The Bear is Awake and Has an Attitude
Oct. 4, 2008 | By Don G. Briggs, President – LOGA

While the United States and European countries are struggling for economic survival, the Big Bear has awakened and is roaring into the 21st century. Russia has emerged from its collapse of the 1980s and has positioned itself as a leading power. The big difference this time around is that Russia is not flexing its military muscle, but using its vast oil and gas reserves to influence politics and economics of countries in Europe, South America, the Middle East and yes, the United States.

The USSR (Soviet Union) collapsed and broke apart in the mid eighties when oil prices dropped delivering financial chaos to their oil income dependent economy. Russia’s economic collapse ended the Cold War with the United States. Twenty years later the pendulum has swung to the other side.

Russia is the largest crude oil producer in the world with production at ten million barrels per day or 12% of global production, and has the largest natural gas reserves in the world. Through Russia’s vast oil and natural gas pipeline infrastructure Russia provides close to 30% of the EU’s (European Union) natural gas supply and 25% of the EU’s crude oil supply. More than 6,000 miles of pipeline projects supplying oil and natural gas to the CEE (Central and Eastern European) region are currently in progress.

Russia’s economy is experiencing unprecedented growth, with real gross domestic product (GDP) of 8.1 percent in 2007. Russia has better than $800 billion in reserves.

Russia has positioned itself to be able to control the flow of oil and gas into Europe, and in doing so, can control Europe’s financial markets, economies and transportation. “Gazprom (Russia’s Natural Gas Company) and by extension, the Russian government, are already beginning to enjoy a power over their European neighbors far beyond the dreams of the Romanov czars or the Communist Party general secretaries.” said Mr. Goldman, professor emeritus at Wellesley College.

Having the power and using the power are not always the same, but Russia has already demonstrated its desire to wield its axe. In recent years Russia has cut off oil and natural gas exports to countries it supplies on more than 40 occasions, always sighting flawed reasons. Moscow denies it uses energy as a political tool.

Russian influence in the energy markets and industry is expanding far beyond its boundaries. On September 26, 2008 “Russia and Venezuelan officials signed agreements meant to bolster cooperation in the oil and gas industry, playing up energy ties between two nations trying to decrease U.S. influence around the world.” Said Steve Gutterman.

At the same time Russia’s Prime Minister Putin vowed to make relations with Chavez and Latin America a top Russian foreign and economic policy priority offering to discuss arms sales and possibly help Venezuela develop nuclear energy. Since 2005 Russia has signed contracts worth more than $4 billion to supply Venezuela with fighter jets, helicopters, and assault rifles.

“Russia needs to take an active position on influencing the current market price of oil. There needs to be a Russian Factor,” said Russia’s Oil Minister, Sergei Shmatko. Shmatko went on to say, “We keep talking about OPEC….but we believe that we occupy such a high place in the world’s oil community that Russia should emerge as an active factor.”

Have you ever heard of “Lukoil”? “Lukoil” is Russian – owned oil company with better than 3,000 service stations on the US Eastern seaboard. Lukoil now has 24% of the market in New Jersey and Pennsylvania and is expanding elsewhere.

Is this all getting “cold” again?