Reheating the Cold War

Three assaults on the Kremlin within the month must be extraordinary even by Cold War standards. They prompted Anatol Lieven, a prominent American scholar on Russia, to pose a rhetorical question: "Why are we trying to reheat the Cold War?"

It all began with a 94-page report released by the influential think-tank
the Council on Foreign Relations on March 5 titled "Russia’s Wrong
Direction: What the United States Can and Should Do". It concluded that
Russia’s foreign and domestic policies had taken directions that hurt US
global interests; that a US-Russian partnership was no longer feasible; and
that the US should lead a coordinated Western policy of "selective
cooperation" with Russia, a variant of the policy of detente during the Cold
War years.

Then appeared, hardly a week later, the annual human-rights report issued by
the US State Department, which roundly criticized the Russian leadership of
President Vladimir Putin for authoritarianism by "virtually stripping
parliament of power ... continuing media restrictions and self-censorship
... continuing corruption and selectivity in enforcement of law, political
pressure on the judiciary, and harassment of some non-governmental
organizations", all of which has resulted in an "erosion of the
accountability of government leaders to the people".

This was followed within a week on March 16 by the White House blueprint
called the National Security Strategy, which in a distinct hardening of tone
toward Moscow not only called on Russia to respect freedom at home, but
specifically warned that the Kremlin’s "efforts to prevent democratic
development at home and abroad will hamper the development of Russia’s
relations with the US, Europe and its neighbors".

The same day, while on a visit to Australia, US Secretary of State
Condoleezza Rice expressed concern over the "centralization of power in the
Kremlin" and spoke about the danger that "by its very existence, a
presidency that is strong without countervailing institutions can be
subverted, can subvert democracy".

Rice, speaking to a town-hall audience in Sydney, saw "a very difficult and
shaky path" right now for Russian democracy, and expressed the hope that the
Russian people "will find their voice to demand accountable, transparent
institutions and to demand the ability to organize themselves to petition
their government and, if necessary, to change their government".

A "regime change" in Russia! Lieven wrote in his article featured in the Los
Angeles Times of March 18 that historians of the future would look back with
amazement that "hardliners within the Bush administration, and especially in
the office of Vice President Dick Cheney, are arguing for a new line against
Moscow along the lines of a scaled-down Cold War" and that they advocate
forming "anti-Moscow military alliances" and giving "overt support" to
Putin’s domestic political opponents.

Lieven took apart the different facets of the "unrealistic, aggressive and
dangerous" US policies toward Russia now being urged, especially the tirade
on democracy, given the United States’ support of former president Boris
Yeltsin’s "pseudo-democracy ruled over by corrupt and brutal oligarchical
clans".

These assaults may appear untimely. Post-Soviet Russia has eschewed any
confrontation with the US in the international arena - even in the face of
the eastward expansion by the North Atlantic Treaty Organization (NATO) and
the specter of an unprecedented and provocative military encirclement by the
US in its "near abroad".

Besides, if Putin himself is at the peak of his presidential power, that is
also largely due to his immense popularity among Russia’s population based
on a successful track record of his presidency that brought the country
economic prosperity, much-needed political stability and foreign-policy
achievements.

To be sure, the Russian economy has significantly recovered in recent years,
registering budgetary surpluses for five consecutive years; Russia has built
up foreign-currency reserves of US$180 billion; it has been able to make its
debt repayments ahead of schedule; the Russian economy has begun integrating
into the world economy.

But Russia today is not a superpower, and is nobody’s enemy. Besides, it
still has to address a host of internal problems, some of which, such as the
decline in population or the misgovernance in its North Caucasus regions,
are very profound and do not lend themselves to easy solutions.

So what is the casus belli of the Cold War-like rhetoric against post-Soviet
Russia? One problem in finding an answer will be that the sources of the
Cold War still lie obscure in many ways.

Alleged "communist expansion" in the post-World War II years apparently led
to the initiation of confrontation in British-American policies toward the
Soviet Union, but scholars chronicling the war, including the late George
Keenan, have admitted that the slide toward the Cold War was at the very
least a two-way process. Many today are willing to admit that the US and
Britain bore much of the blame. But the role played by the incessant
Anglo-American determination to exercise control over the world’s oil
resources remains largely overlooked.

Global fault lines

The current fault lines in the international system came to the surface at
the meeting of energy ministers that Russia convened in Moscow on March
13-14 with its partners among the Group of Eight as a prelude to the G8
summit meeting in St Petersburg this July, where Russia has tabled energy
security as the No 1 agenda item for discussion.

In a nutshell, the G8 energy ministers’ meet showed that Russia saw its
energy sector as a national-security asset, while the US lamented that
energy security had become the "albatross" of its national security.

The Kremlin is not willing to loosen its grip on Russia’s oil-and-gas
industry, while the European Union on the other hand calls on Russia to
liberalize Western access to its gas-pipeline network (calling on Russia to
ratify the Energy Charter, which aims at setting ground rules and treaty
obligations regarding third-party pipeline access and transit obligations).
And both the EU and the US argue that market-based solutions are more
reliable and flexible, while demanding that the Kremlin should preferably
revert to the privatization of its oil industry, as in the early years of
post-Soviet Russia under Yeltsin, or at least allow participation by the
Western oil companies on more liberal terms.

The EU and the US view energy security in terms of guaranteed supplies of
energy through vicissitudes of politics, while Russia says the paradigm of
energy security also includes ensuring "security of demand", which means
allowing its oil and gas companies to invest in the vast distribution
networks in Europe and the US at the wholesale and retail marketing levels
as well and in acquiring properties in the energy sector. This would require
the EU and the US to liberalize their own energy markets.

In an overarching philosophical sense, the EU and Russia visualize a
dialectic involving the interests of the energy-consuming and transit
countries and those of oil-exporting countries, whereas Russia refuses to be
drawn into stereotyped modes of behavior in the era of globalization.

Underlying these differences lies the US perception that Russia is
increasingly using energy as the primary lever of the country’s foreign
policy, and that Russia’s growing role in the world energy markets is
determining its geopolitical influence.

In other words, the Western perception is that energy is being refined by
the Kremlin as a far cheaper and far more effective way of expanding global
influence than the tanks and missiles that the Soviet Union amassed at
enormous cost, which drained resources and ultimately led to the weakening
of the Soviet state structure.

Beyond these factors, the US, as the sole superpower, also has a
psychological problem of having to deal with a resurgent Russia. As a
respected Russian political observer, Vitaliy Tretyakov, editor-in-chief of
Politichiskii Klass, recently wrote, "Russia today is not a world superpower
like the Soviet Union was, but it has preserved its many qualities of a
superpower: gigantic territory, huge natural resources, nuclear weapons,
space technology, scientific potential, atomic technology and energy
resources, a defense industry that is actively working for export ... and
the permanent membership at the United Nations Security Council."

But Russia sees the situation differently. It has threat perceptions of its
own, as spelled out in its National Security Concept of 2000 (dubbed by the
West the "Putin doctrine"): appearance of foreign military bases and
contingents in Russia’s neighborhood; overall decline in post-Soviet
Russia’s political, economic and military influence; NATO’s eastward
expansion; and weakening of the integration processes within the
Commonwealth of Independent States (CIS). In addressing these threat
perceptions, Russia sees energy as a trump card of great potential, if
astutely played.

The big energy question thus began accumulating in recent years on the plate of Russia-US relations.

A defining moment came in September, when Russia concluded a $5.7 billion
deal with Germany in laying a 1,200-kilometer gas pipeline with an annual
capacity of 55 billion cubic meters connecting Russia’s Black Sea coast,
through international waters offshore Poland and the Baltic states, with
Greifswald on Germany’s coast.

The pipeline indeed has the potential to alter Europe’s political landscape.
In the words of a leading research fellow at the Economics Institute of the
Russian Academy of Sciences, Igor Tomberg, "Stable supply of energy to
Europe in the next few decades will depend on relations with Russia."

In September, again, Russia’s Gazprom shortlisted five oil majors for the
development of the huge Shtokman natural-gas field in the Barents Sea, with
an estimated reserve of 3.2053 trillion cubic meters of natural gas and
30.98 million tonnes of gas condensate. The shortlisted firms include
Chevron and ConocoPhilips from the US, Hydro and Statoil from Norway, and
Total from France.

The US would like progress on the $15 billion Shtokman project. Twenty-five
percent of the liquefied natural gas (LNG) produced at Shtokman may be
exported to the US and the rest to Europe. But Russia is taking its own time
deciding, and may accord priority to the European market, unless the US
reciprocally allows Russian oil companies to enter its highly lucrative
retail marketing network as well as facilitate investment and the technology
upgradation of Russia’s aging oil industry.

Another bone of contention appeared as Russia began further improving in the
recent period its monopoly on the transit routs to consumer countries from
the Caspian and Central Asian region. This meant that Europe incrementally
would have a dual dependence on Russia for Russian supplies as well as
Russian-mediated supplies.

Some major decisions are now in the offing. Kashgan oilfield in Kazakhstan,
which is the biggest offshore discovery anywhere in the past 30 years, is
due on-stream by the end of the decade. The export routes for Kashgan are to
be determined soon. There are two choices. One will be to reinforce Russia’s
monopoly further, while the second is to use the US-favored Baku-Ceyhan
pipeline. The US is trying to persuade Kazakhstan to opt for the
Baku-Ceyhan, which runs from the capital of Azerbaijan, Baku, to the Turkish
Mediterranean port of Ceyhan, passing through Georgia. The US energy
secretary visited Kazakhstan in this connection this month. President George
W Bush is also expected to visit Kazakhstan this year.

The US is also impatiently awaiting legislation by Russia clarifying new
rules for investment for US oil companies in natural resources in Russia. In
his speech at the conclave of G8 energy ministers in Moscow last week, Putin
assured that "comfortable, transparent and predictable" conditions of
foreign investment would be created.

But as Russia would see it, why should enabling laws be specially legislated
for the US? Russia does not intend to remain the United States’ energy
appendage. Russian energy certainly would like to promote its technological
potential and integrate it with Western potential, but as Putin stressed in
a recent article in the Wall Street Journal, "energy egotism is a road to
nowhere".

At any rate, Russia is conscious of the immense attraction of its energy
sector for the world community. Holding 20% of the world’s natural-gas
reserves, producing 85% of Russia’s total gas at the moment (which is 16% of
the entire world output of natural gas), supplying already a quarter of the
entire Western European market and, most important, accounting for up to 25%
of Russia’s federal tax receipts on its current accounts, Gazprom’s market
capitalization alone is currently estimated to be in the region of $300
billion. Russia knows that foreign investors know these ground realities
only too well.

Yet another aspect of the paradigm is that the "world energy order" itself
is changing dramatically. The two huge Asian energy guzzlers, China and
India, have ambitious plans to buy stakes in Russian oil producers. They
want access to resources in Siberia, the Far East and Sakhalin. This is
happening at a time when the West, too, is seeking to increase its presence
in Russia’s energy sector. Putin in his article in the Journal underlined
that Russia would pursue an energy policy that was first of all beneficial
to itself.

"It is our strong belief that energy distribution guided wholly by the
priorities of a small group of the most developed countries does not serve
the goals and purposes of global development. We will strive to create an
energy-security system sensitive to the interests of the whole international
community," Putin wrote.

An Asia threat?
The West takes the "Asian threat" altogether differently. Dick Lugar, the
powerful chairman of the US Senate’s Foreign Relations Committee, in a major
speech at the Brookings Institution in Washington on March 13, unveiled an
Energy and Diplomacy Act to be introduced into the US Congress.

He criticized the lack of "full appreciation of our [US] vulnerability" to
the growing competition in the energy market, and underlined that "Chinese
and Indians, with one-third of the world’s people between them, know that
their economic future is directly tied to finding energy resources to
sustain their rapid economic growth. They are willing to negotiate with
anyone willing to sell them an energy lifeline ... The demand for energy
from these industrializing giants is creating unprecedented competition for
oil and natural gas."

Therefore, Lugar said, "a particular priority" of the proposed legislation
would be to "offer a formal coordination agreement with China and India as
they develop strategic petroleum reserves. This will help draw them into the
international system, providing supply reassurance, and thereby reducing
potential for conflict."

Curiously, not by coincidence by any means, Lugar’s idea was echoed in an
article titled "Why Europe must act collectively on energy" in the Financial
Times on March 9, authored by the EU’s foreign-policy chief, Javier Solana.
With the added subtlety of European thinking, Solana argued, "We have to
find the right balance between a market-driven and a more strategic
approach."

Solana said the EU ("as Europeans"), the US and China and India must
collectively conduct their energy dialogue with energy producers. "What we
need is an orderly combination of markets, law and consensual negotiations
... The role of politics is to balance different considerations ... The time
has come to forge a European energy diplomacy, based on common interests and
shared principles."

What explains this sense of Western urgency for assembling a collective of
major oil-importing countries? There was a time until very recently when
Western commentators freely speculated about the inevitability of
Sino-Indian rivalries erupting over issues of energy security. This thesis
has now been summarily abandoned in the haste to argue that a convergence of
interests exists among China, India, and the EU and the US.

Three new likely dimensions of Russia’s energy diplomacy in the coming
period worry the West. First, certain important decisions that Russia is
called on to take on a trunk energy pipeline to China will become known in
the near future, although the indications are that Russia will add a spur to
the proposed pipeline to the Pacific. Japan is hotly contesting any
preferential treatment of China by the Kremlin.

Meanwhile, speaking in Beijing this week, Putin said a new gas-pipeline
system, called the Altai, could be built to deliver gas from western Siberia
to China. Another system would deliver gas from eastern Siberia, for a total
of up to 80 billion cubic meters per year.

As for the US, any long-term Russian commitment with the potential to
augment China’s rise on the global stage is a matter of utmost concern. Much
grandstanding by the various protagonists is, therefore, going on. Energy is
at the top of the Sino-Russian agenda, as seen by Putin’s visit this week to
China, with another expected later in the year.

India, too, is wooing Russia for a qualitatively new level of energy
cooperation stretching to pipeline diplomacy. During the recent visit of
Russian Prime Minister Mikhail Fradkov to Delhi, the Indian side proposed
Russia’s involvement in the Iran gas-pipeline project to Pakistan and then
India (which faces continued US opposition). Any intensification of Russia’s
role in ensuring the energy security of China and India in the medium and
long terms is bound to have profound implications for a truly multipolar
world order.

Second, following up on the North Sea gas pipeline diplomacy with Germany
and Western Europe in September, Russian energy diplomacy is tiptoeing into
"New Europe", the region that separates Russia from Western Europe, which
the US has painstakingly created as a beachhead of geopolitical influence in
the past 15 years.

Central and southeastern Europe have become a highly strategic region for US
global policy. Turkey is already bound by extensive energy cooperation with
Russia - a key factor, among others, that is serving to give a new-found
autonomy to Ankara’s strategic objectives in the Black Sea, the Caucasus and
Central Asia.

Turkey can no longer be counted as a flag carrier of US regional policies.
Nuances are appearing in Turkey’s strategic thinking and it is showing
reluctance to allow the Black Sea to be made into a NATO theater flanking
Russia (though Turkey remains an important NATO member country). Turkey
prefers the Black Sea to remain what it used to be through centuries of
history - a Russo-Turkish preserve, where the interests of the two historic
powers may have rubbed at times on nitty-gritty issues, but increasingly
converge in strategic terms.

Thus the main purpose of Putin’s visit to Hungary and the Czech Republic
this month was energy politics. Against the backdrop of Hungary sourcing
more than 80% of its gas needs from Russia, Putin suggested the construction
of a second section of the Blue Stream pipeline (connecting Russia and
Turkey) to proceed to Hungary as well and to the entire southeastern region
of Europe. This comes at a time when the US is encouraging the EU to hasten
with the Nabucco pipeline project linking Austria to potential Iranian,
Turkmen, Azeribaijani and Kazakh gas supplies as an alternative to Russian
gas supplies.

On similar lines, Putin invited Prague to use the North European gas
pipeline connecting Germany. Clearly, Russia not only wants to consolidate
its position on the central and southeastern European market, but the
Russian proposals to Hungary and the Czech Republic involve pipelines
bypassing Ukraine, the thorn that the US planted on Russia’s sensitive
western flanks after the "regime change" in Kiev early last year.

Putin also reiterated Russia’s keenness for the expansion of its private and
state capital into the properties and assets in the energy sector in Eastern
Europe. Russia has had some success in purchasing assets, such as oil
refineries in Bulgaria and Romania, and in a fairly large network of fuel
retail outlets in the Balkans, as well as in holding shares in Slovakia’s
gas-pipeline company, apart from currently negotiating more acquisitions in
Romania, Bulgaria, Serbia, Macedonia and Bosnia-Herzogovina. But Poland,
Hungary and the Czech Republic have held out over geopolitical
considerations and in terms of the overlaps of their shared history with the
Soviet Union.

The implications for US regional policy of such Russian diplomacy are
obvious. Washington senses creeping ambiguities in the reactions of Eastern
European countries to repeated Russian overtures. As a Russian commentator
wryly observed, "Slovakia, Bulgaria and Romania and the former Yugoslav
republics are more or less benevolent, while Poland, Czech Republic and
Hungary are more cautious."

Surveying these worrisome tendencies, Lugar in his speech at the Brookings
Institution warned that they "might require NATO to review what alliance
obligations would be in such cases".

Russian energy diplomacy is undoubtedly exasperating the US by undermining
the visions of its global dominance. If carried further, Russian diplomacy
may hold implications for the United States’ leadership of the Euro-Atlantic
alliance itself. The secretary of Germany’s Ministry of Economics and
Technology, Georg Adamowitsch, who attended the Moscow conference of energy
ministers on March 13-14, admitted, "The winter was very cold in Germany,
but no one froze, as we have good natural-gas reserves owing to supplies
from Russia."

However, another vector of Russia’s recent energy diplomacy that would
arguably have the greatest potential impact on great-power politics appeared
when Putin wound up his tour of central Europe and headed for Algeria. This
visit serves as one of those rare moments in diplomacy when various strands
of international politics converge as a microcosm. It took place against the
backdrop of Russia’s new Middle East policy - Russia’s observer status
within the Organization of Islamic Conferences, revival of its Soviet-era
ties with Syria, its pursuit of an independent course toward Iran (while
coordinating with China and avoiding any open discord with the US), its open
dealings with Hamas in Palestine, and so on.

Russian Foreign Minister Sergei Lavrov outlined the parameters of this
policy in an important article in Moskoviye Novosti on March 3 titled
"Russia in global politics". Taking exception to the United States’
"transformational diplomacy" in the Middle East, Lavrov said any settlement
of the Iran nuclear issue was possible only on the "conditions of
engagement" of Iran, rather than isolation.

"There is only one choice: either a further buildup of tension towards a
’clash of civilizations’ or the achievement of a compromise, which, out of
all international factors, is going to require a renunciation of outdated
prejudices and oversimplified, unilateralist world views that in no way
square with the emerging reality of multilaterality as the optimal means of
conducting world affairs," he wrote.

Lavrov said Russia couldn’t take the "position of a detached onlooker" on
the United States’ approach toward the Middle East. He spoke of Russia’s
willingness to play the role of a "cultural and civilizational bridge"
between the West and the Middle East, and its determination not to allow any
power "to set it at loggerheads with the Islamic world".

He concluded that the "increased significance of the energy factor"
challenged the "equation formula of strategic stability" in the
international system, and made irrelevant the past assumptions of
geopolitics. "Professionals concerned with Russia studies and policymaking
cannot but see that it is naive to expect of us a readiness to be content in
the world with the role of one being led," Lavrov wrote.

In another article three days later, titled "60 years of Fulton: Lessons of
the Cold War and our time", in Rossiskaya Gazeta, Lavrov reverted to the
same theme of the "liberation of Russia’s energies and its resources".

These articles turned out to be curtain-raisers of one of the most important
diplomatic missions of presidential diplomacy undertaken by Putin - the
visit to Algeria, during which Russia concluded a $7.5 billion arms deal
with the North African country for the supply of a fleet of multi-role
fighter aircraft, missiles and radar systems. A striking aspect of the
massive arms deal is that it will be financed under a payment scheme woven
into deep collaboration between the two countries in the energy sector that
provides for Russian participation in Algeria’s upstream and downstream
operations in the oil-and-gas sector.

Thus Russian companies have been given monopoly rights for oil production in
the Sahara Desert; Russia’s Gazprom will participate in the development and
production of Algeria’s gas sector; and Algeria will share with Russia its
sophisticated Western technologies in gas liquefaction.

Most important, Russia and Algeria decided to work together in the European
market. Algeria is Europe’s only viable alternative source of gas at
present, ranking fourth in the world as a gas-exporting country. Algeria’s
gas pipelines connect Italy, Spain, Portugal and Slovenia. It exports LNG to
France, Spain, Italy, Greece, Turkey and the US.

The Russian-Algerian collaboration in the gas market is in line with overall
Russian energy diplomacy in recent years in creating a matrix of new
dependencies and geopolitical groupings, production and cooperation chains
and price cartels at regional or subregional levels that are incrementally
poised to impact on a global plane.

Moscow’s strategy to enhance gas cooperation with Central Asia has already
met with considerable success. In early 2002, Putin had called for a cartel
of gas producers in the CIS. Since then, Moscow has successfully concluded
agreements with Turkmenistan, Kazakhstan and Uzbekistan. Gazprom is
increasing its purchases of Central Asian gas in the coming three years.
Russia’s monopoly control of all existing routes for Central Asian gas
implies that Moscow now virtually holds all the ropes of all the gas flows
in the post-Soviet space.

The implications of this are beginning to extend beyond CIS boundaries. As
Russian diplomacy crosses the Mediterranean to engage Algeria, an entirely
new ball game begins in the world energy order. (Indeed, an unspoken theme
in the war of pantomimes over the Iran nuclear issue is also that any
Russian-Iranian concord in the energy sector at this juncture will mean the
virtual completion of an arc of the most important gas-producing regions of
the world in the nature of a "gas cartel".)

The EU and the US are indeed very concerned that "Russia has acquired a
freedom to behave ... at the critical stage of formation of a new
architecture of international relations" - to quote from Lavrov’s article in
Rossiskaya Gazeta. The irony and paradox consist in the fact that Russia is
turning out to be one of the biggest beneficiaries of the phenomenon of
globalization in the post-Soviet era.

The "victor" ending up as a dependant of the "vanquished" - it is a rare
occurrence in history. It creates profound psychological problems. It can be
the stuff of cold wars.