Power Politics: Power Politics: Russia and its “Near Russia and its “Near

Abroad”Abroad”Dr. Theresa Sabonis-Helf Dr. Theresa Sabonis-Helf National War College National War College

February 2009

Regional primary energy consumption patterns 2007

coal

hydronuclear

gas

oil

From BP Statistical Review of World Energy 2008

Blue designates members of OPEC

Green designates oil producer (non-OPEC)

Base map: www.petroleumgraphics.com; Million Bbl/Day data from US Dept. of Energy EIA 2008

China: 3.8

Russia: 9.7

Kazakhstan: 1.4

Nigeria: 2.4

Angola: 1.8

Libya: 1.8

Norway: 2.8

Saudi Arabia: 10.7

Iran: 4.1

Iraq: 2.0

Algeria: 2.2

Kuwait 2.7

UAE: 2.9 Indonesia: 1.0

Qatar: 1.1

2007 Oil Producers

(mil bbl/day)

UK: 1.7

Mexico: 3.7

Canada: 3.3

United States: 8.3

Venezuela: 2.8

2007 Oil ProducersBase map: www.petroleumgraphics.com; Million Bbl/Day data from US Dept. of Energy EIA 2008

Brazil: 2.2

Ecuador: 0.5

Blue designates members of OPEC

Green designates oil producer (non-OPEC)

World Oil Reserves by Country, as of January 1, 2005(billion barrels)

0 50 100 150 200 250 300

Rest of WorldOman

AzerbaijanNorway

KazakhstanBrazil

AlgeriaMexico

QatarChina

United StatesNigeria

LibyaRussia

VenezuelaUAE

KuwaitIraqIran

CanadaSaudi Arabia

Oil & Gas Journal, "Worldwide Look at Reserves and Production,“ Vol. 102, No. 47 (December 20, 2004).

World Total =1,278 Billion Barrels

Swing Capacity

Bab el-Mandab 3.0Bosporus/Turkish Straits 3.1Strait of Hormuz: 17

Strait of Malacca 11.7 Russia 2.0 Suez Canal/Sumed: 4.2 Panama Canal: 0.6

7

2

3

4

5

6

7

5

6

1

1

2

3

4

Oil Chokepoints (Millions of Barrels per Day)

Data from US Dept of Energy EIA 2005 (2004 estimates)

Oil in the Region: 1000 Barrels/Day

RussiRussiaa

KazakhstKazakhstanan

AzerbaijaAzerbaijann

2002 7659 968 315

2003 8535 1062 325

2004 9274 1246 318

2005 9511 1337 440

2006 9675 1387 647

2007 9874 1444 848

Data from EIA 2008

Canada’s OilDomestic Impacts of Oil Domestic Impacts of Oil WealthWealth

● Boom and bust economic cycles ● Dutch Disease● No taxation, no representation syndrome● Economic and political development of petrostates has had limited success● High levels of corruption are endemic● State incurs obligations that are hard to rescind

Thomas Friedman’s First Law of

Petropolitics

From Foreign Policy May/June 2006

Oil & Gas RevenuesOil & Gas Revenues

AzerbaijanAzerbaijan KazakhstanKazakhstan RussiaRussia

Oil accounted for 20% GDP in 2007

Oil and gas accounted for 30% GDP in 2007

Oil and gas accounted for 25% GDP since 2003

Oil fund assets: $2 Billion as of December 2006, expected to reach $36 Billion by 2010.

Oil Fund assets: $20 Billion as of October 2007

Stabilization fund by end 2006: $80 Billion

Baku-Supsa Oil Pipeline145,000 B/day(1999)

Existing Soviet Oil Pipelines

“Chechen Loop”

Baku-Tbilisi-Ceyhan Pipeline (BTC)1,000,000 B/Day (2006)

Caspian Pipeline Consortium (CPC)

700,000 B/Day (2001)

Iran “Swap”80,000 B/Day

Map by Gavin Helf

Kazakhstan- China Pipelline 200,000 B/Day (2006)

Where are the Hydrocarbons?

Proven Oil Reserves 2007Proven Oil Reserves 2007 Proven Nat. Gas Reserves Proven Nat. Gas Reserves 20072007

From BP Statistical Review of World Energy 2008

European Reliance on Russian Natural Gas (2006-

2007)RankRank Country Country

(bcf in 2007)(bcf in 2007)2006 % of 2006 % of

Dom. Cons.Dom. Cons.

1 Germany (1,378 bcf)

36%

2 Turkey (827 bcf) 64%

3 Italy (742 bcf) 25%

4 France (346 bcf) 20%

5 Czech Rep (247) 79%

6 Poland (247 bcf) 47%

7 Hungary (226 bcf) 54%

8 Slovakia (223 bcf) 100% Data from EIA Russia Country Report 2008

Russian Oil and Russian Oil and Gas Pipelines to Gas Pipelines to Europe: Actual Europe: Actual & Proposed& Proposed

Data from US Dept of Energy EIA 2008

Russian Gas Sales Prices 2008($ per thousand cubic meters)

European Market priceEuropean Market price $370.00$370.00

Lithuania (~78% of supply) $280.00

Latvia (~ 78% of supply) $280.00

Estonia (~78% of supply) $280.00

Georgia (100% of supply) $230.00

Moldova $191.25

Ukraine (66% of supply) $179.50

Belarus (Q1) (98% of supply) $119.00

Armenia $110.00Data from EIA Russia Country Report May 2008

Russian Nord Stream Natural Gas PipelineFacts

Route: Portovaya Bay, Russia to coast Germany (underwater) – Baltic Sea

Capacity: 27.5 billion cubic meters (2010); 55 bcm (2012 – 2nd pipeline)

Length: 1,200 km (World’s largest underwater natural gas pipeline – max depth: 210 meters)

Cost Estimate: 5 Billion Euros (60% Increase – 8 Billion Euros) – Cost 2.2 Billion Euros if built on land

Supply: Shtokman gas field (estimated reserves of 3.7 trillion cubic meters – 2010 available)

Shareholders: Gazprom (51%), BASF (24.5%), E.ON (24.5%)

Contracts: Wingas – German Gas Co. – 9 bcm for 25 yrsDONG – Danish Co. – 1 bcm for 20 yrsE.ON – German Co. – 4 bcmGaz de France – 2.5 bcm

Slide courtesy of Nelson Dodd, NWC Elective 5404

Map from RAO-UES Annual Report 2003

RAO-UES Electricity Grid (Western View)

Arm Azer Geo Kaz Kyr Taj Tkm Uzb

Main Type of Generation

Nucl Ther Hydr Ther Hydr Hydr Ther Ther

Synchronized

X X X X X X X* X

Transmission

X X X X X X --- X

Generation X --- X X X X --- ---

Debt for equity

X --- X X X X --- ---

RAO-UES Interest/ Involvement

* partial parallel

Foreign Presence in Energy Sectors

Armenia Azerbaijan GeorgiaNational partners

Russia, Iran Russia, Georgia, Turkey, Iran

Russia, Azerbaijan, Turkey

Energy Sources

Nuclear, hydroImports nat. gas

Oil, Gas (international private investments)

Hydro, Imports nat. gas

Exports Swaps electricity for nat. gas w/ Iran

Oil to world market,Gas to Georgia & Turkey , Swaps nat. gas w/ Iran (for Nakhchivan)

Negotiating re management of Enguri HPP (Abkhazia)

RAO-UES investment

Extensive Russian ownership

Linked to overall grid, no ownership inside Azerbaijan

Extensive Russian ownership

Gazprom involvement

Owns some pipelines and distribution, power plants

Negotiating to purchase gas and/or gas swaps(Azer was an importer until Winter 2007)

Georgia receives 10% of gas supplied to Armenia

Nuclear Energy

Russia

Kazakhstan

Kyrgyzstan

TajikistanTurkmenistan

Uzbekistan

Azerbaijan

Armenia

Georgia

Ukraine

Moldova

Belarus

LithuaniaEstonia

Latvia

Active RBMK Reactors

Mothballed RBMK Reactors

Mothballed Breeder Reactor

Active Breeder Reactor

Active VVER Reactors

All Reactors

Questions?