Russia scores one in the Great Game over Caspian Energy Rights

The great game over Caspian energy has taken a dramatic turn. The United States has suffered a huge defeat in the race for Caspian gas.

Gazprom, Russia's energy leviathan, signed two major agreements outlining a new scheme for purchase of Turkmen gas. The first one elaborates the price formation principles that will be guiding the Russian gas purchase during the next 20-year period. The second agreement is a unique one, making Gazprom the donor for local Turkmen energy projects. In essence, the two agreements ensure that Russia will keep control over Turkmen gas exports.

From all appearance, Gazprom, which was headed by Russian President Dmitry Medvedev for eight years from 2000 to May 2008, has taken an audacious initiative. The Kremlin has a grand strategy. China Daily commented, "It seems that a shift of Russia's energy export policy is under way. Russia might turn its eyes from the Western countries to the Asia-Pacific region ... The cooperation in the energy sector is an issue of great significance for Sino-Russian relations ... the political and geographic closeness of the two countries would put their energy cooperation under a safe umbrella and make it a win-win deal. China-Russia ties are at their best times ... The two sides settled their lingering border disputes, held joint military exercises, and enjoyed rapidly increasing bilateral trade."

Suffice it to say that Gazprom's new stature as the sole buyer of Turkmen gas strengthens Russia's hands in setting the price in the world gas (and oil) market. Besides, Russia is taking a renewed interest in the idea of a "gas cartel". Medvedev referred to the idea during the visit of Venezuelan President Hugo Chavez to Moscow.

There must be deep frustration in Washington. In sum, Russia has greatly strengthened its standing as the principal gas supplier to Europe. Moreover, Russian oil and gas companies are now spreading their wings into Latin America, which has been the US's traditional backyard.

[Excerpt of an article by Ambassador M K Bhadrakumar, a career diplomat in the Indian Foreign Service, as published in the Asia Times]

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