How far will Russian President Vladimir Putin go to stop fracking in Europe? Tint his thinning hair an eco-friendly color?
According to NATO Secretary General Anders Rasmussen, Russias myriad intelligence agencies, which now include the Foreign Intelligence Service (SVR), the military intelligence directorate, or GRU, the Federal Security Service of the Russian Federation (FSB), and the Federal Protective Service (FSO) are working directly with European environmental groups to fund anti-fracking campaigns.
Putin is doing this to slow the spread of the U.S. shale revolution across the Atlantic so Russia can hold on to its monopoly of the European natural gas market.
Europes energy insecurityits dependence on Russian gashas proven to be Putins favorite tool of geopolitical blackmail. Until recently, Europe has had little choice but to put up with Putins shenanigans, such as turning off the flow of gas through Ukraine in the dead of winter following contract disputes. But the balance of energy power is moving away from petro dictators like Putin, thanks to fracking and surging U.S. production of oil and natural gas from shale.
Europeans see U.S. liquefied natural gas (LNG) exports and U.S. shale expertise as the energy supply alternatives they desperately need. Already, the U.S. Department of Energy (DOE) has approved seven LNG export terminals. And, shale deposits that have made the United States the worlds largest producer of oil and natural gas also lie beneath much of Europe.
The Russians may try to slow the development of Europes shale resources, but fracking technology cannot be stopped. Shale exploration has begun in Poland and Great Britain; deals with U.S. energy companies have been signed by several eastern European nations, including Lithuania and Romania. So, while it may not happen overnight, Russias grip on Europes energy supply is beginning to loosen.
With his power built squarely upon energy52 percent of the Russian state budget comes from oil and gas exportsPutin has been forced to pivot east to Asia for new buyers. Russias new gas supply contract with China is the result. The contract, a 30-year deal to supply $400 billion worth of natural gas, may be large, but its not the decisive coup the Russian propaganda machine wants the world to believe it is.
The Chinese and Russians have been haggling over a gas supply deal for a decade. The Russians tried to demand that the Chinese buy their gas at the same price premium Europeans are paying. The Chinese balked, proposing the lower price they pay for gas piped in from the former Soviet Republic of Turkmenistan. Neither country was willing to compromise until now.
While the precise details of the deal remain shrouded in mystery, the Russians seemed to have blinked. The Chinese, well aware of Russias eroding market in Europe, gained the upper hand.
Even with the China contract, Putin needs European buyers far more. They are his biggest customers several times over. Russia agreed to sell 38 billion cubic meters of natural gas a year to China. But last year Russia exported 161.5 billion cubic meters of gas (worth $60 billion) to Europe, which remains Russias most important market.
Putin can continue to funnel rubles to Europes environmental activist groups and hope to slow the spread of the shale revolution. But Russian dominance of the European gas market is on borrowed time.
The International Monetary Fund projects Russias economic growth to be a paltry 0.2 percent this year.
This gives the United States a decided advantage, if the administration doesnt blow it. President Barack Obama should move immediately to open U.S. shale gas reserves to the global marketplace. The DOE has approved several LNG export applications, which is a start; but its sitting on two dozen more.
Greenlighting the remaining applications and allowing free trade of U.S. gas not only will bring about further domestic energy production and job growth, it also will provide our European friends with an alternative to Russian gas.
The opportunity to deny Putin the very foundation of his power is an opportunity the president would be foolish to pass up.
|William F. Shughart II is a Research Director and Senior Fellow at The Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.|