Edited by W. Joseph Stroupe with the mission of explaining world events correctly via strategic analysis & forecasting
Experts See Emergence of Russian-Led "Global Axis of Oil & Gas" |
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Expert Testimony Before Senate Committee on Energy and Natural Resources on Jan. 10, 2007 Reveals U.S. at Risk from an Emergent and Unprecedented Russia-China Centric Global Axis of Producer/Consumer Energy Principals |
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U.S. Faces Severe Economic Hardship, Geopolitical Setback and Potential Catastrophe |
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Compare what the Experts are Saying
With what RUSSIAN RUBICON Outlined & Predicted
The Experts' Testimony Before US Congress |
The New Book, RUSSIAN RUBICON [Aug. 2006] |
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"Resource nationalism is often defined as national governments’ assertion of ownership rights over oil and gas reserves against the interests of international energy companies. But there is another dimension to resource nationalism on which I want to focus—that is, national governments making decisions about the production and marketing of the hydrocarbon reserves under their control not only on the basis of economic factors, but also on the basis of strategic and political calculations." Leverett, Jan. 10, 2007, page 2
“Resource mercantilism—that is, the reliance of energy importing states on national energy companies to secure access to overseas oil and gas resources on more privileged bases than simple supply contracts. Resource mercantilist states provide various kinds of support to their national oil companies’ efforts to acquire hydrocarbon assets abroad and, like resource nationalist states, often seem to base their actions in global energy markets on strategic calculations as well as on commercial and economic considerations." Leverett, Jan. 10, 2007, page 3 |
"In line with its chosen theme of international energy security which it promoted at the recent 2006 G-8 summit, Russia is actively constructing a new international system designed to achieve that very goal, international energy security. But Russia’s vision of “international energy security” conspicuously leaves out of the picture the strategic energy security of the US itself, at least as defined by the US. Russia’s vision, and the model it adheres to in the construction of its new international system, is radically different than the current US-backed model of liberal, open global oil markets and exchanges and radically increased foreign investment to ensure global production comfortably exceeds global demand. Russia’s vision is instead that of closed, private politically-oriented, politically-motivated state-to-state long-term supply contracts, agreements and ties that increasingly bypass the liberal open markets by locking up an ever greater percentage of global resources, making such resources no longer visible and accessible to the global markets. Russia’s vision is one of the rise of a complex of ever deepening mutually beneficial alliances and ties between the world’s producers and key consumers mostly in the East with ever greater political affinity between all the players on both sides of the producer/consumer equation. Its vision is one in which such deepening ties expand to other spheres outside of energy to include the spheres of security, the economy, the military and the diplomatic. Russia’s vision is that of new energy and mineral bourses denominated in currencies other than the dollar and of an international exit from the dollar as the dominant global currency. Russia’s vision is therefore one of the arising of a de facto geopolitical bloc of the East, multifarious yet enjoying profound cohesiveness, fundamentally based upon and driven by energy geopolitics and the quest for what Russia has called “international energy security”. This is Russian RUBICON." Page 274 | ||||
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| "how major energy exporting states—primarily in the Middle East and Russia—handle their enormous and growing current account surpluses is now as important to the management of global economic imbalances and the future of the dollar as the world’s leading reserve currency as the decisions of China and other major Asian economies. Here, too, there is considerable potential for a variant of the axis of oil to develop considerable strategic leverage over the United States." Leverett, Jan. 10, 2007, page 8 | "That axis, when soon completed, will form a global energy monopoly whose strings are virtually pulled from Moscow and Beijing. Increasingly, key members of the axis speak about dispensing with the US dollar in their international energy transactions. The eventual consolidation of the new global energy axis will result in loss to the West in various important ways, and in a grand reversal, will place multifarious East in ascendancy over West." Page 81 "Russia and China, the foremost promoters of what they have called the multi-polar world order, insist that such is not aimed at any single power such as the US. However, that is mere indirection on their part as they work smart and energetically to construct the foundation, namely global control of strategic resources, that facilitates the rise of their new world order, an order aimed directly at undermining the US global position. |
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"During this next twenty years (and quite probably beyond), it is infeasible to eliminate the nation’s dependence on foreign energy sources. (...) The voices that espouse “energy independence” are doing the nation a disservice by focusing on a goal that is unachievable over the foreseeable future " CFR, Oct. 2006 "And the United States, insufficiently aware of its vulnerability ... " CFR, Oct. 2006 "Today (...) import dependence is roughly 60 percent and expected to rise during the coming decades." CFR, Oct. 2006 "Simply put, there is no economically plausible scenario for a strategically meaningful reduction in the dependence of the United States and its allies on imported hydrocarbons during the next quarter century." Leverett, Jan. 10, 2007, page 8 |
"... the West, including the US itself, which has become hopelessly dependent upon foreign sources of energy and minerals." Page 81
"... the sphere of strategic resources, upon which the West has become hopelessly dependent, utterly reliant upon foreign sources of such resources. That persistent and deepening dependence upon foreign supply of strategic resources is simultaneously the Achilles Heel of the West and the lever to power for the East." Page 301 |
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"Most oil and gas resources are controlled by state-run companies, some of which enter into supply contracts with consumer countries that are accompanied by political arrangements that distort the proper functioning of the market. (...) And some governments use the revenues from hydrocarbon sales for political purposes that harm U.S. interests." CFR, Oct. 2006 "Over the last few decades the trend has been for major resource holders to rely to a greater extent on national oil companies (...) In recent years, with high prices, some countries such as Russia and Venezuela have increased the authority of these state companies. NOCs control some three-quarters of the world’s oil reserves. Indeed, the largest independent oil company, ExxonMobil, ranks only 14th on the list of proven reserve owners, behind a long list of NOCs." CFR, Oct. 2006 |
" The bulk of the globe’s crucial resources (...) have fallen or are in the process of falling under the control of authoritarian regimes with a deep and growing ideological and political affinity with Russia and China and a simultaneous repulsion with respect to the West in general and the US in particular." Page 226
"Such regimes are (...) following the Russian model of consolidation of resources-based industries and corporations under ultimate state control." Page 226 |
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"... the United States has limited leverage to achieve its energy security objectives through foreign policy actions" CFR, Oct. 2006 "... dependence causes political realignments that constrain the ability of the United States to form partnerships to achieve common objectives. Perhaps the most pervasive effect arises as countries dependent on imports subtly modify their policies to be more congenial to suppliers. For example, China is aligning its relationships in the Middle East (e.g., Iran and Saudi Arabia) and Africa (e.g., Nigeria and Sudan) because of its desire to secure oil supplies. France and Germany, and with them much of the European Union, are more reluctant to confront difficult issues with Russia and Iran because of their dependence on imported oil and gas as well as the desire to pursue business opportunities in those countries. These new realignments have further diminished U.S. leverage, particularly in the Middle East and Central Asia." CFR, Oct. 2006 |
"America finds that (...) it is mostly unable to influence the world at large to take up its agenda. All these factors spell increased weakness and vulnerability for the last superpower, and provide opportunities for rival powers to increase their own influence by leveraging their strengths against America's weaknesses." Page 113
"American economic, military, political and diplomatic power is showing (...) vulnerabilities and weaknesses ...." Page 113 |
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| "Third, high prices and seemingly scarce supplies create fears—especially evident in Beijing and New Delhi, as well as in European capitals and in Washington—that the current system of open markets is unable to ensure secure supply. The present competition has resulted in oil and gas deals that include political arrangements in addition to commercial terms. Highly publicized Chinese oil investments in Africa have included funding for infrastructure projects such as an airport, a railroad, and a telecommunications system, in addition to the agreement that the oil be shipped to China. Many more of these investments also include equity stakes for state-controlled Chinese companies. Another example is Chinese firms taking a position in Saudi Arabia, along with several Western firms, in developing Saudi Arabia’s gas infrastructure. At present, these arrangements have little effect on world oil and gas markets because the volumes affected are small. However, such arrangements are spreading. These arrangements are worrisome because they lead to special political relationships that pose difficulties for the United States. And they allow importers to believe that they obtain security through links to particular suppliers rather than from the proper functioning of a global market." CFR, Oct. 2006 | "Pointedly heightened insecurity on the part of consuming nations as respects access to energy resources is powerfully governing policy in their capitals. China, India and other so-called emerging economies in Asia have an ever increasing appetite for oil. They can ill afford to take chances with their economic security by failing to secure the required energy resources. Hence, the growing trend is private state-to-state agreements between themselves and producers for the long-term supply of oil rather than what they increasingly see as blind reliance on the US-backed traditional global markets." Page 245, 246 "Both China and India have concluded and are continuing to seek such long-term supply contracts with key oil exporters such as Russia and those across the Middle East, Africa, with Canada, states in Latin America and Central Asia." Page 245, 246 |
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"the accelerating pace of recent oil deals that Chinese state-controlled enterprises have made with major resource holders most, but not all, of these deals involve state-to-state arrangements in which China has offered a range of concessions, such as building airports (and, in some cases, indirectly supplying arms), in addition to commercial terms. The rising number of these deals has coincided with higher prices for oil in the world market and China’s swelling petroleum imports. There is no simple causal relationship between these factors. However, their simultaneous occurrence has raised concerns about whether these arrangements will become even more numerous in the future, with more widespread negative consequences for governance in oil-rich countries and possibly even broader consequences for the world oil market." CFR, Oct. 2006 "(...) these political energy arrangements are leading other countries—notably Korea and India—to adopt similar practices." CFR, Oct. 2006 |
"It is vitally important here to note that such joint deals as noted earlier between Saudi Arabia and China and between Saudi Arabia and India in the oil extraction and refining sectors effectively create captive private pools of oil just for India and China, largely bypassing the liberal open global markets. This trend is a fairly recent but profoundly significant development, and it is also accelerating. Hence, key consuming nations are no longer content to blindly place their energy security fortunes entirely in the hands of the West-backed, comparatively less strategic security-oriented liberal open global oil markets. They are hedging their bets, diversifying their sources by turning increasingly to making direct agreements with exporters. Russia has taken the lead to encourage and bolster this global trend rather than to bolster the current global market model. (...) By refusing to narrow its options solely to the traditional markets and by proliferating its politically oriented state-to-state agreements and contracts [Russia] sees rapid growth in its direct leverage and influence. The same is true for all other producers who are increasingly less enchanted with the liberal open markets and more enchanted by the benefits arising from direct state-to-state ties and alliances." Page 248 |
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| "Global dependence on oil is rapidly eroding U.S. power and influence because oil is a strategic commodity largely controlled by regressive governments and a cartel that raises prices and multiplies the rents that flow to oil producers. These rents have enriched and emboldened Iran, enabled President Putin to undermine Russia’s democracy, entrenched regressive autocrats in Africa, forestalled action against genocide in Sudan, and facilitated Venezuela’s campaign against free trade in the Americas. Most gravely, oil consumers are in effect financing both sides of the war on terrorism." CFR, Oct. 2006 | "Ominously, the corporate state regimes around the globe that sit in control of strategic resources all have a political affinity for one another, and the politics that bind them ever closer is increasingly the politics of growing insensitivity to American interests, outright rivalry with America and growing anti-Americanism. The Middle East, Latin America, Central Asia and Africa are bursting at the seams with such resources-based corporate states and authoritarian regimes increasingly aligned either independently of American strategic interests or in outright opposition to America. Even the moderate oil exporting states of the Middle East are loathe to continue in close alignment with the US and are actively looking to the East, realigning accordingly. The West has little authentic influence over the resource-rich regimes of the world, but Russia’s influence within that faction is mounting as its alliances and ties with its members deepen. China’s influence there is mounting as well. Both powers actively arm and otherwise bolster such resource-rich regimes. |
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