Edited by W. Joseph Stroupe with the mission of explaining world events correctly via strategic analysis & forecasting
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| ►►►December 3, 2006 ►►►W. Joseph Stroupe |
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Russia's New Global Energy Order Winning Key Adherents |
►India's Petroleum Minister Murli Deora has come out in favor of Russia's leadership in creating a new "multi-polar" energy order aimed at "balancing the energy access in the globe", according to a report in The Hindustan Times.
The world already has a global oil order that is liberal (open) and features very high supply liquidity, meaning that a disruption of supply in one part of the order is quickly and naturally filled in by supply from another part of the order. That feature prevents any supplier(s) from enacting an embargo against consumer nations. The US and Britain created the current order in the early 1980s in the aftermath of the 1973/74 Arab oil embargo, and it features the two commodity exchanges in London and New York where highly-liquid oil futures contracts are bought and sold on a daily basis and denominated in US dollars and where the pricing mechanism rests largely upon the functioning of the spot markets.
Everyone is welcome to buy and sell at the current US-led global oil order - so why do Russia, China, India and the bulk of the rest of the rising economies of the East and the majority of the world's oil and gas producers think a new order is needed, one that is more "balanced" as far as "access in [ie: across] the globe" is concerned?
The rising powers in the East have not placed their trust in the current US-led liberal energy order, the governing institutions (IEA and OECD) of which they are mostly excluded from. They are ever more frantic to secure guaranteed energy resources for their rising economies, and they have already decided not to trust that they will have all the required access to such resources within the current US-led order.
Global supply margins are strategically very tight and competition for access is becoming very heated, so they are actively locking up supply for themselves by scouring the globe and concluding private bilateral long term supply contracts with suppliers. These agreements and contracts increasingly feature acquisition of equity shares in the producing and exploration acreage, meaning that the East is insidiously taking over ownership of both the current and future production of increasing portions of the global supply. That is the kind of global energy order in which they feel they can place their trust. It is a rigid order of bilateral (state-to-state) agreements and contracts that diametrically works against, and ever more powerfully undermines, the continued supply liquidity of the current US-led liberal order.
►As acknowledged by India's Petroleum Minister, Russia, the largest oil and gas exporter and the state that has the largest gas reserves, is the power that is leading the creation of the new "multi-polar" global energy order. Why did Mr. Deora refer to the new energy order as "multi-polar"?
Because it is an order in which the US has little, if any, leverage and control, whereas the rising powers in the East have powerful leverage and ultimate control. The term "multi-polar" signifies that power and leverage are distributed away from the current excessive concentration in the US toward a disbursement among the rising powers in the East.
Therefore, the "balancing" of access Mr. Deora speaks about is the progressive locking up of the globe's energy resources into private pools for the consumption of the individual economies of the East. The US will not be able to threaten their access to such private pools, which are becoming accessible to the current US-led order.
►How does the new Russian-led order threaten the current US-led one, and what are the implications?
The continued high supply liquidity of the current US-led liberal energy order spoken of above, which feature prevents exporters from targeting any consumer nation(s) with an embargo, relies entirely upon the factor of unflagging and full global adherence to the current US-led order. If key consuming and producing states move in the direction of weakening their adherence to the current US-led order then that crucial factor of high supply liquidity is progressively lost. The current order will become more rigid and less able to "heal" any supply disruptions that may occur or that are intentionally created.
►►►Russia and its global partners on both sides of the energy exporter/importer equation hold virtually all the trump cards in the global economic game. These are trump cards of immense potency. How Russia and its partners are already playing those cards should get the attention of everyone who is interested in the future.
►►►These developments are ones of immense risk to the strategic energy security of the West, and they are progressively acquiring the power to threaten nothing short of economic catastrophe for the US.
| Note: This Gold version of the analysis is significantly condensed as compared to the full text Platinum version available only to subscribers. The Platinum version addresses head-on the issues of precisely how the new Russian-led global oil order poses a threat to the current liberal US-led order and what the implications are. |
© Copyright 2004-2008 This article may not be reproduced, reprinted or otherwise disseminated, nor may its inherent distinctive and original ideas be used elsewhere without the prior written permission of W. Joseph Stroupe. No journalistic, analytical, editorial or forecasting substance from GeoStrategyMap.com may be republished or employed in any form without prior written permission. Send all requests for permission by email to: editor_in_chief@geostrategymap.com. |
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