Russia’s Deadly New Weapon

The mighty Russian bear is back. Russia may yet become more powerful than at any time in its history, including its peak during the Cold War.

The West is only beginning to wake up to this new reality.

This resurgence is based upon one thing: Russia’s massive energy and natural resource reserves. Oil, natural gas, uranium, platinum, gold, silver, copper, zinc and nickel prices each remained near all-time or multi-decade highs during 2006. Consequently, state coffers of resource-rich Russia are overflowing, pumping life back into the national economy. Seven years of strong economic growth based upon rising commodity prices has given Russia a bulging budget not seen since before the Berlin Wall fell—and confidence to match.

In addition, current booming resource demand in China and India, as well as growing geopolitical instability in many producer nations such as Iran and Nigeria, suggest that high energy and raw-commodity prices are here to stay for the foreseeable future. That means the strength of the Russian revival may become much greater than many have anticipated.

Yet if rising energy and global resource demand is the anvil of Russia’s geopolitical revival, the hammer is the Kremlin’s policy to nationalize and use state control of strategic industry and natural resources for political purposes.

Consolidating Energy Control

During the 1990s—when many commodity prices were comparatively low, including those of oil and gas—Russia needed foreign resource companies to develop its deposits. Now that those prices have risen, Russia’s dependence on Western investment is lighter.

Russian President Vladimir Putin is determined to make Russian companies majority partners on any project taking place on Russian territory. Consequently, Russia is confiscating (or what amounts to confiscating) billions of dollars’ worth of foreign-built infrastructure and placing it under control of state-owned corporations.

In September, the Russian government revoked the environmental permit for Royal Dutch Shell’s massive Sakhalin-2 energy development and threatened the consortium with environmental fines of up to $30 billion. Shell was coerced into selling a controlling 50 percent-plus-one-share interest in the $22 billion project to Russia’s state-owned energy giant Gazprom for $7.45 billion. Literally minutes after the handover, Putin revealed that the environmental problems were no longer a concern, and the government now fully supported the project.

Using similar tactics, it looks like Gazprom is also set to gain control of British Petroleum’s Kovykta gas field, which is the largest in Siberia. French energy company Total is facing mysterious “back tax” bills. Exxon Mobil’s Sakhalin-1 project is rumored to be the next Kremlin target.

In late November 2006, Russia’s two state-owned energy giants, Rosneft and Gazprom, signed an alliance deal that further signaled Russia’s desire to force foreign energy companies out of the country. Rosneft is the second-largest oil producer in Russia, and Gazprom has an acknowledged monopoly on natural gas production.

Organizing all of the resources within Russian borders under state-owned companies makes it easier for Moscow to wield its most powerful weapon. Not coincidentally, the most sought-after resources on Earth are the very ones Russia is gaining a firm grip on. As Putin has consolidated state-control over strategic resources, he has been able to wield it with war-hammer ruthlessness, battering opponents into submission.

In January last year, Gazprom cut off Ukraine’s gas supply—and consequently much of the rest of Europe’s—after Ukraine’s newly elected, pro-Western government balked at paying gas prices that were much greater than those paid by the previous, pro-Russian government. Being in the midst of winter, Ukraine had little choice but to accept the higher prices.

Georgia has also endured Russian energy punishment. Last year, relations between Russia and Georgia broke down after Georgia accused four Russian military officers of spying. The Kremlin responded with economic and transport sanctions. In December, after Gazprom threatened to completely cut off gas supplies, Georgia agreed to pay us$235 per 1,000 cubic meters, up from $110. These are cruel moves in the midst of this region’s infamously harsh winters.

Belarus too recently succumbed to similar Gazprom strong-arm tactics. On January 1, Russia forced Belarus into accepting price hikes that more than doubled Belarus’s current costs. As part of the deal, Gazprom demanded Belarus sell it 50 percent of the shares in the Belarusian pipeline network, which supplies gas to Poland and Germany.

Estonia, Latvia, Lithuania, Moldova and Armenia are other known victims of Russian energy coercion.

All this activity has revealed the energy weakness of another major global power, one that is having to respond strategically to Russia’s growing clout.

That power is Europe.

Energy as a Weapon

The way Russia is treating its eastern neighbors is giving the European Union cause to look to other markets for its energy supplies.

Energy vulnerability is a major issue on German Chancellor Angela Merkel’s agenda for the six months that Germany is president of the EU. “Europe must reduce its dependence in order to guarantee its energy supplies in the long term,” Merkel wrote in an article for the daily Handelsblatt. “Moreover, it must speak with one voice on foreign energy relations. This also goes for relations with our important energy partner Russia.”

Germany, Italy and France already import 90, 91 and 95 percent of their daily oil needs respectively, as well as the vast majority of their natural gas needs. These nations typify the foreign-energy dependence that plagues almost all EU nations. The EU now imports 56 percent of its energy—much of it from Russia. In 1995, this figure was only 44 percent. If trends continue, then by 2020 the EU will need to import two thirds of its energy demand, according to the European Commission.

Adding to Europe’s problem is the fact that Asia is becoming a more attractive market for Russian energy.

China and India are increasingly drinking up and competing for available energy supplies. Of all nations, Russia is uniquely situated to meet Asian energy demand. Russia has the oil, gas, uranium and other natural resource supplies needed to keep China’s and India’s rapidly expanding economies booming. Its growing energy clout is steadily drawing China and India into Russia’s sphere of influence.

Russia’s strengthening bonds with these Asian trade partners could further jeopardize its reliability as an energy provider for Europe. Given Europe’s present dependence on Russia for energy supplies, this is a worrisome and very real threat. At a UN conference last November, for example, Gazprom warned that problems with the EU were forcing the company to “look increasingly toward rival markets in Asia” (EUbusiness.com, Nov. 28, 2006). Russia is currently developing large-scale energy-transmission capabilities in the east, which will enable it to send much more of its vital oil and gas reserves to Asia—an event that will increase its leverage over Europe exponentially.

Meanwhile, Russia is actively backing Iran (another major oil producer) by providing it with nuclear-power-generating capacity and by undermining UN sanctions. The Kremlin has also broken ranks with the West and held talks with the terrorist group Hamas. Russia is additionally backing anti-Western governments in Uzbekistan and Kazakhstan, two other strategic energy-producing countries.

Moreover, a leaked confidential study by nato economic experts “warned Russia may be seeking to build a gas cartel including Algeria, Qatar, Libya, the countries of Central Asia and perhaps Iran and cautioned that kind of opec-like near monopoly would strengthen Moscow’s leverage over Europe” (Associated Press, Nov. 27, 2006).

This growing tension between Russia and Europe is worth watching closely in the time ahead. It portends significant foreign-policy initiatives between the EU, Russia and opec as Europe moves to consolidate its sources of much-needed energy.

More Powerful Than the Soviet Union

U.S. scholar Marshal Goldman makes a strong point. He says “Russia is more powerful now than it ever was during the czarist era or the Soviet era. In the Soviet era there was mutually assured destruction. They had nuclear weapons. We had nuclear weapons. We didn’t use them, because we were worried they would and vice versa. Here you don’t have that kind of restraint” (MosNews.com, Dec. 8, 2006).

As energy expert and author Micheal Klare says, “[A] new era, where energy has replaced nuclear weapons as the medium of superpower rivalry,” has already arrived. “Vladimir Putin believes that. … And he is moving to accumulate as much energy power as he can” (Associated Press, op. cit.).

It is clear that, in region after region, growing Russian energy clout is helping to reshape the world. Current events certainly indicate a coming global conflict in which energy supplies will play a central role. But beyond the politics and alliances, trends and statistics about natural resource demand and distribution, there is a much better indicator of where current events are leading and how world power blocs are developing, and that is the “more sure word of prophecy” (2 Peter 1:19)—the outline of major events that would unfold in the period just before the Second Coming of Jesus Christ.

That powerful biblical picture reveals just how Russia will use its energy arsenal to bind itself to Asia and eventually to punish Europe. The moves we see taking place today suggest just how imminent these future events truly are.