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The Summit Oil Deal - Setting the Stage for even Bigger Oil Bargains
Russian Observer ^ | May 24, 2002 | Ira Straus

Posted on 05/25/2002 3:31:13 PM PDT by Shermy

A new element in the U.S.-Russia agenda has emerged at this Summit: energy deals. It is a subject where the two countries are basically on the same side; they can reach deals to greatly increase their success in realizing their mutual interests, if they first simply set up a framework to reconcile the secondary differences in interest.

Their initial agreement is meant to do this. They have agreed to work together on energy strategy, reconciling their national energy strategies: this means they both recognize it as a strategic matter in which they are on the same side. Specifically, they will cooperate against instability in global oil markets; which in practice means that Russia should increase its oil supplies to make up for the shortfall in case of cuts in oil supplies to the West from the Middle East. Meanwhile, America is to help develop Russian oil sources and markets: this means investment. Evidently there is to be cooperation on developing Central Asian oil markets.

This is, at first glance, a modest step, but it is one that is pregnant with a change in the basic nature of Russia-West relations. As Mikhail Khodorkovsky of Yukos wrote, "the opportunities would be almost limitless" if the U.S. and Russia started making bargains in this field (Financial Times, May 24). They have started. The effects should keep growing with time:

1. It makes Russia an ally of the West in a vital Western economic security interest.

2. It makes the West an ally of Russia in a vital Russian economic growth interest.

3. It places a new regular item on the agenda of U.S.-Russia relations. Nuclear weapons disagreements need not always have the spotlight at a summit; energy bargains might instead.

4. It creates an invigorating atmosphere. Energy bargains are win-win deals, not zero-sum deals (which is the depressing feeling that always accompanies nuclear arms talks). Everyone can feel in the wallet how their interests are being benefited.

This is not likely to be the last energy deal. It is just the opening wedge. Now that energy-dealing has gotten onto the agenda, people can start thinking about what the next deal could be. Pressure groups should soon come to see the benefits they have gained from the present bargain and mobilize in favor of further deals. This is the classic way for setting an integrative dynamic into motion.

This energy deal should be seen as Stage 1. It is already possible to envisage Stage 2 and Stage 3 deals that would multiply the benefits several times over.

A Stage 2 energy deal: Russia joins the International Energy Agency (IEA), a fair oil price is agreed upon for Russian oil, the West agrees to compensate Russia for financial losses when oil prices fall below this level, and Russia agrees to compete ruthlessly against OPEC to cut world oil prices as low as possible.

The benefits: the West gains literally 10 ten times in low oil prices as much as it transfers to cover Russian losses from the same. Russia recoups all its losses, then gains some from increased market share. Desert sheikdoms stop accumulating huge financial power, something that has destabilized global finances and put big money behind the spread of religious extremist seminaries and terrorism. The world economy benefits tremendously, Third World (India, China, etc.) as well as First World. China and other countries burn less coal.

A further, long-term benefit: The Russian economy starts to rise and fall together with the rest of the world economy, instead of the other way around. It gets onto the same cycle as the West and the world economy, rather than an opposite cycle. This fosters a new enterprising and productive spirit, in keeping with the tremendous capabilities and skills of the Russian people. It encourages a better, mutual-gain attitude toward the world at large - not the old spirit of monopoly and extortion. It helps Russia become a healthy society. And it lances the financial boil of Middle Eastern societies, which have become unhealthier, cartel-and-extortion societies through their oil wealth.

A Stage 3 energy deal. A Russia-West Oil and Gas Community is established, incorporating the deals in Stages 1 and 2. The harmonization of Western and Russian oil price interests, achieved in Stage 2, makes it possible to form a strong joint organization in this sphere. The IEA is upgraded institutionally to form the basis for the Oil and Gas Community.

Like the Coal and Steel Community that laid the foundations of the European Common Market and today's EU, a Russia-West Oil and Gas Community could lay the foundations for a Euro-Atlantic-Eurasian common market.

And then there would be still further prospects:

Stage 4: the end of OPEC. By this stage, OPEC has been greatly weakened; and IEA, representing all the countries of the global "North", greatly strengthened. IEA can set norms for energy policy, energy taxation, stabilization funds and reserves, investment and production among its members. And the UN can set global norms on these matters and dictate to OPEC. A First World-Third World alliance can easily prevail in the UN against OPEC. UN regulations can undermine what is left of OPEC, outlawing its role as a cartel -- an illegitimate form of inter-governmental organization. Eventually OPEC members would no longer find it worth the embarrassment of maintaining the organization.

Stage 5: the end of global oil injustice. The UN Security Council proclaims oil and gas to be a commodity of global economic and security interest and to be subject to global antitrust regulation, as well as regulation motivated by environmental and other concerns. In low-population high-oil states such as the Gulf states (or perhaps all states where oil and gas production and reserves exceed population by a certain specified ratio), it undoes their nationalization of oil, placing the oil and gas fields under global ownership and authority. A UN energy agency could work closely with IEA to set overall management guidelines; a fair rent could be paid to the host states for use of their land.

And there we would have it. No more sucking of the world economy by a few barely populated states. No more letting the hundreds of billions of dollars go to financial destabilization, religious extremism, and terrorism, among other things. Instead a healthier Russia, a healthier Russia-West relation, and a healthier Northern leadership of the world system.


TOPICS: Business/Economy; Editorial; Foreign Affairs; Russia
KEYWORDS: energylist; gas; oil; russia; russialist
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To: Shermy; *Russia List; larryjohnson; Fish out of Water; MJY1288; Dog; MJY1288; swarthyguy...
In the article psoted titled Russia Is Finished this poster just a few months before 9/11 wrote the following:

I could have read this about Russia written in every century by writeres with delusions of granduer from the dominant power of that century. French, British, German, American, it is all the same.

I wonder is the writer angry that the Russians have rejected Western guardianship? Is Russia a super-power? No not anymore, but it will always be a power, occupying the center of the world and in control of those resources. If the Russians could have survived Napoleon, the last few Czars the Nazis and communisim and done well under them imagine what will happen once they recover? As for this comment: "the Russians are likely to face a long, slow, relatively peaceful decline into obscurity—a process that is well under way."? No nation that has the natural wealth and ability to make nuclear tipped ICBMs will ever be obscure. It may be that the Europeans needing that oil and gas even more from Russia, start to even champion her since she is to big for Europe to digest.

some advise to the Russians, empire is not its cracked up to be. Sit back and export natural resources, drink vodka and get fat. When the West needs you to save it again from themselves they know where you are.

97 Posted on 04/24/2001 17:42:05 PDT by Pericles

Who was that masked man???

21 posted on 05/25/2002 7:01:47 PM PDT by Spar
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To: Shermy
Follow da oil.
22 posted on 05/25/2002 7:06:57 PM PDT by mafree
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To: mafree
Hey guys you are right Russia has massive oil deposits under their country Vlad don't know where to start LOL! RACKKKKK OIL DEAL
23 posted on 05/25/2002 7:09:47 PM PDT by SevenofNine
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To: aristeides; Askel5; Boyd; crazykatz; Joe Montana; robbinsj; Spar; Wallaby
Russia diverts part of the US-Saudi cash flow- not to mention the fact that now we are occupied with policing their southern border looking for moslem terrorists (that's right, we're looking for terrorists on their borders, not ours). This should make the Russians feel safer.

This ain't over- as long as we remain multicultural enough to welcome moslem terrorists with expiring student visas. All we need is a continued set of color-coded threats on TV. Russia Inc. couldn't have hoped for a better marketing tool. The spending power of chubby dumbed-down, couch dwelling American humanoids is unlimited. The upside is the Russians could use the money. The downside is- enough wealth and the Russians will gain weight and watch too much TV.

Its been a couple of years since we dissected how all the klintoon benefactors made out on the rape of Russia. Now that we have a kinder and gentler administration, it will be more pleasant for Russia.

Can't wait to watch which GHWB insiders get the best pieces of the pie..............

As for Milosevic, it looks like that's been put back on the table. What Primakov has is a wild card.

24 posted on 05/25/2002 7:43:47 PM PDT by Hamiltonian
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To: Hamiltonian
Spasena Rossiya. Spasena teper' Rossiya. I Amerika.
25 posted on 05/25/2002 8:28:06 PM PDT by aristeides
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Comment #26 Removed by Moderator

To: Willie Green
It would be interesting to see a similar set of numbers for other raw materials and some finished materials as well. My suspicion is that this is not an oil trend, but an overall fact of life in america that very few industries are immune too. Only the industries that are impossible to export to cheap labor markets will remain in america....Construction, transportation, vendors and suppliers and retail, defense, various repair industries. And these industries will be awash in illegal aliens that receive reduced wages.
27 posted on 05/25/2002 9:07:16 PM PDT by mamelukesabre
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To: Shermy
the end of global oil injustice.

The problem with the scenario sketched out here is that nearly all the "injustices" ever recognized by the UN are related to the "inequitable distribution of wealth" that has been "perpetuated" by the "selfish" Western countries who refuse to "contribute" their "fair share" of their wealth to the "greater good."

I have never seen, even once, an acknowledgement in any UN or NGO forum of how utterly destructive the open racketeering of OPEC has been to the world's poorer economies. Had OPEC consisted of American corporations rather than national monopolies they would all have gone to jail.

I can't see the UN acting against OPEC at any time for any reason. If it can't be blamed on America/Israel/the West, than the UN has no patience for it.

28 posted on 05/25/2002 9:19:32 PM PDT by denydenydeny
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To: Willie Green
Most of that "imported" oil now comes from Canada, Mexico and South America. I can live with that.
29 posted on 05/26/2002 4:04:57 AM PDT by DB
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To: DB
Most of that "imported" oil now comes from Canada, Mexico and South America. I can live with that.

Fair enough.
I'm relatively unconcerned about the water and power shortages that plague NIMBY Kalifornians anyway. I've written the state off as a lost cause long ago.
Rather, I find their self-inflicted emergencies somewhat amusing.

For the rest of us, 65+% petroleum imports (46.3% of which is OPEC) is unacceptable.

30 posted on 05/26/2002 8:31:48 AM PDT by Willie Green
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To: denydenydeny
Good point about the UN and OPEC which should be repeated often.
31 posted on 05/26/2002 2:11:27 PM PDT by Shermy
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To: Shermy
Thanks Shermy.

Wouldn't it be ironical that the 9/11 mass murders financed by the Opecker Princes and the thugs that control Iran/Iraq may turn out to be the critical event that turned off the oil spigot from the Opecker Countries.

Here in N. Kali we have seen the miracle of miracles. There has been a significant reduction 4 to 8 cents per gallon on gasoline in the days just before Memorial Day.

Those in the know, say that if we have no other terrorist actions or Opecker tricks, we will see more reductions in the price of oil before 4 July. Then stablization if not more lowering after 4 July.

Hopefully in 10 years, Opec will be just a disgusting footnote in our history, and Opec will be in the ashheap of bad things.

32 posted on 05/26/2002 2:46:59 PM PDT by Grampa Dave
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To: Shermy
Thanks. The consequences of high energy prices are more than economic for poor countries. In the developed world, forested land is growing enormously, while countries like Haiti and India have been essentially deforested by poor peasants in need of fuel.
33 posted on 05/26/2002 2:53:37 PM PDT by denydenydeny
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To: Willie Green
We have a lot of oil wells in and near the county (SLO) I live in and a nuclear power plant to boot. So don't tell me "not in my backyard". We have plenty in "my back yard" here and I'm not complaining about it either. I don't have a problem buying oil from our non-dictator neighbors.
34 posted on 05/26/2002 3:14:33 PM PDT by DB
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To: Hamiltonian
'Georgia on my mind'
35 posted on 05/27/2002 8:00:43 AM PDT by Boyd
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