(May 23, 2013) To maintain Gazprom’s dominance in the European market, Putin has been fighting off competitors on numerous fronts.
This article was first published by the National Post.
Is Russian President Vladimir Putin supporting the murderous regime in Syria to restore Russia’s influence in the Middle East, lost during the Cold War? Is he flexing Russia’s military might to demonstrate it remains a Superpower? To maintain Russia’s arms sales to Syria, one of its biggest clients? Or is Putin merely acting out of spite, to get back at the U.S. for fomenting anti-Putin demonstrations following his disputed election in 2011?
These conjectures and others come from a perplexed press and punditry which wonder why Russia would ally itself to Syria’s Assad, butcher of some 80,000, when doing so harms Russia’s longstanding attempts to show itself a modern nation that belongs among the G8 democracies. While there may be something to some or all of those conjectures, there’s also a much more compelling explanation for Putin’s motivations: Without Syria, Russia — and Putin personally — stand to lose much of their wealth and influence.
Russia’s importance on the world stage today rests overwhelmingly on energy, its main source of foreign exchange and — because much of Europe utterly depends on Russian gas — a dominant source of its political influence. The gas is delivered by monopoly exporter Gazprom, until this year the world’s most profitable company. According to unofficial sources, Putin, who has placed his cronies in control of Gazprom and personally makes all of its strategic decisions, uses this company to further his foreign policy, to cement his domestic control by delivering patronage, and to enrich himself — Putin is believed to own 4.5% of Gazprom’s shares, today worth roughly $4-billion.
To maintain Gazprom’s dominance in the European market, Putin has been fighting off competitors on numerous fronts. First, to prevent Europe from acquiring gas from a proposed gas pipeline from Turkey, Putin directed Gazprom to pre-empt it by building an economically dubious rival pipeline to Europe. Then, when it became apparent that Europe had immense shale gas potential, Putin supported Europe’s anti-shale movement, to keep Europe’s gas in the ground on green rationales. Now a new threat to Gazprom’s hegemony has emerged – ever-larger discoveries of natural gas in the eastern Mediterranean’s Levant Basin, much of which would ordinarily be destined for Europe. In response to these finds in the Levant Basin, which the U.S. Geological Survey believes could hold one of the world’s richest deposits, Putin is again acting to maintain Europe as his preserve, by ensuring that Gazprom has a say in Mediterranean gas deliveries.
Step One in Putin’s Mediterranean gambit involves Israel, by tying down its nine-trillion-cubic-foot Tamar field. Under terms of a 20-year deal completed earlier this year, Gazprom will now be the exclusive seller of Tamar gas. Very likely, Gazprom will soon also secure rights to Israel’s even larger Levianthan field. Step Two involves Cyprus, by securing rights to its gas. This Gazprom seems set to do, largely by acquiring the Greek gas distribution company which will receive Cyprus gas.
Steps Three and Four involve two other Levant Basin countries, Syria and its client state, Lebanon. By maintaining Assad in power — not least since Syria hosts Russia’s only naval base in the Mediterranean — Putin will have outsized influence over Levant Basin gas, and the plausible means to continue to keep Europe dependant on him. Gazprom’s dismal performance of late makes his success in the Mediterranean that much more crucial.
In 2008, Gazprom, then worth $365-billion, predicted it would be worth $1-trillion by 2015, both by maintaining its dominance in Europe and by capturing much of the Asian market. Instead, Gazprom’s value plummeted to $200-billion two years ago and to less than $100-billion today. The Asian market has not materialized as expected and Europe is also at risk, particularly if the green scare fades and European leaders decide to develop their shale gas. To keep Gazprom’s market share from falling further, and his influence and personal fortune with it, Putin will need to play hard ball with all concerned. Given the stakes, and given Putin’s well-deserved strongman image, no one should be surprised at Putin’s single-minded determination to keep Syria’s Assad, and himself, solidly in power.