Rosneft – Strategic Culture Foundation https://www.strategic-culture.org Strategic Culture Foundation provides a platform for exclusive analysis, research and policy comment on Eurasian and global affairs. We are covering political, economic, social and security issues worldwide. Sun, 10 Apr 2022 20:53:47 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.16 Reuters Bites Off Tongue in US War Against Venezuela – Rosneft Forces Withdrawal of News Fabrication https://www.strategic-culture.org/news/2019/04/26/reuters-bites-off-tongue-us-war-against-venezuela-rosneft-forces-withdrawal-news-fabrication/ Fri, 26 Apr 2019 11:07:04 +0000 https://www.strategic-culture.org/?post_type=article&p=85328 John HELMER

The Reuters news agency has published a retraction of an “exclusive” report on operations between the Venezuelan and Russian state oil companies, PDVSA and Rosneft, after disavowing the US-supplied source. Reuters has also acted after Rosneft applied for a criminal investigation of the media company’s operations in Russia by Moscow prosecutors.

The acknowledgment of misreporting has exposed evidence that Reuters’ reporters and bureaux in Caracas, Venezuela, Mexico City, Houston, London and Washington are routinely relaying disinformation supplied by US Government agents in their attempt to damage Venezuelan, Russian, Indian and Chinese operations in the international oil market.

According to a publication by Reuters issued on Tuesday, April 23 –  but made to appear to have been published on April 18 – the news agency has admitted it “could not determine” its earlier allegation that a “scheme uncovered by Reuters” was true. The new Reuters claim also disavows the charge that Rosneft was acting illegally with Petróleos de Venezuela, S.A. (PDVSA) to bust US sanctions imposed on the Venezuelan company  in January;  and on Evrofinance Mosnarbank, a state bank, sanctioned on March 11.

Now, Reuters says, “experts see no violation of sanctions.”  The “scheme uncovered by Reuters” reported on April 18 has been reprinted this week as a “new approach described to Reuters.”

The unprecedented retreat by Reuters followed a Rosneft press statement issued on April 19. The company called the Reuters report an “outright lie…purposeful misinformation, legalization of rumours…invent[ed] information fabricated for the purpose of causing damage to the Russian economy, Russian companies, and the Russian state.” Welcoming the correction in MoscowRosneft calls it “an unprecedented admission that we were right in our evaluation of Reuters’ article.”

International journalist sources express concern that the reputation and ability of Reuters to report internationally has been damaged by what they call the “Americanization” of the news agency. This is a reference to the editor in chief of Reuters, Stephen Adler, who is based in New York.

Reuters’ spokesmen in New York and in London have yet to clarify the sources of the now repudiated allegation. So far, they also refuse to correct an earlier Reuters “exclusive” with allegations against PDVSA and Rosneft, whose sources were also from Washington, and whose veracity was challenged at the time as propaganda for the US sanctions war against Venezuela and Russia.

According to the byline in print, the reporter responsible for the original and corrected version  of the Reuters allegations is Marianna Parraga (right). Educated at a private university in Venezuela, Parraga worked first for Reuters in Caracas. Subsequently based at the same time in Mexico City and in Houston, Texas,she calls herself an energy correspondent for Latin America. Reuters has published several “exclusive” reports with  Parraga’s byline, all claiming anonymous sources for evidence that the Venezuelan Government and the state oil company PDVSA are breaking US sanctions; read the list of Parraga’s list of  “exclusives” here.

In March, reporting from Houston,  Parraga advertised a document she was given by the US-financed opposition to the Venezuelan government. In a pitch for US investor support, Parraga claimed “Venezuela’s interim government led by congress head Juan Guaido is preparing new legislation to reverse late President Hugo Chavez’s energy industry nationalization, allowing private companies a bigger role in its oilfields and shrinking state-run PDVSA, according to sources and a draft seen by Reuters.”

In her Twitter feed  Parraga has not made a personal correction of her misreporting. Instead, she continues to promote the April 18 publication.

Although the Reuter management has erased most traces of the original story, they have failed to “correct” the Yahoo internet version. Before it too disappears, here are several screen shots:

Source: www.yahoo.com

Directed from a headquarters in New York, Reuters’ editor-in-chief is a Harvard-educated American, Stephen Adler.  Last month Adler issued a statement attacking the Myanmar (Burmese) Government for putting two Reuters reporters on trial, convicting them on criminal charges, and sending them to prison for long sentences.   “They are honest, admirable journalists who did not break the law, and they should be freed as a matter of urgency,” Adler claimed. According to the New York Times version of the Reuters case in Myanmar,  the evidence against the two reporters came from  local police who caught the journalists with official documents in violation of the local official secrets law. Reuters engaged for their defence Amal Clooney, a member of the London law firm defending Julian Assange against the US Government indictment for conspiracy to violate one of the US official secrets statutes.

Left, Stephen Adler in New York. Centre, Reuters reporters in Myanmar, Wa Lone and Kyaw Soe Oo. Right: Julian Assange in London.

Adler, according to two sources briefed on his conversation, has Americanized the global coverage of Reuters. At the same time, the sources comment, Adler has imposed cost and job-cutting which has reduced the number of reporters and flow of news from sources in countries with which the US Government is engaged in information warfare. Editing and rewriting Reuters news flow have increasingly been centralized by Adler in the US.

Last November, in what Parraga and a colleague from the Reuters bureau in Washington  called an “exclusive”, Reuters claimed a secret meeting in Caracas between Rosneft chief executive Igor Sechin and Venezuelan President Nicolas Maduro was “one of the clearest signs of strain between crisis-stricken Venezuela and its key financier Russia.”  Reuters reported its evidence came from “two sources briefed on the [Sechin-Maduro] conversation last Saturday”.  Read the Reuters story here.

Doubt that Sechin had been in Caracas when Reuters claimed, and evidence that the reported “crisis” between Rosneft, PDVSA and the Maduro government had been fabricated in Washington, can be followed in detail here.

Yesterday the spokesmen for Reuters, Heather Carpenter (right) in New York, was asked detailed
questions about the veracity of both Parraga  “exclusives” – the November report and the April  18 report. Concretely, by telephone and email,  she was asked to clarify the evidence and the “two sources” on which the November publication was based. She was also invited to explain how Reuters had verified Parraga’s material before publishing it.

Carpenter was also asked to explain why this week’s correction of Parraga’s April 18 report has been published as if on the original date; why the corrected version added reporting from Reuters bureaux in Caracas, New Delhi and London which had not been identified in the original; and whether the published correction is an acknowledgement by Reuters that the origin of the claim, which can no longer be “determined”, is US Government information-war material.  Why, the spokesman was questioned, had Parraga and her colleagues cited sources at the US Treasury and the State Department without reporting from Rosneft or the Russian Government?

Carpenter acknowledged receiving the questions. “We will come back to you on this,” she replied. She didn’t. A London spokesman for Adler refused to answer the questions.

johnhelmer.net

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‘The Biggest Player in the History of the World’ https://www.strategic-culture.org/news/2018/05/01/biggest-player-in-history-world/ Tue, 01 May 2018 08:55:00 +0000 https://strategic-culture.lo/news/2018/05/01/biggest-player-in-history-world/ John Mauldin gives us a highly pertinent anecdote about China:

“Back in the 1990s, Robert Rubin, a Secretary of the Treasury under Bill Clinton, was negotiating the terms under which China would be allowed into the World Trade Organization. My sources say he was basically asking for many of the exact same things Trump wants now … But in 1998, in the middle of the Monica Lewinsky scandal, Clinton wanted a “win” (Not unlike the current president.) And Rubin wasn’t delivering, holding firm on his demands for market access and guarantees on intellectual property, etc. Clinton then took the Chinese negotiations away from Rubin and gave it to Secretary of State Madeleine Albright with the instructions to get it done.

Not being a trade expert, Albright didn’t understand the underlying issues. The Chinese recognized she was playing a weak hand and held firm. To make a long story short, my sources say she effectively caved. Clinton got his “win” and we got stuck with a lousy trade deal. When Trump alleges that we got snookered in a bad trade deal, he is correct—although I wonder if he understands the history. Maybe somebody gave him the background, but it never came out in any of his speeches. That WTO access, which finally happened in 2001, let China begin capturing markets through legal means, and access US intellectual property without paying for it …

Does this make a difference now? Probably not … But it gets to the rivalry we discussed above. Is it possible for both the US and China to stay in an organization like WTO? Trump seems to doubt it, as he’s threatened to withdraw from WTO. We may someday look back at this period of a single body governing international trade as an aberration — a nice dream that was never realistic. If so, prepare for some big changes.”

This goes to the crux of one of the biggest geo-political issues facing Europe and America. Mauldin then gives us what very much the consensus view that, “despite some of his rhetoric, I don’t believe [Trump] is ideologically against trade. I think he just wants a US “win” and is flexible on what that means”. Yes, Trump quite possibly will end up doing ‘a Clinton’, but does America have a realistic alternative but to accommodate a rising China?  The world has changed since the Clinton era:  this no longer is just a matter of tussling over the terms of trade.

Xi Jinping lies at the apex of the Chinese political system. His influence now permeates at every level. He is the most powerful leader since Chairman Mao. Kevin Rudd (former PM of Australia and longtime student of China) notes, “none of this is for the faint-hearted … Xi has grown up in Chinese party politics as conducted at the highest levels. Through his father, Xi Zhongxun … he has been through a “masterclass” of not only how to survive it, but also on how to prevail within it. For these reasons, he has proven himself to be the most formidable politician of his age. He has succeeded in pre-empting, outflanking, outmanoeuvring, and then removing each of his political adversaries. The polite term for this is power consolidation. In that, he has certainly succeeded”. 

And here is the rub: the world which Xi envisions is wholly incompatible with Washington’s priorities. Xi is not only more powerful than any predecessor other than Mao, he knows it, and intends to make his mark on world history. One that equates, or even surpasses, that of Mao.

Lee Kuan Yew, who before his death in 2015, was the world’s premier China-watcher, had a pointed answer about China’s stunning trajectory over the past 40 years: “The size of China’s displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.” 

The year 2021, marks the centenary of the Chinese Communist Party’s founding, and Xi clearly intends that in 2021 China will showcase the achievements of its first centenary goals.  By then, China expects to be the most powerful economy in the world (it is already there – on a purchasing power parity basis), and an emerging world class power – both in political and military terms. According to Richard Haas, the President of the US Council for Foreign Relations, “[China’s] long-term ambition is to dismantle the U.S. alliance system in Asia, replacing it with a more benign (from Beijing’s perspective) regional security order in which it enjoys pride of place, and ideally a sphere of influence commensurate with its power”. (If anything, Haas may be understating things).

To achieve the first of the two centenary goals (the second concludes in 2049), China has one major economic, one economic/political strand, and one political/military strand of policy to the achievement of its goals.

Made in China 2025 is a broad industrial policy that is receiving massive state R & D funding ($232 billion in 2016), including an explicit potential dual-use integration into military innovation. Its main aim, besides improving productivity, is to make China the world’s ‘tech leader’, and for China to become 70% self-sufficient in key materials and components. This may be well-known in theory, but perhaps the move towards self-sufficiency by both China and Russia suggests something more stark. These states are moving away from the classic liberal trade model to an economic model based on autonomy, and a state-led economy (such as advocated by economists like Friedrich List, before becoming eclipsed by the prevalence of Adam Smith-ian thinking).

The second prong to policy is the famous ‘Belt and Road’ initiative linking China to Europe. The economic element however, is often deprecated in the West as ‘mere infrastructure’ – albeit on a grand scale. Its conception, rather, represents a direct swipe at the western, hyper-financialised economic model.  In a famous critical remark directed at China’s heavy reliance on western-style, debt-led growth – an anonymous author (thought to be Xi or close colleague), noted (sarcastically) the notion that big trees could be grown ‘in the air’.  Which is to say: that trees need to have roots, and to grow in the ground. Instead of the ‘virtual’, financialised ‘activity’ of the West, real economic activity stems from the real economy, with roots planted in the earth.  The ‘Belt and Road’ is just this: intended as a major catalyst to real economics.

Its political aspect, of course, is evident: It will create an immense (Remimbi) trading and influence block, and being land-based, will shift strategic power away from the western domination over sea-power to land routes over which western conventional military power is limited – just as, in the same way, it will transfer financial power away from the reserve dollar system, to the Remimbi and other currencies.

The other aspect, which has received much less notice, is how Xi has been able to mesh his objectives with those of Russia. Initially cautious towards the ‘Belt and Road’ project when Xi launched it in 2013, the Kremlin, warmed to the notion in the wake of the western coup against its interests in Ukraine, and with America’s joint project with Saudi Arabia to crash the price of oil (Saudi wanted to put pressure on Russia to abandon Assad, and the US to weaken President Putin, by weakening the rouble and government finances). 

Thus, by 2015, President Putin had pledged a linkup between Russia’s Eurasian Economic Union and China’s Silk Road Economic Belt, and two years later, Putin was the main guest of honor at the 'One Belt, One Road' summit, held in Beijing.

What is interesting is how Russia has integrated Xi’s vision into its own ‘Greater Eurasia’ thinking, conceived as the core antithesis to an American-led, financialised, world order. The Kremlin, of course, well understands that in the trade and finance realm, Russia’s position in Eurasia is much weaker than that of China. (China’s economy being eight to ten times the size of that of Russia).

Russia’s crucial strengths traditionally lie in the political-military and diplomatic domains. Hence, leaving economic initiatives to China, Moscow strives for the role of the chief architect of a Eurasian political and security architecture, a concert of major Asian powers, and energy producers.

President Putin has, in a sense, found the Russian symmetry and complementarity to Xi’s ‘road and corridor’ politics (an asymmetrical Russian balance, if you like, to Xi’s raw economic strength) in its ‘One Map; Three Regions’ politics. Bruno Maçães has written:

In October 2017, Rosneft Chief Executive Officer Igor Sechin took the unusual step of presenting a geopolitical report on the “ideals of Eurasian integration” to an audience in Verona, Italy. One of the maps projected on the screen during the presentation showed the supercontinent—what Russian circles call “Greater Eurasia”—as divided between three main regions. For Sechin, the crucial division is not between Europe and Asia, but between regions of energy consumption and regions of energy production. The former are organized on the western and eastern edges of the supercontinent: Europe, including Turkey, and the Asia Pacific, including India.

Between them we find three regions of energy production: Russia and the Arctic, the Caspian, and the Middle East. Interestingly, the map does not break these three regions apart, preferring to draw a delimitation line around all three. They are contiguous, thus forming a single bloc, at least from a purely geographic perspective.

The map, Maçães notes, “illustrates an important point about Russia’s new self-image. From the point of view of energy geopolitics, Europe and the Asia Pacific are perfectly equivalent, providing alternative sources of demand for energy resources … And, as you consider the three areas [which the map] delimits, it becomes apparent that two of them are already led and organized by a leading actor: Germany in the case of Europe; and China for the Asia Pacific”.

It is from this perspective, that Russia’s renewed interest and intervention in the Middle East must be understood. By consolidating all three energy-producing regions under its leadership, Russia can be a true equal to China in shaping the new Eurasian system. Its interests lie now more decisively in organizing a common political will for the core energy production region, than in recovering ‘old yearnings’ about being a part of Europe.

And ‘political will’ is Xi’s project too: Whereas once Mao’s Cultural Revolution tried to wipe out China’s ancient past and replace it with communism’s “new socialist man”, Xi has increasingly portrayed the party as the inheritor and successor to a 5,000-year-old Chinese empire brought low only by the marauding West, writes Graham Allison, author of Destined for War: Can America and China Escape Thucydides’s Trap?  Thus the Party has evoked past humiliations at the hands of Japan and the West “to create a sense of unity that had been fracturing, and to define a Chinese identity fundamentally at odds with American modernity”.

Finally, Xi has pledged to make China strong again. He believes that a military that is “able to fight and win wars” is essential to realizing every other component of China’s “rejuvenation”.  America has more military ‘structure’ than China, but Moscow has technologically better weapons  but China too is catching up in this respect with the West fast. The direct strategic military co-operation between China and Russia (China stood behind Russia militarily as well as politically) was evident in the recent US and UK infowar thrust  Skripal and chemical weapons in Syria – against Russia.  It acts as a deterrent against US military action undertaken against either state.

In Washington there are – in contrast to Beijing – multiple voices attempting to define how America should interact with China.  Trump has been the loudest, but ideologues are there too, calling for a fundamental re-set of the terms of trade, and of intellectual property rights. But the US military also are adamant that the US must remain the military hegemon in the Asia-Pacific region and that China cannot be allowed to push America out.  There is, though, rare unity in Washington – amongst ‘think-tankers’ and between the two main political parties – on one point, and one point alone: that China constitutes the ‘Number One’ threat to the American-led ‘rules-based’ global order … and should be cut down to size.

But what – amongst China’s objectives outlined above – is it that that the US thinks it can somehow ‘roll back’ and more substantially cut China ‘down to size’ – without going to war? 

Realistically, Xi may grant Trump enough minor concessions (i.e. on ownership and intellectual property issues) to enable Trump to claim a ‘win’ (i.e. to do ‘a Clinton’ again), and buy a few years of chilly economic peace, whilst the US continues to rack up trade and budget deficits. But ultimately, America will have to decide to accommodate to reality, or risk recession at best, or war at worst.

It will be fraught both economically and geo-politically, especially since those who claim to know Xi, seem to be convinced that aside from wanting to return China to being the ‘biggest player in the history of the world’, that Xi also aspires to the one who, finally, reunites China: including not just Xinjiang and Tibet on the mainland, but also Hong Kong and Taiwan. Can America culturally absorb the thought of ‘democratic’ Taiwan being militarily unified into China? Could it trade that for a North Korean solution?  It seems improbable.

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Russia’s New Energy Gamble https://www.strategic-culture.org/news/2018/04/22/russia-new-energy-gamble/ Sun, 22 Apr 2018 08:25:00 +0000 https://strategic-culture.lo/news/2018/04/22/russia-new-energy-gamble/ Bruno MAÇÃES

Having abandoned any attempt to join the Western global political order, Russia seems to have quickly found a new self-image: as the center and core of the Eurasian supercontinent, it can reach in all directions and provide a bridge between Europe and China on both ends. In this context, the Middle East has emerged as a central axis of Russia’s strategic concerns, perhaps for the first time in the country’s history.

In his recent book What Is Russia Up To in the Middle East?, Dmitri Trenin shows how the Middle East was always marginal to Russian geopolitical interests. When progressing south, Russian military expansion had its eyes on the Balkans or Istanbul, in some periods extending to British India, Afghanistan or northern Iran, but a serious push beyond those areas was never considered. Against Ottoman Turkey, Russia waged twelve wars. It took the czarist army half a century to prevail over the mountaineers of the North Caucasus. Russia also conquered Central Asia and invaded Afghanistan, a military adventure that left little appetite for a return to the heart of the Muslim world. But neither the Russian Empire nor the Soviet Union had ever fought directly in Arab lands. In 2015, something genuinely new and unexpected took place. Russia stepped into the Syrian conflict.

Any exercise considering what the Kremlin’s intentions and goals might have been has to start by noting how Syria offered a unique opportunity for promoting Russian strategic interests. By 2015 the United States had exhausted all choices there and showed signs of disinterest and disengagement. A Russian military intervention would constitute something of a revolution in global affairs. For the first time since the end of the Cold War, a country other than the United States would be projecting military force far away from its borders without consulting or involving Washington in the decision.

Syria had never been considered important for Russian national interests, but in the new global landscape that would quickly change. After all, Syria was a critical issue for Turkey and Iran. The refugee crisis was affecting the European Union in powerful ways and China saw the Syrian corridor linking West and Central Asia to the Mediterranean as potentially decisive for the “Belt and Road” initiative, its project of trade and infrastructure development across the Eurasian supercontinent.

With every other major actor reluctant to get involved in the Syrian civil war, Russia had an opening—not to solve the political and humanitarian crisis but to become the most important factor in any future solution.

Once these initial elements were considered, more interesting possibilities started to appear. Between 2013 and 2015, the Russian economy had been under extreme pressure, not so much because of the sanctions imposed after the Ukraine crisis but as a result of the precipitous fall in energy prices. As a major oil and gas producer, Russia had neglected to prioritize energy geopolitics, paying a steep price for that. While China, highly dependent on inward energy flows, had spent decades extending its influence and leverage in Central Asia, Africa, and South America—preparing for all possibilities and diversifying energy supply routes—Russia knew it had more energy resources within its borders than it could ever need and customers were forever assured a more or less mechanical result of a growing and more balanced global economy. But that set of assumptions neglected how other producers can hit your interests by manipulating market prices.

By 2015 the Kremlin was certain that the United States and Saudi Arabia were deliberately lowering oil market prices to squeeze Russia and Iran. With their budgets so highly dependent on oil revenues, Iran and Russia could be effectively pressured into limiting their expansionist agendas. One could even hope that they would become more inclined to abandon their nuclear ambitions, in the case of Iran, and aggressions against Ukraine, in the case of Russia.

At the end of 2015, a 10 percent cut in public spending in Russia was the best evidence of the growing stress from the pincer movement of international sanctions and low energy prices in an economy that depends on crude at $100 a barrel. Faced with a direct challenge, Russia decided that the Middle East was now the arena where its future would be decided.

One Map, Three Regions

In October 2017, Rosneft Chief Executive Officer Igor Sechin took the unusual step of presenting a geopolitical report on the “ideals of Eurasian integration” to an audience in Verona, Italy. One of the maps projected on the screen during the presentation showed the supercontinent—what Russian circles call “Greater Eurasia”—as divided between three main regions. For Sechin, the crucial division is not between Europe and Asia, but between regions of energy consumption and regions of energy production. The former are organized on the western and eastern edges of the supercontinent: Europe, including Turkey, and the Asia Pacific, including India.

Between them we find three regions of energy production: Russia and the Arctic, the Caspian, and the Middle East. Interestingly, the map does not break these three regions apart, preferring to draw a delimitation line around all three. They are contiguous, thus forming a single bloc, at least from a purely geographic perspective.

Sechin’s map has a number of other interesting elements. As noted already, Turkey is left on the European side of the line delimiting the energy production core in the west. The same is true for Ukraine, which although unavoidable in this context is still an unusual inclusion in a map sanctioned by the highest echelons of Russian state power. If one looks at the world through the prism of energy geopolitics, then Ukraine is a European country—a consumer, not a producer.

Some of the most persistent foci of conflict in the contemporary world are located on the delimitation line between regions of energy production and energy consumption: eastern Ukraine, northern Iraq, Syria, Afghanistan, and North Korea. The fact may not be entirely coincidental. Many of these transition zones have become valuable prizes in the global fight for energy resources, with major powers often supporting rival internal factions in their bids for influence and control.

In other cases, the “foci of conflict” are transit hubs for energy flows, determining who has control over them in case of future conflict. More interestingly, transition zones are often fault lines between different political and economic models. It seems to be the case, for example, that the attempt to create a form of personal rule in Syria in the absence of oil wealth created the need for sectarian politics.

Sectarianism—the persistent promotion of mistrust and conflict between different ethnic or religious groups—functions as an alternative to oil, a form of compensation for the lack of oil resources such as those at the disposal of royal families of the Arab Gulf. It provides the ruling elite with a third method of obtaining consent from the governed, distinct from both oil patronage and the social rights of a developed democracy. Lost between two competing models, Syria has been unable to develop a genuinely stable variety of consensual politics.

The map illustrates an important point about Russia’s new self-image. From the point of view of energy geopolitics, Europe and the Asia Pacific are perfectly equivalent, providing alternative sources of demand for energy resources. Russia has been struggling to abandon its traditional orientation toward Europe, hoping to benefit from the flexibility of being able to look both east and west to promote its interests. It seems that Sechin and Rosneft can place themselves in that position much more effortlessly.

Sechin’s map subtly makes one final—and decisive—point. As you consider the three areas it delimits, it becomes apparent that two of them are already led and organized by a leading actor: Germany in the case of Europe and China for the Asia Pacific. Production chains within these highly industrial regions are increasingly managed by German or Chinese companies, which tend to reserve the higher value segments for themselves. Their spheres of influence extend to all important inputs, with one glaring exception: energy. In order to address this vulnerability, the two regions of energy consumption will be attracted to the core region, where they need to ensure ready and secure access to energy resources. And their efforts may well be made easier by the fact that the core region of energy production lacks a hegemon capable of ensuring its survival as an autonomous unit in the Eurasian system.

One further and decisive factor must be mentioned here. As the United States drastically increased its oil and gas production over the last ten years—a result of the shale gas revolution—its role in global energy geopolitics started to shift. Two trends have become dominant. First, Washington no longer sees the Middle East as critically important for its safety and prosperity. What was a constant of American foreign policy for almost a century now seems open to revision. If domestic supply can now take the place of imports, the United States is less pressured to invest in peace and stability in the Middle East. It is not difficult to speculate that its response to the Syrian civil war would have been different—much more active and resolute—before the shale gas revolution. This fact naturally opened opportunities for Russia, already discussed above.

Second, the new energy abundance in the United States might justify using energy as a geopolitical tool—steering energy flows and influencing market prices so as to reward friendly states and punish others. As we have seen, the Kremlin grew convinced that the United States was doing just that with regards to Russia and Iran. Attempts to use energy markets to drive geopolitical outcomes reinforced Russia’s conviction that it needed to acquire higher levels of dominance in global energy markets, pushing it to intervene more actively in the Middle East.

It is from this perspective that Russia’s renewed interest in the region must be understood. By consolidating all three energy-producing regions under its leadership, Russia can take the decisive step in shaping the new Eurasian system. Its interests lie more decisively in organizing a common political will for the core region than in recovering the old dreams of integration with Europe.

That the Syria military intervention is now regarded as a success—while the intervention in Ukraine led nowhere—may point to the fact that the former, but not the latter, took into account the facts of geopolitics.

On the one hand, Russia feels at home in the Middle East. The pursuit of shifting goals against a background of persistent chaos or state disorder appeals to Russian strategic culture and its early success in Syria was quickly put to use. Suddenly Russia became an important interlocutor for every country in the region. Turkey, Iran, Saudi Arabia, Iraq, and Israel all have significant interests in Syria, so they all need Russia, the new effective overlord above Bashar Al-Assad. On the other hand, Russian leverage in Europe and China depends on the extent to which Moscow is able to increase its control over energy production. Efforts after 2013 to engage China as a growing destination for its energy exports suffered from the obvious difficulty that China had already developed a diversified pool of suppliers and was therefore in a position to dictate purchasing terms that Russia found unattractive.

That a deal was finally reached with Saudi Arabia at the end of 2016 to collectively reduce oil production and give a boost to global oil prices is a direct result of Russia’s ability to influence decisions in the Middle East. Less than a year later, the agreement achieved its objective of raising oil prices to a level of $60 per barrel. King Salman’s visit to Russia in October 2017 was the first ever by a Saudi monarch. With Russia facing a new set of sanctions, Moscow now appears interested in exploring new sources of investment and capital. They may well include Saudi Arabia, following the announcement of more than $3 billion in potential investment deals upon the king’s visit.

Energy Diplomacy

In two other maps, Sechin proceeded to show how energy projects offer the best example of Eurasian integration. Major companies from Europe, Russia, China and elsewhere typically pool capital and expertise, investing in exploration and refining projects from Scotland and Egypt to Vietnam and Indonesia. Eurasian integration implies the participation of energy consumers in energy production through investments in the shareholder capital of producers. Rosneft is a good example, with 50 percent of shares owned by the Russian state and stakes from BP, Qatar Investment Authority, Glencore, and CEFC China Energy.

Moscow’s attempts to spread itself across the Middle East can be understood through a series of deals signed in the last two years. The oil and gas giant LUKOIL, the second largest company in Russia after Gazprom, is in negotiations to start production at the newly discovered Eridu field in Iraq. Gazprom Neft, Gazprom’s oil arm, has taken exploration blocks in Iraqi Kurdistan while also operating the Badra field in southern Iraq. Rosneft has signed cooperation agreements in Kurdistan and Libya and has bought a 30 percent stake in Egypt’s giant Zohr offshore gas field.

The very same day he delivered his speech on Eurasian geopolitics, Sechin announced that Rosneft would take control of Iraqi Kurdistan’s main oil pipeline, boosting its investment in the autonomous region to $3.5 billion, despite Baghdad’s military action sparked by a Kurdish vote for independence. The move helped shield Kurdistan from increasing pressure from Baghdad.

Two weeks later, Sechin went on to sign a preliminary pact with the National Iranian Oil Company, the first step before a binding deal to participate in Iran’s oil and gas projects over the next few years, with investments totaling up to $30 billion and a production plateau of 55 million tons of oil per year.

Four Russian oil companies have even begun negotiating for opportunities in Syria, a venture driven as much by politics as by commercial interest. The aim is not to explore and extract Syria’s modest petroleum reserves, of course. By actively participating in rebuilding and operating Syrian oil and gas infrastructure, Russian energy companies will be in control of a critical transit route for Iranian and Qatari oil and gas heading to Europe, bringing two rival producers closer to its orbit and tightening its stranglehold on the European gas supply. In 2009, Qatar proposed to run a natural gas pipeline through Syria and Turkey to Europe. Instead, Al-Assad forged a pact with Iran to build a pipeline from the Persian Gulf and then through Iraq and Syria and under the Mediterranean. This project had to be postponed because of the war. When it is resumed, Russia will be in control.

It is in the very nature of the Eurasian system described by Sechin that the core energy production region—provided it is sufficiently united and organized—will benefit from its central position, being able to pick and choose between east and west in order to obtain the most favorable terms. Russia and the Middle East are now part of the same geopolitical unit. It took the Russian military intervention in Syria for the world to start to come to terms with this reality.

thecairoreview.com

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King of Saudi Arabia to Visit Russia: Bringing Relationship to New Phase https://www.strategic-culture.org/news/2017/07/09/king-saudi-arabia-to-visit-russia-bringing-relationship-new-phase/ Sun, 09 Jul 2017 05:45:00 +0000 https://strategic-culture.lo/news/2017/07/09/king-saudi-arabia-to-visit-russia-bringing-relationship-new-phase/ Much has been said about the much vaunted trip of US President Donald Trump to Saudi Arabia where he was lavished with extravagant royal pomp. The $110 billion arms deal was signed and the plans to create an Arab NATO set the agenda. The visit – the president’s first foreign trip – was described as a major step to boost the US clout in the Middle East but the days when the region was Washington’s exclusive sphere of influence are gone.

The Kingdom has launched an ambitious Vision 2030 program to start a new chapter in its history, turning itself from a US dependent oil exporter to a regional powerhouse with diversified economy, gradually opening the doors to the whole world. Investment flows are to come from different directions with money put into different baskets. Saudi Arabia is intensifying its diplomatic efforts to change its perception to start a new era. Russia is viewed as a partner in the far-reaching plans.

The blossoming relationship between Russia and Saudi Arabia signals yet another sea change in the ever-evolving global order. King Salman is to become the first Saudi monarch to visit Russia. The trip is expected this month with talks on the way to specify the date. The visit acquires special importance as the King has taken a decision not to attend the July 7-8 summit of the G20 summit in Hamburg, Germany.

On May 30, President Putin welcomed then Deputy Crown Prince Mohammed bin Salman in the Kremlin and both men said they would deepen cooperation in oil and work on narrowing their differences over Syria. The visit came on the heels of US President Donald Trump’s historic visit to Riyadh.

Prince Mohammed bin Salman was recently appointed to the position of Crown Prince and heir to King Salman of Saudi Arabia. This appointment bodes well for the Russia-Saudi relations. The crown prince has overseen the ties with Moscow and has visited Russia many times. Russian President Vladimir Putin has called him a «very reliable partner with whom you can reach agreements, and be certain that those agreements will be honored».

Russia and Saudi Arabia might launch joint projects in petrochemical industry, in the field of renewable energy and liquefied natural gas (LNG) technologies among others. The Russia-Saudi Arabia brokered and recently extended oil output cut agreement between OPEC and non-OPEC members has become the flagship symbol of cooperation.

On June 2, Russia's largest oil producer, Rosneft, and the Kingdom’s national oil company Aramco announced that they would look into joint investments in Saudi Arabia. The announcement was made after Rosneft head Igor Sechin and Saudi Aramco Chief Amin Nasser had held their first ever formal, scheduled meeting on May 30, going beyond brief encounters at international oil events.

The parties discussed possible ways of cooperating in Asia, including Indonesia and India, as well as in other markets. Cooperation in Asia between the world's two biggest oil exporters would be unprecedented. Saudi Arabia via its oil giant Aramco has openly stated to be interested in global gas investment opportunities, starting in Russia’s Siberian region.

Investments have all chances to be a true ram. Saudi Arabia would particularly consider the issue of participating in the Arctic LNG projects. Russia and Saudi Arabia give indications of a possible OPEC 2.0 scenario, with Russia becoming a member. This would confront the market with a renewed and stronger oil cartel.

Russian gas giant Lukoil has revealed that it will also consider marketing oil alongside Saudi Aramco. Another Russian oil company, Tatneft, has announced it is open for cooperation with Saudi Arabia.

Saudi Arabia has confirmed it would evaluate the possibility of joining Russia's arctic liquid natural gas (LNG) project. Saudi Aramco has always been heavily involved in the gas sector, as it is already a very large gas producer. It is pursuing shale gas in the future, with first production expected around 2020-2021.There are prospects for OPEC – non-OPEC cooperation going beyond crude oil to integrate the Gas Exporting Countries Forum (GECF). A new cartel would be powerful enough to stabilize the energy market and protect it from negative developments.

The parties do not agree on Syria and some other issues but the differences in political contacts are limited and do not affect the neutrality of Riyadh with respect to Crimea, the events in Ukraine and sanctions against Russia, which Saudi Arabia has never joined.

According to Dmitry Shugaev, the head of Federal service on military-technical cooperation (FSMTC), arms deals are being discussed. Russia's Rostec state corporation has been in talks with Saudi Arabia and on the T-90S third-generation main battle tanks deal. Riyadh wants to purchase Russia MiG-35 lightweight fighters. S-400 cutting edge air defense systems are also on the table.

No doubt, the Qatar crisis will be part of the agenda. Russia has not taken sides in the current dispute between Qatar and other Arab states and it has a recent history of cooperation with all sides of this conflict. As a result, Russia is well suited to act as a mediator and a communications channel between Riyadh and those who support Doha – such influential actors as Iran and Turkey.

Evidently, Saudi Arabia wants to introduce adjustments to its policy of one-sided focus on the United States. Russia has improved its strategic stance in the region significantly in recent years. The King’s visit will be a "turning point" in relations between the two countries. Riyadh’s desire to boost the relations with Moscow can be seen as a shift to affect the political dynamics of the Middle East and even global politics. 

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Gauging the Energy at SPIEF 2016 https://www.strategic-culture.org/news/2016/06/26/gauging-energy-spief-2016/ Sun, 26 Jun 2016 03:45:11 +0000 https://strategic-culture.lo/news/2016/06/26/gauging-energy-spief-2016/ The state of the global oil market and the future of Russian gas-sector projects were the focus of the discussions at the 20th St. Petersburg International Economic Forum 2016 (SPIEF 2016). The substance of the discussions once again suggested that Russia will continue to remain a key player in the global oil industry and in Europe’s energy security.

The most important energy issues at the forum were addressed at a special session, «The World Oil Market at a Crossroads: Investing in Uncertainty or Managing Risk?» hosted by Rosneft. The leaders of the world’s largest oil and gas companies took part in the session – Robert Dudley (BP), Patrick Pouyanné (Total), Lorenzo Simonelli (GE Oil & Gas), Eulogio Antonio Del Pino Diaz (Venezuela’s oil minister and the head of PDVSA), and Rex Tillerson (Exxon).

«Oil production in Russia will remain stable until 2035», was the prediction by the chairman of the Rosneft oil company, Igor Sechin. He claims that the crisis caused by global oil prices has pushed three major oil-producing countries with the necessary resources and geological potential to center stage – Saudi Arabia, the US and Russia. But, even if current oil prices lead to a recovery in US shale production, that will no longer be a sector of explosive growth. Russia’s industry has great potential and at low prices, Sechin stressed.

In recent years, two ideas on the world oil market have gradually been abandoned, one of which focused on the crucial regulatory role of OPEC and the other on the prospects for a fundamental reshaping of the oil market as a result of the American «shale revolution». Neither of those concepts remains credible in today’s environment, due to the fact that the oil market has become more multipolar.

It’s symptomatic that last year one of the most imposing and active delegations at SPIEF came from Saudi Arabia, but now that country’s leaders have turned their attention to domestic issues. «Today, faced with the collapse in oil prices, Saudi Arabia is experiencing financial difficulties and can no longer affect to be a welfare state, generously redistributing its oil revenues», states Roland Lombardi, an analyst at JFC-Conseil. «According to the IMF, the Saudis’ reserves are evaporating and the kingdom can’t hang on even another five years at this rate», writes Mr Lombardi, concluding gravely, «Personally I think that Turkey and Saudi Arabia are now the «two sick men» of the Middle East».

In the near future we can expect Saudi Arabia to take new steps to reach agreements with Russia on joint oil-production limits. Riyadh is pointing to the new deliveries of Iranian oil to Europe as evidence of a threat to both Saudi and Russian interests. In turn, Venezuela’s oil minister has suggested that if OPEC countries do not take immediate action, global oil prices for winter 2017 could plummet to $20 per barrel.

Some specific projects have emerged as an important signal of new trends in the energy sector. In particular, according to information from Russian Novatek, China’s CNPC and France’s Total have expressed interest in taking part in the Arctic LNG-2 project. According to the chairman of the board of Novatek, Leonid Mikhelson, the company intends to finalize the conceptual design behind Arctic LNG-2’s technology this year. Production lines with a capacity of six million tons per year are being studied. Earlier it was reported that the project might have a yield similar to that of the Yamal LNG plant currently under construction (which boasts three production lines, each with an annual capacity of 5.5 million tons). The new plant will draw on deposits that have total reserves of 385 billion cubic meters of gas. India, Pakistan, and Southeast Asia represent a promising market for the new plant’s output, as they currently consume over 75% of the world’s LNG and continue to lead the way in terms of growth in demand. It is estimated that by 2025 the region’s LNG needs will expand by an additional 120 million tons per year.

Non-OPEC countries are exerting increasing influence on the global oil market. Declining oil production in those countries, along with continued stable demand for oil, could become a key factor in stabilizing the global market.

According to the latest report by the International Energy Agency (IEA), total world oil production decreased in May 2016 by 800,000 bbl/d. This was the first significant reduction in oil output since the beginning of 2013, and the drop in oil production in the US and Canada – non-OPEC countries – played a key role in this.

The outcome of the last OPEC summit did not in itself have any real influence on price behavior. Both before and after the cartel’s forum, July futures for Brent crude continued to trade at around $50 a barrel – the highest level since November 2015.

IEA analysts emphasize that «[U]nexpected supply cuts and outages in North America, Africa, and South America dampen global production forecasts», in part referring to production problems at American and Canadian oil companies.

Given the close link between the production/pricing indexes for oil and gas, new developments on the global oil market will inevitably have a rapid and significant impact on the future of gas projects, including those that affect Europe’s energy security.

With the rally in global oil prices and the growing uncertainty on the oil markets, long-term contracts to supply gas to Europe are becoming particularly significant. Those allow Europeans to secure additional guarantees of gas delivery, while also allowing them to negotiate routine price discounts.

Calculations of the financial and economic efficiency of the Nord Stream 2 project indicate that gas shipped through this pipeline will be 20% cheaper for Europeans than the current supplies that arrive via Ukraine. And let us not forget that it is precisely in northwestern Europe where we are currently seeing increased demand for Russian gas, i.e., in the target region for the Nord Stream 2 project. This makes it possible to create a unified, efficient transportation infrastructure that will connect the yield of the Bovanenkovo – Ukhta and the Ukhta – Torzhok pipelines to that future gas line.

Long-term calculations also suggest that the downward trend in domestic gas production in Europe will persist despite growing demand.

Speaking about the status of the Nord Steam 2 project, Gazprom CEO Alexey Miller stated that the work is proceeding «according to plan» and that the task of laying the pipeline will begin in early 2018.

And while on this subject, special mention should be made of one factor that is key for all European consumers. Nord Stream 2 in no way threatens the energy security of Central and Eastern European countries that currently use the existing transit routes for obtaining Russian gas. Moreover, the expansion of transit capacity will allow those countries to offset any supply shortages if gas transit through Ukraine is cut off or reduced.

One such country is Slovakia, which gets almost 100% of the gas it needs from Russia (Estonia, Hungary, Bulgaria, the Czech Republic, Latvia, Lithuania, and Poland are in a similar situation). In 2015, Gazprom supplied 3.8 billion cubic meters of gas to Slovakia, plus the Slovaks take in approximately 700-800 million euros each year in transit fees.

And Russia has already confirmed its readiness to hook Slovakia up to the new European gas transportation infrastructure. According to Russia’s minister of economic development, Alexei Ulyukayev, Moscow is prepared to eliminate Slovakia’s risk of lost income from gas transit, by supplying gas to that country via the Nord Stream 2 system. He claims that it is possible for gas from Nord Stream 2 to travel south after leaving Germany, through Austria and Slovakia, and then onward to Hungary and the Balkans. In addition, the Russian minister has stated that no one is preparing to abandon the transit route through Ukraine: all existing transit agreements will be honored – the contract is valid until 2028 and is incontestable.

In addition to Slovakia, Hungary could hold an important place in the new gas pipeline structure. Pal Sagvari, Ambassador-at-Large for Energy Security at the Hungarian Ministry of Foreign Affairs, has already stated that Budapest views Nord Stream 2 as «a very powerful project».

Finally, another important component of Europe’s new architecture of energy security is the development of projects in the Mediterranean that include Russian input. Russian President Vladimir Putin was clear about this in an interview with journalists from the leading foreign news agencies. «Regarding our interest in Mediterranean projects, it is still there. As you know, Gazprom signed a memorandum with an Italian company and a Greek one to look for cooperation options. We are considering this opportunity as well», noted President Putin. At the St. Petersburg forum, Italian Prime Minister Matteo Renzi confirmed, «I am prepared to bet that the energy vector will remain a top priority and that with common sense, solutions will be found».

Thus, the general trends on the global oil and gas markets – despite their complexity – suggest a gradual recovery in oil quotes and a corresponding increase in world gas prices, as well as the advantages of long-term gas contracts and the cost-effectiveness of the new architecture for gas lines as proposed by Russia. And the Nord Stream 2 pipeline system should play a central role in ensuring Europe’s energy security, along with the simultaneous development of projects in the Mediterranean.

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Russia – Iran: Western Sanctions as a Stimulus for Development of Relations https://www.strategic-culture.org/news/2014/05/14/russia-iran-western-sanctions-as-stimulus-development-relations/ Tue, 13 May 2014 20:00:01 +0000 https://strategic-culture.lo/news/2014/05/14/russia-iran-western-sanctions-as-stimulus-development-relations/ Relations between Russia and Iran are experiencing a stage of dynamic development. Both parties are making significant efforts to reach a qualitatively new level of cooperation in all areas of interstate relations. Great expectations are attached to the upcoming visit of Russia's president to Iran. This could very well take place in the first half of this year. The schedule for Iranian president Hasan Rouhani's participation in the Caspian summit in Astrakhan in September 2014 has also been fully coordinated…

The fast pace of dialog between the two countries testifies to the active preparations for the summit among the Russian and Iranian leadership. The period of December 2013 – April 2014 saw an exchange of visits of foreign ministers and intergovernmental contacts in the area of economics. Among the latter, one should note the visit of Russian Minister of Energy Aleksandr Novak to Tehran. The productivity of the visit of the head of Russia's Ministry of Energy, who is also the co-chairman of the Permanent Russian-Iranian Commission for Trade and Economic Cooperation, was closely linked with earlier agreements between the parties on the highest political level. Presidents Vladimir Putin and Hasan Rouhani met on the sidelines of the SCO summit in Bishkek on September 13, 2013. The agreements reached at that time between Moscow and Tehran were not set down in a written document, but the idea of the «Bishkek Agreements between the two presidents» has become part of expert assessments and politicians' statements. The Iranian ambassador in Moscow, Mehdi Sanaei, described the Putin-Rouhani meeting as «a vivid event which in the future will be inscribed in the history of relations between the two countries». During a conversation with the president of the IRI on April 28, Minister of Energy Novak emphasized that the Russian president is personally monitoring the implementation of the agreements reached in Bishkek and paying special attention to relations with Iran in general. 

Within the scope of the agreements between Russia and Iran are the resolution of the dispute over shipments of Russian S-300 missile defense systems to Iran and construction of a second power producing unit at the nuclear power plant in Bushehr, Iran by Rosatom. Now the parties' attention is focused on an oil deal in which Russia could take on the unaccustomed role of a large importer of energy resources from the Middle Eastern region. A shift toward the resolution of any of these issues will bring the parties closer to progress in related areas as well. Moscow and Tehran are trying out the package method of achieving results, comprehensively encompassing all relevant areas of cooperation. For example, the following scenario is possible: Iran would withdraw its arbitration claims against Russia in connection with the breaking of the 2007 contract (for the delivery of five divisions of S-300 PMU-1 systems), after which the parties would launch extensive military technical and economic cooperation with an emphasis on energy. 

The Iranians are inviting companies from Russia to take part in projects for developing their railroad system. The package format for future agreements can be seen here as well. Russia could set up joint production of rails with its Iranian partners, supply rolling stock, and work on the electrification of the IRI's main rail lines. In 2012 Russian Railways completed the electrification of a 46-km line between Tabriz and Azarshahr. New projects are on the agenda for Russian rail workers and their Iranian colleagues.

The West's course of imposing sanctions against Russia objectively brings Moscow and Tehran closer together. One of the West's goals for its policy of isolating Iran in previous stages was maximally complicating its relations with Russia. This goal has not lost its relevance even after the process of improving relations between Western states and Iran started on November 24, 2013. Washington is reacting very nervously to the oil contract being discussed by Moscow and Tehran. After all, Iran will not simply send a certain volume of black gold north (Russian companies are prepared to acquire 500 barrels of oil a day from their Iranian partners) and receive needed goods for it; the possibility of Iran paying for other services from Russia with oil is also under consideration. For example, those related to the implementation of projects for building a second power producing unit at the Bushehr nuclear power plant, the laying of power lines from Russia through Azerbaijan to northern provinces of Iran, and the construction of new generating capacities for Iran and the modernization of existing ones. Russian-Iran projects in the field of electric power alone could amount to $10 billion (construction of a hydroelectric plant and export of 500 MW of electric power from Russia to Iran). 

Iran could pay for part of potential orders of Russian goods and services with oil in such projects under discussion as shipments of grain and technical equipment to Iran as well. Circumventing systems of paying for Iranian oil with «cold cash» is made necessary by the continued regime of harsh financial and trade limitations imposed on the IRI in relations with foreign partners. If you add the attempts of Russia and Iran to transition to using their own currencies in their payments, U.S. fears of «losing control of the situation» becomes even more pronounced. After all, if the Russian-Iranian oil contract is implemented, the total export of Iranian oil could exceed the threshold of 1 million barrels a day agreed upon in the interim agreement reached with the P5+1 on November 24, 2013.

As far as one can judge from statements made by Washington, the U.S. administration has no clear-cut plan with regard to improving relations with Iran or in its policy of pressuring Russia with sanctions with the goal of isolating it. In taking steps to hinder closer relations between Tehran and Moscow, the U.S. is reminiscent of a tightrope walker who has frozen midway across and risks losing his equilibrium. It is doubtful that it will be able to balance in this position for long. The Americans emphasize that the sanctions against Russia are a process of which even the interim results cannot be assessed. As for Iran, it has already built up a certain immunity to the problems which arise in connection with the imposition of sanctions. It also has experience in counteracting sanctions. 

By broadening and deepening their ties, Russia and Iran will demonstrate the futility of attempts by outside forces to affect this process. The relations of the two natural partners can be slowed, and even for a long time, but the superpower, which has lost its sense of reality, is unable to hinder their development. The sanctions which Washington would like to make a show of the United States' power will have the opposite effect; they only reveal the uncertainty of the American «tightrope walker's» steps in resolving acute international problems.

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The FIRST REAL Russian Retaliation for US-led Sanctions: Far More Harmful to… https://www.strategic-culture.org/news/2014/04/08/first-real-russian-retaliation-for-us-led-sanctions-far-more-harmful/ Mon, 07 Apr 2014 20:00:26 +0000 https://strategic-culture.lo/news/2014/04/08/first-real-russian-retaliation-for-us-led-sanctions-far-more-harmful/ It starts:

Rosneft has recently signed a series of big contracts for oil exports to China and is close to signing a “jumbo deal” with Indian companies. In both deals, there are no US dollars involved.

Reuters reports, that Russia is close to entering a goods-for-oil swap transaction with Iran that will give Rosneft around 500,000 barrels of Iranian oil per day to sell in the global market.

The White House and the russophobes in the Senate are livid and are trying to block the transaction because it opens up some very serious and nasty scenarios for the petrodollar.

If Sechin decides to sell this Iranian oil for rubles, through a Russian exchange, such move will boost the chances of the “petroruble” and will hurt the petrodollar.

It can be said that the US sanctions have opened a Pandora’s box of troubles for the American currency.

The Russian retaliation will surely be unpleasant for Washington, but what happens if other oil producers and consumers decide to follow the example set by Russia?

During the last month, China opened two centers to process yuan-denominated trade flows, one in London and one in Frankfurt.

Are the Chinese preparing a similar move against the greenback?

We’ll soon find out.

The US has, to use the phrase du jour, a great deal of “privilege” because the US dollar is the standard unit of trade, most significantly, trade in oil.  If you get frozen out of the dollar, you get frozen out of a large part of the world economy.

American sanctions can virtually destroy a country, as banks, even non-American banks, won’t do business with a country the Treasury department has forbidden doing business with.

Breaking that—moving to a multilateral world, or to a world where trading in Yuan is just as acceptable, goes a long way to breaking American power.

In general, the Europeans will follow the US lead, so moving to the Euro provides no protection from America.

 

 

But moving to the Yuan and the Ruble, does.

Pricing large oil transaction in rubles also helps protect the Russian currency from large moves: if the ruble drops too much, people will go into it if you can buy oil in rubles, and the Russians are opening a futures operation as well, meaning traders can make that play, even if the US doesn’t like it.

Of course, the US could go harder in sanctions, making it difficult to take those winnings and get them back into dollars or Euros, but if the trade is large enough, Chinese and Oilarchy banks will clean the money and hide the flows.

London and New York will then want to get in on it, and will, through their offshore subsidiaries in various banking havens.

Note also the poke in the eye: the deal to take Iranian oil and sell it as Russian oil, bypassing the sanctions against Iran.

All of this is far more harmful to America’s real interests than any sanction the US has so far imposed on Russia.

By Ian Welsh, 4thmedia.org

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Economic Cooperation Prevents Conflict of Interests in the Arctic https://www.strategic-culture.org/news/2013/02/20/economic-cooperation-prevents-conflict-interests-in-arctic/ Tue, 19 Feb 2013 20:00:04 +0000 https://strategic-culture.lo/news/2013/02/20/economic-cooperation-prevents-conflict-interests-in-arctic/ New technologies and climate change have significantly raised the profile of Arctic resources for the global economy. According to the Economist, the Arctic is warming twice as fast as the rest of the planet. Many experts quoting Alfred T. Mahan’s work «The Influence of Sea Power Upon History» agree that seaborne commerce in the High North will become an important geopolitical factor over the next several decades. Prospects of political dominance in the Arctic provoke heated debates sometimes overdramatised by the media. But realpolitik dictates that all states concerned should rely on existing legal and institutional framework enabling peaceful cooperation.

Looking beyond the media hype we should admit that political tension in the Arctic is low today. Nevertheless, business competition may create challenges in the future. Luckily the Arcitc Council has already established all necessary mechanisms to deliver credible and balanced regional management. If we want to understand the Arctic better, the situation analysis should cover three important areas: military aspects, legal environment and energy policy.

Speaking about power politics the U.S. military planners currently consider the Arctic to be «an area of low conflict». Swedish experts agree with American conclusions. Background paper «Military Capabilities in the Arctic» (SIPRI, 2012) says, that power projection into the Arctic in 2010-2011 was very limited. The Arctic states maintain military presence in the region only to patrol and protect sovereign territories. There is no sign of military standoff along the borders – the situation is stable and predictable. Therefore any extension of NATO’s engagement in the Arctic is counterproductive, because it could renew tensions nonexistant since the end of the Cold War. As the Russian Foreign Minister Sergey Lavrov put it in 2011, «there is no reason for drawing NATO into Arctic affairs». The Arctic is a zone of peace now and should remain so.

From the legal point of view the status of the Arctic is already specified in the provisions of the international law. The Arctic Council and the Ilulissat Declaration (Greenland, 2008) provide a solid institutional and legal foundation for responsible management of the Arctic by the five coastal states. Under the Ilulissat declaration any demarcation issues in the Arctic should be resolved on a bilateral basis between contesting parties. Besides, all members of the Arctic Council except the U.S. ratified an important treaty – the United Nations Convention on the Law of the Sea (UNCLOS). Norway and Denmark also made an official submission into the UN Commission on the Limits of the Continental Shelf. Russia's final claim to a portion of the Arctic shelf would be filed with the Comission by December 2013, according to Arthur Tchilingarov, the veteran explorer who led the expedition to plant a Russian flag on the seabed at the North Pole in 2007.

As to energy policy the members of the Arctic «five» have preferential rights to tap its resources. It should be noted, that 97% of the discovered and potential reserves of the Arctic are located under the sovereign jurisdiction of the Arctic states. Concerned countries especially China and some members of the EU should consider that there is no «unclaimed» territory in the region. However, third parties can freely apply for a mining claim through bilateral agreements. Most probably the Arctic sweet spots will be developed on the basis of public–private partnership.

The latest example is the $500 billion offshore venture deal between Rosneft and Exxon Mobil. The contract will grant Exxon preference to develop three vast untapped fields in the Russian Arctic Kara Sea, with hydrocarbon reserves estimated at 85 billion barrels of oil equivalent. This high profile business initiative brings hope for productive cooperation, despite all political differences. The common ground, although of purely economic nature, is a fine example of civilized approach to energy policy in the Arctic. We cannot but hope it will set benchmarks for all players in the market – both public and private. 

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