Oil, Gas and Imperialism

By Daniel Litvin
The Guardian UK

Wednesday 04 January 2006

The Russia-Ukraine crisis is a reminder that politics, not the market, is driving global energy policies.

You may have thought the age of empires was over, that in today's globalising world relations between states were governed by economics, market forces and free trade, rather than battles for political influence between the great powers. When it comes to the quest for, and control of, energy supplies, however, we still live in a partly 19th-century world.

Compared with the situation earlier this week, Russia's attempt to more than quadruple the price of the gas it charges to Ukraine is no longer affecting other European countries as severely as it was. None the less Russia continues to seek to withhold gas from Ukraine, exerting a stranglehold on the nation that would appear to be motivated as much by politics as economics. Smarting from Ukraine's recent turn to the west, including Nato and the EU, Russia wishes to bring its once vassal state back into its sphere of influence. Russia has long offered subsidised energy to such states to help keep them within its fold. Threatening to hike Ukrainian gas prices to free market levels is in this respect the modern equivalent of a warning shot fired from the Russian imperial gunboat.

But Russia is not alone in treating energy security as the means of, or motive for, imperial-style endeavours. The quest for influence over oil and gas reserves underlies much recent western intervention in the Middle East and has driven high-profile political developments in Latin America, central Asia and elsewhere. We need to recognise this energy imperialism as a fact of the modern world. For only by recognising it can we find ways to soften its nastier elements.

There are two forms of modern energy imperialism. The first, typified by Russia, involves producers using their leverage over supplies or energy transport systems to influence political outcomes. Most memorably, Opec, the Middle East-dominated oil producers' cartel, tried this by restricting oil supplies in the 1970s, aimed partly at shifting western policy towards the region.

Today two Latin American producer states are using energy as a tool in standing up to the "imperial" west. Venezuela's Hugo Chavez has threatened to interrupt oil shipments to the US and is tapping the state's burgeoning oil revenues to win political support. In Bolivia, Evo Morales recently swept to power on promises to take back control of gas reserves from multinationals.

The second form of this imperialism involves consumer states launching political or military manoeuvres to secure supplies. Whether or not the US and Britain invaded Iraq with a sincere belief in weapons of mass destruction, no one doubts that fears over oil security played a part in strategic calculations - particularly after September 11 had so shaken the west's trust in Saudi Arabia.

Now, with oil prices so high, and many western oilfields in decline, western firms and governments are working together (peacefully this time) to stake out new territories to reduce dependence on the Middle East. Around the Caspian, western political interests have again conflicted with Russia's: the path of a new BP-operated pipeline from Azerbaijan to Turkey, for example, was the subject of a major geopolitical tussle between west and east. Japan and China are also arguing over pipeline routes from Russia's far-east energy reserves, while China's oil corporations are busy seeking alliances with Middle East and African governments.

If Britain opts to build more nuclear power stations this will be partly due to fears of reliance on foreign (Russian) energy. With our transport system still dependent on oil, however, reviving nuclear will hardly remove this problem.

One reason energy helps to revive the imperial urge for consumer nations is that, for all the growth of free markets and trade, energy security is paradoxically too important to the smooth running of capitalist economies to leave entirely to market forces. Our economic systems comprise a huge investment in infrastructure (including roads, cars, buildings and power stations) dependent on fossil fuels. The imperial temptation for producers is related: the political levers it creates can be too powerful to resist. The issue here is not just geographic concentration of fossil-fuel supplies but the fixed and monopolistic nature of energy infrastructure: pipelines supplying entire nations can be flicked on or off on a political whim.

The inevitability of modern energy imperialism needs to be recognised. For consuming countries, securing energy supplies must be achieved in a way that better serves the long term interests of producing countries, rather than taking the form of western support for compliant but corrupt regimes or ill-conceived invasions that provoke further violence.

And producing countries should be encouraged to understand that their long term interest is often better served by working with consumer states, rather than imposing ultimatums upon them. Russia's hard-ball tactics with Ukraine have damaged its credibility as a secure supplier with big European customers.

Eventually oil and gas may be replaced by renewables but, for the time being, energy imperialism is here to stay, and efforts should focus on making it a more benign force.

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Daniel Litvin is the author of Empires of Profit: Commerce, Conquest and Corporate Responsibility.