Azerbaijan, Baku, 10 November / Trend / Ariel Cohen, political expert, Senior Research Fellow at The Heritage Foundation (USA), specially for Trend :
Gas OPEC Expands its Geopolitical Clout
The three founding members of the natural gas cartel, Russia, Iran and Qatar, and other members of the Gas Exporting Countries' Forum (GECF) are planning to "reach strategic understandings" on export volumes, schedules of deliveries, and the construction of new pipelines. Baku, Ashghabad, and other capitals of smaller gas producing countries are nervous as their sovereign decision making may be jeopardized.
Alexei Miller, Chairman of Gazprom, the Russia's state owned natural gas monopoly and the largest gas producer on the planet, said in an interview with Channel One TV, that the troika is focus on trilateral projects. "The three countries will work along the whole gas chain from prospecting and production to distribution and marketing... The big troika is going to be a locomotive for the gas exporting gas forum.
"Gas producers see certain drawbacks in the existing mechanism of price setting. The piped gas is underpriced in comparison with liquefied natural gas (LNG), let alone oil and petrochemicals... But gas is the same hydrocarbon as they are... Gas is the fuel of the future, almost pure energy... The goals of the organization are noble. The prices for consumers have to be transparent and predictable.
GECF also plans to jointly explore and develop gas fields and coordinate startups and production schedules. To continue their work, members plan to create a permanent secretariat. Despite protestations to the contrary, the GECF has all the trappings of a nascent cartel, and the troika includes its founding members. These founders will expand their cooperation beyond their relationship through the GECF and drag other gas producers with them.
Moreover, Russia and Iran are interested in increasing their leverage against the EU in areas that often have little to do with energy, while its neighbors Azerbaijan's and Turkmenistan's agenda to export gas directly to Europe may be thwarted.
The new cartel may provide its three leaders with greater geopolitical advantage. If this new cartel expands, Russia and Iran are the net winners, as they will gain clout over smaller Eurasian gas suppliers, such as Azerbaijan, Turkmenistan, Kazakhstan, and Uzbekistan.
Major gas producers such as Iran, Russia, Qatar, Turkmenistan, Brunei, and Venezuela have one feature in common: a democracy deficit. All three members of the new cartel share this dubious quality. Just like OPEC, the gas cartel will be a formidable global geo-economic force that can be used to oppose, challenge, and possibly weaken market-based democracies through high energy prices and wealth transfer. Such a cartel may cut deals with similarly undemocratic large-scale consumers, such as China, while forcing the West to pay full price.
Coordinated Global Action Needed
The Bush Administration barely reacted to the Tehran and Doha meetings. Ileana Ros-Lehtinen (R-FL), the Ranking Member of the House Foreign Affairs Committee, wrote to the secretary of state after the Doha meeting that the establishment of a gas OPEC would be a "major and long-term threat to the world energy supply" that the U.S. should "vigorously oppose." Officials express grave concern, but only in private.
In reaction to the October announcement, the European Commission stated that it "feels that energy supplies have to be sold in a free market" and that it opposed price-fixing cartels in principle. It remains to be seen if the recently defeated "Gazprom clause" of the unbundling proposal that would block Gazprom from owning mid- and downstream assets in Europe is resurrected. One also wonders whether the world would even be dealing with the emergence of a gas cartel if European companies such as E.ON and Eni had not been successful in lobbying for Russian energy interests.
As the case of OPEC demonstrates, closing markets to competition, promoting national oil companies, and limiting production through a quota system results in limited supply and higher oil prices. Gas, in the long run, will not be different.
What the U.S. Can Do
The United States should open its vast natural gas resources on- and offshore to further exploration and production and encourage its neighbors in Canada, Mexico, and the Caribbean to do the same.
Additionally, the next Administration must develop a clear global policy to limit cartelization of the gas markets. Specifically, the U.S. should work with the European Union member states, Japan, China, India, and other countries to prevent the cartelization of the gas sector. This can be accomplished through cooperation with the International Energy Agency, which China and India should be invited to join, and by applying anti-trust legislation worldwide against state-owned companies that are actively involved in cartel-like behavior in energy markets.
Finally, the U.S. should also work closely with those within GECF and outside, who oppose Russian-Iranian domination, including Azerbaijan, Canada, the Netherlands, and Norway.
The next Administration's National Security Council and the National Economic Council should take the lead in developing this policy. Unless buyer solidarity is translated into action, energy consumers and economic growth will suffer worldwide.