Bodman: Russia using energy as foreign policy 'tool'

US Secretary of Energy Samuel Bodman, concerned about Russia's use of energy as a tool of foreign policy, said he would take up the issue with officials at a meeting next week in Vienna.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Sept. 29 -- US Secretary of Energy Samuel Bodman, concerned about Russia's use of energy as a tool of foreign policy, said he would take up the issue with officials at a meeting next week in Vienna.

"I am concerned when…there seems to be a pattern of using energy and their God-given resources to affect foreign policy," Bodman said at an energy conference in Washington, DC. "That's a situation that bears looking into," he said.

Bodman's remarks coincided with reports that Abdalla Salem El-Badri, the secretary-general of the Organization of Petroleum Exporting Countries, would visit Moscow on Oct. 21-24.

The aim of El-Bari's visit is to hold talks following the attendance of a high-level Russian delegation, led by Vice-Premier Igor Sechin, at recent OPEC meetings.

At the meetings, Sechin proposed "extensive cooperation" with OPEC to meet global energy needs and said a draft memorandum of understanding would be drawn up to strengthen ties with the group.

While OPEC officials have downplayed the idea that Russia would join the organization, there are concerns in the US and elsewhere that Moscow will attempt to influence the group in connection with world markets—a point emphasized by Russian energy minister Sergei Shmatko on Sept. 26.

A more active position
"A Russian delegation attended the recent OPEC meeting, and I want to tell you what many of those in our delegation were saying: Russia needs to take a more active position concerning the current market price for oil," Shmatko said, adding, "There needs to be a Russian factor."

"We have always told OPEC, which tries to regulate it, that there are other factors: financial speculation, US inventories, etc. From our standpoint, we occupy such an important place in oil 'high society' we should be our own, Russian factor, perhaps not just one," Shmatko said.

"In any case, the [Russian] energy ministry has set that goal for itself. We will be preparing if not proposals then at least approaches. We haven't done this before; We want to formulate these approaches. And in that sense the decisions might be most unexpected. Why not, for example, revise oil production forecasts?" he said.

"We believe we should more actively engage with the markets. Technological considerations prevent us from simply turning off the tap. We can't simply shut down a field and then open it up again at any time. We have different climatic conditions. In my view we can give our opinion from the point of view of forecasts, perhaps even engage in that in actuality," he said.

"The idea of reserving potential fields is very interesting in my view. Instead of discovering a field tomorrow and then proceeding [with development], we prepare a field from the point of view that it won't be touched for the time being, but there will be the ability to start it up in a fairly clearly defined term," he said.

"We are absolutely convinced, given those 'American bumps' oil prices have experienced in recent times, that we, a big, important oil power, need to formulate our relation to that—the Russian factor," Shmatko said.

As for when the new approaches would be ready, Shmatko said: "We are going to the next OPEC meeting in December, and I think we will have something before then."

"This is not a joint effort with OPEC," he added.

A new oil consortium?
Bodman's comments coincided with reports that Prime Minister Vladimir Putin of Russia and President Hugo Chavez of OPEC member Venezuela have established plans to create an oil consortium aimed at investing in joint oil ventures.

"[The Russians have] offered us the chance to create an oil consortium…the largest in the world," said Chavez in televised remarks from Moscow, adding that the consortium would be comprised of state-owned Petroleos de Venezuela SA, Russia's Lukoil Holdings, TNK, OAO Rosneft, and OAO Gazprom.

The venture initially would develop oil and gas projects in Venezuela then in other Latin American countries at a later time, Venezuela's communications ministry said in a statement.

While Russia may be using diplomatic efforts to affect market prices, it also has been criticized for using military tactics to control the flow of oil and gas.

In August, Russia attacked neighboring Georgia and was accused of efforts to undermine the transport of hydrocarbons from the Caspian-Central Asia region to world markets.

During the hostilities, Georgia accused Russia of attempting to bomb all three of the main pipelines through the country: the Baku-Tbilisi-Ceyhan and Baku-Supsa oil pipelines and the South Caucasus Pipeline, which carries gas to Turkey.

Anatoly Nogovitsyn, deputy head of Russia's general staff during the incursion denied early reports of attacks on the BTC line by his country, saying: "The oil pipeline was never a target that needed to be bombed" (OGJ Online, Aug. 12, 2008).

The Russian military incursion nonetheless caused the closure of oil and gas pipelines, as well as railway lines and ports, across the region (OGJ Online, Aug. 25, 2008).

Contact Eric Watkins at hippalus@yahoo.com.

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