Saturday, January 22, 2011

Vladimir Putin Forges an Alliance With BP to Explore the Arctic

« BP Chief Executive Bob Dudley (left) shakes hands with state-run Russian firm Rosneft President Eduard Khudainatov after signing an agreement to form a global and arctic strategic alliance.
(Leon Neal/AFP/Getty Images)
As Washington resists efforts by U.S. energy companies to push forward into the Arctic, other countries are moving in—and leaving the U.S. behind.
Nine months after the Deepwater Horizon oil spill in the Gulf of Mexico, BP is making a statement that it does not intend to cede its position at the forefront of deepwater drilling in the face of U.S. hostility.
This statement comes in the form of a business deal with the Russian state-owned energy giant Rosneft—a deal in which both BP and Rosneft sign away almost £5 billion of their shares to each other. The deal, which was personally approved by Russian Prime Minister Vladimir Putin Friday last week, gives the Kremlin a slice of ownership of BP’s global operations, which stretch from Alaska to the Gulf of Mexico, North Africa, Azerbaijan and the North Sea. In Washington, the State Department is already facing calls to investigate whether the Russian government’s links with BP pose a national security threat. As Republican Congressman Michael Burgess pointed out, BP is one of the biggest energy suppliers of the U.S. military.
The heart of this £10 billion transaction, however, is the opportunity it provides Russia to explore an energy frontier containing enough oil and natural gas to fuel Asian demand for five full years—the Arctic. “The Arctic, rich with oil and gas resources, belongs to Russia,” reports Rowena Marson in the Telegraph. “But only BP has the cutting-edge technical expertise to get the black gold out of the deep, icy wastes.” Now that the Kremlin has a controlling interest in BP, the resources of the Arctic are fair game for Vladimir Putin and Russia’s energy tycoons.
It is this news that BP is pushing forward in Sakhalin, and not in Alaska, that will be causing the biggest chill in the White House, according to Gal Luft, director of the Institute of Analysis of Global Security.
Russia sees energy as its main tool of national power and, as such, has crafted an energy policy for the Arctic—a region that could potentially hold up to 25 percent of the world’s oil and gas reserves.
National security documents released by the Kremlin in 2009 identified the intensifying battle for ownership of vast untapped oil and gas fields around Russia’s borders as a source of potential military conflict within a decade. “In a competition for resources it cannot be ruled out that military force could be used to resolve emerging problems that would destroy the balance of forces near the borders of Russia and her allies,” stated the document, which analyzed security threats up to 2020.
The United States, on the other hand, does not have a fully crafted policy on the Arctic and seems to lack the political will necessary to explore its Alaskan energy reserves. Yet, as Washington dillydallies and resists efforts by U.S. companies to push forward into the Arctic, other countries are moving in—and leaving the U.S. behind.
For more information on the role energy conflicts will play in the near future, please reference our article “The Battleground.”