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Russia's Energy Resources

What can stand in the way of Russia becoming the world’s premier energy supplier? Well, the answer could be Russia itself, or at least the short-sightedness of the present regime in Moscow. There are disturbing signs that some old Soviet era thinking permeates energy regulation in Russia, and threatens its future prospects in self-destructive manner.

The State is a major player in the sector, and the country’s disputes with former Soviet territories which have broken free, show that Moscow is not averse to using its reserves and pipelines to score political points rather than profits and customer satisfaction!

It is the same with the Yukos story, and many do not believe the cases brought against the founder of this enterprise and his persecution. What can be the fate of foreign interests if Russia’s own citizens are put in bars like animals on trumped up charges? That question has more than moral overtones, because Russia’s reserves cannot be brought to market without a transparent role for private investments. The dominant role of energy in Russia’s exports means that the country must get its act together in this vital respect, without further delay.

Western oil companies are almost desperate to increase their Russian forays, and Moscow to its credit, has also made important concessions for foreign capital and know how to come in. However, vengeful moves on adversaries go against the grain of market reforms, and must worry top executives in key companies. Russia’s full membership of the World Trade Organization will help existing members as much as it promises Moscow!

Russia has done well in gas but the petroleum area needs rapid exploration, refining, and distribution breakthroughs. Many fields remain untapped or even undiscovered, and most refining units are simply archaic. Nuclear energy is another international concern, since the clouds of Chernobyl have barely settled; already, new nuclear power stations are under active consideration in Moscow.

An irreversible and transparent reform of Russia’s entire energy sector, with phased shrinkage of all political interests in the matter, will act as a major boost for the Russian economy, and take it to the vanguard of the globe’s energy producers and suppliers. There are loads of strategic benefits for the downstream industries of the domestic economy as well.

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