DOHA and DAMASCUS – Four years after the fall of Baghdad – which for the neo-cons would signal the advent of the US as “the new OPEC” – a meeting in the tiny Gulf emirate of Qatar may be signaling the birth of a new cartel: a “gas OPEC”, grouping countries controlling 73% of the world’s gas reserves and 42% of production.
It’s not as simple as it seems, because a gas cartel along the lines of the Organization of Petroleum Exporting Countries is above all a brilliant political idea – an astute exercise in (new) branding. The irony is that in this case the wealthy West – so keen on branding when it comes to soft drinks and TVs – has been shaken to the core.
Doha could not be a more adequate venue for this crucial meeting of the soon-to-be-rebranded Gas Exporting Countries Forum – an organization founded in 2001. By 2008, Qatar will be the world’s premier supplier of liquefied natural gas (LNG). It already boasts the highest per capita income in the Middle East. Official spin rules that the emirate is “carefully investing” no less than US$130 billion over the next five to seven years to build a “dynamic and sustainable economy”. Iraqis about to be “liberated” from their oil wealth have every reason to be jealous, not to mention the array of gas-deprived developing countries.
Members of the Gas Exporting Countries Forum include Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Oman, Qatar, Russia, Trinidad and Tobago, the United Arab Emirates, and Venezuela. Norway is an observer. The founding fathers of the gas OPEC would be Russia, Iran, Qatar, Venezuela and Algeria. All their political leaders are in favor – from Vladimir Putin to Mahmud Ahmadinejad, from Hugo Chavez to Abdelaziz Bouteflika. That’s what sends shivers down the spines of the United States and the European Union – testy Putin and favorite bogeymen du jour Chavez and Ahmadinejad laying down the law in yet another powerful club.
Russia holds the world’s largest gas reserves (47.8 billion cubic meters), followed by Iran (26.7 billion cubic meters) and Qatar (23.7 billion cubic meters). But production is another matter. According to 2005 data, Russia controls no less than 21.6% of the world’s natural-gas production, well ahead of Algeria (3.2%), Iran (3.1%), Indonesia (2.8%) and Malaysia (2.2%). Russia above all wants to become a huge global exporter: for the moment it exports only a third of its production. Iran, incredible as it might seem, imports more from Turkmenistan than it exports to Turkey – because of investment problems. Like Russia, Iran’s aim is to become a major global exporter.
No wonder Iran, with the world’s second-largest gas reserves and desperately needing to export more, has vividly recommended to Russia the creation of a gas OPEC. Unlike the oil market, in gas matters there is no price coordination: prices are individually negotiated – for as long as five years per contract – between buyer and producer. Buyers – overwhelmingly from wealthy Western nations – usually have the upper hand. A gas OPEC makes total sense for producing countries in terms of a swift counterpunch to the West’s economic might. As far as Iran is concerned, it’s strategically fundamental: it would open the way for a much stronger presence in Asian and European markets, and it would improve its security and power of dissuasion. To cut to the chase: with Iran in a gas OPEC, no Western nation would dream of supporting a US preemptive strike.
Easier said than done. Qatar may be in favor but as it is in fact little other than a US military base, Washington would never agree to its membership in a gas cartel. Moreover, Qatar already ships a lot of LNG to the US. Even before the meeting, Qatari Energy Minister Abdullah bin Hamad al-Attiyah told Reuters in Abu Dhabi: “We do not see the need for the creation of a gas organization because the issue of gas is more complex.”
Turkmenistan’s case, for that matter, is quite complex – as the Central Asia gas republic’s natural wealth is actually exported through Russian pipelines. There’s no inkling on the intentions of Gurbanguly Berdymukhammedov, the successor to the recently deceased Saparmurat Niyazov “Turkmenbashi”, who reigned absolute-monarch-style for 21 years.
A Russian-Iranian game
It is widely assumed that Iranian Supreme Leader Ayatollah Khamenei formally proposed the creation of a gas OPEC to the secretary of the Russian Security Council, Igor Ivanov, last January in Tehran. But the fact is, a gas OPEC has always been a Gazprom-nation initiative. It was not Iran, but Vladimir Putin himself – supported by the Central Asian republics – who first came up with the idea of a gas OPEC, way back in 2002. Obviously all major Western corporations were against it.
Lately, Putin has been much more cautious. In his annual Kremlin press conference on February 1, he said on the record that he did not want to see a gas OPEC controlling production to influence gas prices; he was more interested in “cooperation” to help the security of supplies.
This happened after May 2006, when Gazprom deputy chairman Aleksandr Medvedev had thrown a news bomb, saying that if Russia didn’t get a good energy deal with the European Union it would create “an alliance of gas suppliers more influential than OPEC”. In August, this “alliance of gas suppliers” was already in business – as Gazprom and Algeria’s Sonatrach signed a memorandum of understanding calling for coordinated gas prices. It’s practically inevitable that Gazprom and Sonatrach will market their gas together in Europe – and that certainly opens the way to a gas OPEC. What EU officials who keep complaining about the “lack of transparency” of Russia’s gas strategy really wanted was to see Sonatrach involved in a price war with Gazprom, so in the end the Europeans would dictate their own conditions. Wishful thinking: this is not going to happen.
The Nezavissimaya Gazeta daily argues, “More than 57% of the world’s gas reserves are concentrated in three countries – Russia, Iran and Qatar. If these states create a cartel, the gas OPEC will be easier to manage than the oil cartel and may in fact have the monopoly on the sector.”
If that is the case, one should expect an inflation of Putin voodoo dolls. The key reason Putin and the Gazprom nation are so demonized among Western financial/corporate elites is simple. It’s called direct marketing – which happens to be yet one more Western concept. Putin does not give a damn about Wall Street or the City of London. He does not give a damn about the US dollar, either (he prefers selling in euros). And he prefers to sell the Gazprom nation’s gas contract by contract, and company by company.
Russia and Iran united in a gas OPEC royally serves them both. Iran’s export way out is first and foremost Asia. Russia wants to concentrate on Europe. But the Europeans would do anything to diversify their sources, so Iran, in the end, will also be the winner.
Russian newspaper Vremia Novostiei argues that “an agreement for the formation of a gas OPEC would mean the unequivocal passage of Russia from the status of partner of the West to opposing it, and not only from the point of view of energy”. It’s not that simple. It would all depend on a peaceful solution to the Iranian nuclear dossier – which is in the interests of the gas-hungry European Union. Diplomats in Brussels never stop swearing that the EU’s ultimate fear is to become a hostage to Russia’s energy policy. The alternative supplier is definitely Iran.
One thing is certain. Doha signals to the world that the Gas Exporting Countries Forum is no longer a talking shop: now it really means business. “Gas OPEC”, as a branding concept, is here to stay. It does not matter that Canada, Norway, the Netherlands and Australia – which combined sell 35% of the gas available in world markets – are not part of it. The idea has been planted – and in this case the idea is far more influential than concrete mechanisms to implement it.
The North Atlantic Treaty Organization, true to form, had to react with extreme paranoia. Last November, NATO members were “warned” that Russia was fabricating a new, deadly political roadside bomb against Europe, by trying to set up a natural-gas cartel from Algeria to Central Asia.
Welcome to the new, Pentagon-inspired, arc of (gas) instability. Who would have thought that branding could become so explosive?