domestic production of shale gas and oil, would very likely lose interest in Central Asia. Chinese expansion into Africa would also peter out, and Beijing’s dependence on oil supplies from the Persian Gulf would diminish.
At first glance, if shale technology lives up to the hype, Russia would appear to be in the camp of losers. This, however, is not quite true. First, the country has a more diverse economy than, say, Saudi Arabia. It is of course heavily dependent on oil and gas revenues, but a fall in the latter would provide a further powerful stimulus to economic diversification.

The fact is that, due to dictator Putin's and his money machine Gazprom's complete failure in anticipating the shale gas revolution and its strategic importance, Russia is most certainly in the camp of losers. With the amateur "economist" and "energy expert" Putin and his henchmen in charge, Russia will not be able to diversify its economy, which is still heavily dependent on the income from gas and oil exports. (Oil and gas revenues, including mining and quarrying taxes as well as export customs duties on oil and gas, together constitute almost half of the federal government's revenues). Russia will be able to leave the losers' camp only when Putin exits. 

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