Russia and The Global Energy Markets

Developing Just Leadership

Ahmet Mehmet

Muharram 03, 1444 2022-08-01

News & Analysis

by Ahmet Mehmet (News & Analysis, Crescent International Vol. 51, No. 6, Muharram, 1444)

As NATO’s global geopolitical standoff with Russia continues, West European regimes struggle to strategize seeking ways to outwit Russia via the energy markets. One of the key avenues for NATO is to find alternated energy sources to bypass Russia. Over the past couple of years Crescent International has analyzed the political angle of this issue. This was long before the Russian invasion of Ukraine launched on February 24. It is, however, important to focus on some key economic and logistical variables of this issue.

On July 18, the European Commission signed a memorandum of understanding with Azerbaijan’s authoritarian regime to double its natural gas imports by 2027. Azerbaijan and other Central Asia countries along with Qatar and Algeria regularly feature in news headlines as key substitutes for Russian energy products.

Apart from the fact that the autocrats in Azerbaijan and Central Asia are unlikely to sideline Russia for reasons of their political survival, substituting Russian energy products will require massive reconfiguration of many trade rules and building of colossal infrastructure.

If it were peacetime, this would sound plausible. The war in Ukraine, however, is raging and it is Russia that is dictating the military and political framework for the war. The west is forced to merely react and is doing so haphazardly with minimal long-term economic and political planning.

Thus, we must return to the central question: how realistic is it for NATO regimes to sideline Russia from the global and their own energy markets?

Yes, pipelines, shipping routes, tax reforms and trade agreements can all be put in place to make Central Asian and energy products of Algeria and Qatar available to western consumers and markets, but at what economic and political costs? Can it be done in a timely fashion to offset Russian gains in Ukraine? What concrete economic and logistical counter measures will Russia take, to retain its dominant position in the global energy markets? Such questions are rarely studied in a sober fashion and almost never analyzed outside of the western political narrative.

Regimes through which the West European countries aim to substitute Russian energy products are engulfed in mass scale corruption, nepotism, and bureaucratic incompetence. These factors make it virtually impossible to put together a viable, and more importantly, quick mechanisms in place to sideline Russia from key energy markets. This problem is of the west’s own making, as for decades while sloganeering about free elections and democracy, NATO regimes have been propping up autocrats worldwide. These autocrats are more interested in fattening their private bank accounts in western countries rather than development of their countries. While fully aware of these malpractices, NATO regimes have turned a blind eye and continued with such policies.

Another key factor which will hinder NATO regimes from sidelining Russia from the energy markets and bring in substitutes from other regions is the fact that organizing the infrastructure and smoothing out the logistical aspects of this endeavor will require many years. As NATO regimes try to put in place economic and logistical infrastructure, so will its opponents.

While western regimes have some financial and political advantages at present, opponents of the west-centric order are not starting their economic game from scratch either. They also have logistical and economic advantages in certain spheres.

The logistical and economic infrastructure centered around China’s Belt and Road Initiative (BRI), supplemented through the BRICS association, and coupled with the International North-South Transport Corridor (INSTC) is a solid framework which will give Russia a chance to rollback many of the negative effects of western economic sanctions and other pressures. Even looked at superficially, the issue becomes clear that the three listed elements will allow Russia to continue selling its natural resources.

If Islamic Iran is able to sell its energy products and regularly increase its share of doing so under severe economic sanctions for 43 years, a massive country like Russia will also be able to do so.

It should be kept in mind that the western goal is to inflict massive economic pain on Russia to force Moscow to abandon its geopolitical ambitions. Those aware of the economic conditions in Russia and the western bloc, will see that while the western regimes have the ability to cause some economic setbacks for Russia, those are nowhere near the required pain level which will force Moscow to scale back its opposition to western presence in Russia’s sphere of influence.

Sanctions on Russia are orchestrated within a framework of west-centric economic and political order. NATO regimes assume that by visiting Riyadh, Doha or Caracas they can quickly pressure these countries to set in motion economic policies favorable to NATO but detrimental to Russia. This mindset is outdated as many developing countries no longer look only towards Western economic models and markets for their development policies.

Restriction on Russian energy products will open the energy markets to developing countries that have significant natural gas, oil and other products. The energy market will be reorganized. However, as the reaction of Islamic Iran, Algeria and even the US-beholden Saudi regime shows, the reorganization of this highly political market will take place with minimal western control.

This means that the energy market will be more diversified and allow smaller players to have greater influence than they previously enjoyed. Overall, in the field of energy supply, demand and logistics, the west is slowly being reduced to one of the players; it is no longer the only player.

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