“Did you know there’s an oil war? And the war has an objective: to destroy Russia,” said Venezuelan President Nicolas Maduro in a live television speech last week. “It’s a strategically planned war … also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse.” It’s the United States that has started the war, Maduro said, and its strategy was to flood the market with shale oil and collapse the price.
Russia’s President Vladimir Putin agrees. “We all see the lowering of oil prices.” he said recently. “There’s lots of talk about what’s causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.” The evil Americans are at it again. They’re fiendishly clever, you know.
We are hearing this kind of talk a lot these days, especially from countries that have been hit hard by the crash in the oil price. Last Thursday Brent crude hit $55 per barrel, precisely half the price it was selling for last June. The Obama administration’s announcement last week that it is preparing to allow the export of some US oil to foreign markets may send it even lower. (US crude oil exports have been banned since 1973.)
When the oil price collapses, countries that depend very heavily on oil exports to make ends meet are obviously going to get hurt. President Putin, who has let Russia get itself into a position where more than half its budget revenue comes from oil and gas sales (some estimates go as high as 80 percent) is in deep trouble: the value of the rouble has halved, and the economy has already slipped into recession.
Venezuela, where government spending is certainly more than 50 percent dependent on oil exports, is in even deeper trouble – and, like Putin in Russia, President Maduro of Venezuela sees this as the result of an American plot. Various commentators in the West have taken up the chorus, and the conspiracy theory is taking root all over the developing world.
So let us consider whether there really is an “oil war”. The accusation is that the United States is deliberately “flooding the market” with shale oil, that is, with oil that has only become available because of the fracking techniques that have become widespread, especially in the US, over the past decade. Moreover, Washington is doing this for political purposes, not just because it makes economic sense for the United States to behave like this.
In order to believe this conspiracy theory, however, you really have to think that a rational US government, acting in its own best economic interests, would do the opposite: suppress the fracking techniques and keep American oil production low, in order to keep its imports up and the oil price high. But why on earth would it want to do that?
You will note that I am going along with the notion (a necessary part of the conspiracy theory) that all important business decisions in the United States are ultimately made by the US government. That is ridiculous, of course, but we don’t need to refute this delusion in order to settle the question at hand, so let it pass.
Hydraulic fracturing (“fracking”) as a means of recovering gas and oil, particularly from shale formations, has its roots in early attempts dating back as far as 1947, but it was the development of cheap and reliable techniques for horizontal drilling in the late 1980s that slowly began to transform the US oil industry.
By 2012, over a million fracking operations had been performed in US wells – but in 2012, last year’s events in Ukraine were unforeseen and the United States and Russia were still on relatively good terms. Many oil-exporting countries were worried by the prospect that rising US oil and gas production would shrink American imports and thereby cut their own profits, but it was still seen as a supply-and-demand problem, not a strategic manoeuvre.
The operators wanted to make a profit, and Washington liked the idea that rising US domestic oil production might end the country’s dependence on imported oil from unstable places so much that it gave tax breaks and even some direct subsidies to the companies developing the fracking techniques. But that’s no more than what any other government of an oil-producing country would have done.
So did the US develop fracking to hurt its enemies? The dates just don’t work for Russia: fracking was already making US production soar years before Washington started to see Moscow as an enemy. As for Venezuela, it continues to be the fourth-largest exporter of oil to the United States, at a time when the glut of oil on the market would let Washington cut Venezuela out of the supply chain entirely.
And Barack Obama is not opening the flood-gates for massive American oil exports that will make the oil price fall even lower. The US still imports a lot of oil, and will go on doing so for years. He has only authorised the export of a particular kind of ultra-light oil that is in over-supply on the domestic market: only about one million barrels of it, with actual exports not starting until next August.
If this is a conspiracy, it’s a remarkably slow-moving one.
To shorten to 725 words, omit paragraphs 8, 9 and 12. (“You…industry”; and “The operators…done”)
This is what former Ukrainian President Viktor Yanukovych, subsequently driven from office by mass protests in Kiev, said to German Chancellor Angela Merkel just one year ago, at the start of the crisis. It was recorded by a Lithuanian television crew, eavesdropping on the conversation with a directional mike, at the European Union summit in Vilnius where Yanukovych announced that he was not going to sign an EU-Ukraine trade deal.
“The economic situation in Ukraine is very hard, and we have big difficulties with Moscow,” Yanukovych explained to Merkel in Russian (which they both speak fluently). “I would like you to hear me. I was left alone for three and a half years in very unequal conditions with Russia…one to one.”
The Ukrainian president was not overthrown by a “fascist” plot, as Russian propaganda would have us believe, nor was NATO hoping to make Ukraine a member. (Indeed, NATO had repeatedly told the previous Ukrainian government, which was very pro-Western, that under no circumstances could it ever join the Western alliance.) Exactly one year into the crisis, it’s useful to remember what really happened.
The basic question you have to ask about any international crisis is: conspiracy or cock-up? The Ukrainian crisis definitely falls into the latter category. Nobody planned it, and nobody wanted it. Here’s how they stumbled into it.
Yanukovych inherited the negotiations for a trade deal with the EU from the previous government when he returned to the presidency in 2010. (He was overthrown by the “Orange Revolution” in 2004, after winning a rigged election, but in 2010 he won narrowly but cleanly.) And he didn’t break off the talks with the EU because that would have alienated half the country: the western, mostly Ukrainian-speaking part.
Yanukovych was a typical post-Soviet political figure, deeply corrupt and almost comically greedy – the presidential palace he lived in on the banks of the Dnieper was so lavish it could have been in the Middle East – but he was a competent politician. Almost all his votes had come from the eastern and southern, mostly Russian-speaking parts of the country, but he knew that he couldn’t simply ignore the west.
On the other hand, he couldn’t ignore Moscow either. Russia’s President Vladimir Putin saw the EU as a stalking horse for NATO, and was trying to persuade Yanukovych to join his own “Eurasian Economic Union” (EEU) instead. Moreover, Russia had huge economic leverage, since it provided most of Ukraine’s energy and bought half of Ukraine’s exports (mainly coal, steel and heavy industrial goods made in eastern Ukraine).
So for three years Yanukovych temporised, trying to get financial guarantees out of the EU that would make up for the economic punishment Putin would inflict if Ukraine signed the trade treaty. The EU wouldn’t budge: there would be no special help for Ukraine. It would just have to take its punishment, Yanukovych was told, but the trade deal would be good for the country in the long term.
Politicians have to live in the short term, however, and in 2012-13 Ukrainian exports to Russia fell by half as Putin turned the screws tighter. Those exports mostly provided income for people in industrial eastern Ukraine, i.e. Yanukovych’s own supporters. The EU had left him “alone for three and a half years in very unequal conditions with Russia…one to one” – so in late 2013 he made his choice: break off the EU talks, and sign up with Putin’s EEU instead.
Did Yanukovych foresee that there would be big demonstrations against him in Kiev, where people had pinned their hopes on association with the EU? Of course he did, but he probably didn’t foresee that the protests would be fuelled by the ham-fisted resort to violence by his own officials. He certainly didn’t foresee that he would ultimately be overthrown – nor did Putin, who had put him in that impossible position.
All the subsequent escalations of the conflict in Ukraine – the Russian annexation of Crimea, the pro-Moscow revolts in the two eastern provinces with the largest ethnic Russian minorities, the direct Russian military intervention that saved those revolts from collapse last August – have been driven by Putin’s determination to reverse his original error.
If Ukraine cannot be brought back into Moscow’s sphere of influence, then Putin’s strategy is to neutralise and paralyse it by maintaining a permanent “frozen conflict” in the east. In coldly rational terms, Ukraine’s best strategy now would be to abandon those two provinces, Donetsk and Luhansk, which are basically open-air industrial museums, and leave it to Russia to subsidise them instead.
But it’s not going to do that, because sovereign states never give up territory voluntarily. Realistically, therefore, Kiev’s best option is to strengthen the current ceasefire and let the front lines congeal and stabilise into de facto borders, while maintaining its legal claim to the two provinces. It remains to be seen if Moscow will even let that happen.
To shorten to 725 words, omit paragraphs 12 and 13. (“If Ukraine…happen”)
Russian politician Andrei Zhirinovsky is all mouth, so it would not normally have caused a stir when he suggested earlier this year that Russia should simply annex the parts of neighbouring Kazakhstan that have a large Russian population. But the ultra-nationalist leader of the Liberal Democratic Party actually frightened the Kazakhs, because there is a bigger game going on.
Kazakh President Nursultan Nazarbayev, in power since before Kazakhstan got its independence from the former Soviet Union in 1991, was so alarmed that he openly expressed doubts about whether Kazakhstan should join Moscow’s “Eurasian Economic Union” (EEU) when it launches next January. “Kazakhstan will not be part of organizations that pose a threat to our independence,” he said in August.
The EEU is the same organisation that Ukrainians rebelled against joining last year when their pro-Moscow former president, Viktor Yanukovych, abandoned plans for closer ties with the European Union (EU). But Kazakhstan under Nazarbayev has always been on good terms with Russia, so Russia’s autarch, Vladimir Putin, immediately cracked the whip.
“Kazakhstan never had any statehood (historically),” Putin said. Nazarbayev merely “created” the country – with the clear implication that it was an artificial construct that might, if the wind changed, just be dismantled again. With Russian troops in eastern Ukraine “on holiday” from the army (but taking their armoured vehicles and artillery with them), it was a veiled threat that Kazakhstan had to take seriously.
There has actually been a Kazakh state. Almost the entire area of the current country, and substantial parts of neighbouring countries, were ruled from the 15th to the 18th centuries by a powerful Kazakh khanate, the traditional form of state among the Islamic, Turkic-speaking peoples of Central Asia. The reason it never evolved into a modern state is that the whole area was conquered and colonised by the Russian empire.
Russia is still the only great power within easy reach of the Central Asian states, and it underlined its displeasure with Nazarbayev by holding military exercises near the Kazakh border in early September. But Putin was not just restoring discipline in a prospective member of the EEU, his pet project to rival the EU.
Putin’s strategic objective is to control oil and gas traffic across the landlocked Caspian Sea. The last thing Moscow needs is cut-price competition from Central Asian producers in its European markets.
Moscow at the top of the Caspian Sea and Iran at the bottom have their own pipelines to get oil out to the markets. Azerbaijan, on the western shore, has built pipelines through Georgia into Turkey, one of which reaches the Mediterranean, so Russia cannot control its exports. But Moscow still has a stranglehold on the big oil and gas producers on the eastern side of the sea, Kazakhstan and Turkmenistan.
Neither of those former Soviet republics can escape Moscow’s grip unless it can move its oil and gas in pipelines across the Caspian seabed to Azerbaijan and out to the Mediterranean from there. So Putin has been trying for years to get a Russian veto on any such pipelines. He’s nearly there.
If the International Law of the Sea applied, then each country’s Exclusive Economic Zone, with control over seabed developments, would extend 300 nautical miles from its coast. The Caspian is not that big, so all five EEZ’s would meet in the middle – and Kazakhstan and Turkmenistan’s zones would both touch Azerbaijan’s, so the question of trans-Caspian seabed pipelines would be beyond Moscow’s control.
But since the Caspian Sea is not part of the world ocean, the five countries around it can agree on any local rules they like. Russia is by far the greatest power on its shores, and the rules it likes would confine each country to a 15-nautical-mile sovereign zone and a 25-mile exclusive fishing zone.
Under this regime, the middle of the sea would remain a common area where any development would need the consent of all five countries. Hey presto! A Russian veto on any pipelines crossing the Caspian Sea, and continuing control over oil and gas exports from Central Asia to Europe.
Following a summit meeting of the five countries’ leaders in Astrakhan at the end of September, it’s practically a done deal, although the final treaty will not be signed until 2016. Late last month Richard Hoagland, U.S. assistant secretary of state for South and Central Asian affairs, visited Astana, the Kazakh capital, and said that the US firmly supported Kazakh independence and territorial integrity, but everybody knows who’s boss in the region.
Sidelining Kazakh and Turkmen competition in the European gas and oil markets will not help Moscow much, however, if Putin’s behaviour on Russia’s western borders continues to frighten the Europeans. They will be scrambling to cut their dependence on Russian gas and oil as fast as they can, and the fracking Americans, with their soaring production, will be more than happy to help.
To shorten to 725 words, omit paragraphs 5 and 6. “There has…EU”
“The world is on the brink of a new Cold War. Some say that it has already begun,” said Mikhail Gorbachev, the last president of the Soviet Union and the man who inadvertently administered a mercy killing to Communism in Europe. He’s 83 years old, he played a leading role in ending the last Cold War, and he’s practically a secular saint. Surely he knows what he’s talking about.
No he doesn’t. Not only has this new Cold War not begun already, but it’s hard to see how you could get it going even if you tried. The raw material for such an enterprise is simply unavailable. You can summon the ghosts of history all you want, but they are dead and they can’t hear you.
Gorbachev was speaking in Berlin, now once again the capital of a united Germany, on the 25th anniversary of the fall of the Berlin Wall. Even he would agree that it turned out to be, on balance, a Good Thing, but he is a great deal more ambivalent about the collapse of European Communism and the dismantling of the Soviet Union.
His original goal, and his hope right down to the end in 1991, was to save Communism by reforming it, not to bury it. He also believed, or at least hoped, that if he could make Communist rule “democratic” and user-friendly, he could save the Soviet Union as well. But the Soviet Union was just the old Russian empire in new clothes.
Gorbachev was and is a romantic, and he undoubtedly agrees with his rather less cuddly successor as president of Russia, Vladimir Putin, that the collapse of the Soviet Union was “the greatest geopolitical catastrophe of the 20th century.” So of course he ends up defending Putin’s actions and blaming the United States and NATO for this alleged drift into a new Cold War.
It’s all nonsense. Nothing could have saved the old Soviet Union. It was the last of the European empires to fall, mainly because it was land-based rather than sea-based, but only half its population was Russian. When it finally dissolved, fifteen different nations emerged from the wreckage, and its collapse was no greater a loss to civilisation than the fall of the British or French empires.
And the main reason you can’t have a new Cold War is precisely because the “evil empire” (as Ronald Reagan famously called the Soviet Union) longer exists. There is only Russia, a largely de-industrialised country that is run by a kleptocratic elite and makes its living by exporting oil and gas.
Russia has only 140 million people (less than half the United States, less than a third of the European Union), and its armies are no longer based around Berlin and all through eastern Europe. They are 750 km (500 mi.) further east, guarding Russia’s own frontiers. They occasionally grab a bit of territory that isn’t covered by a NATO guarantee (Abkhazia, South Ossetia, Transnistria, Crimea, Luhansk, Donestk), but they dare not go any further.
So you could get a really unpleasant NATO-Russian confrontation out of this for a while (although it hasn’t happened yet), but not a real Cold War in the old globe-spanning style. Russia just couldn’t hold up its end of it. As for World War Three, don’t worry. Putin cares a lot about saving face, but not that much.
Which leaves the question: who is to blame for this regrettable hostility between Russia and the Western powers? The West, in Gorbachev’s view. In fact, he had a whole list of complaints about Western threats, crimes and betrayals.
NATO broke its promise and let all the Eastern European countries that had been Soviet satellites during the Cold War join NATO. It let Kosovo declare its independence from Russia’s traditional friend, Serbia. It launched wars of “regime change” in the Middle East (Afghanistan, Iraq, Libya) that Moscow disapproved of. It even planned a missile defence system that allegedly threatened Russia’s nuclear deterrent (if you could believe that it would work).
Diddums. Yes, Russia has been invaded a lot in its history, but the license to be paranoid expires after fifty years. Of course the Eastern European countries all clamoured to join NATO; they’re still terrified of Russia. The Western great powers do lots of stupid stuff and some seriously bad stuff, and Russia has also done a fair amount of both in the past decade and a half under Putin.
The job of diplomats, and of leaders in particular, is to avoid the really stupid and dangerous stuff, and keep the rest to a minimum. Barack Obama has been quite good at that, as has German Chancellor Angela Merkel. Putin used to be good at it, but is not so good now, perhaps because he has been in power too long. His military interventions in Ukraine have been alarmingly rash.
But nobody is going to go to war with Russia over Ukraine. The Ukrainians were told years ago that they couldn’t shelter under NATO’s security blanket, and they have chosen to defy Moscow anyway. They may pay a high price for that, and the Western alliance’s relations with Russia may go into the deep freeze for the remainder of Putin’s reign. But it will be just a little local difficulty, not a huge event that defines an entire era.
To shorten to 725 words, omit paragraphs 4, 9 and 13. (“His original…clothes”; “So…much”; and “The job…rash”)