Oil, Gas, and Politics

The conflict between Russia and the Ukraine highlights the differences between oil and gas, and energy as a political whip. Russia's row with the Ukraine has everything to do with politics. Namely, punishing the Ukraine for turning to the west. Russia can raise the price, or turn off the tap. The Ukraine has few options of getting gas from elsewhere. Even though much of their gas comes from Turkmenistan rather than Russia, the pipeline runs through Russia. It is therefore within the capability of Russia to shut the line. However; the Ukraine also has power in this struggle as the pipeline to western Europe runs through the Ukraine. They too can divert the flow, or shut off the pipeline. Hence, they can hurt both Russia and other European nations. In this complex, tit for tat game, two major differences between oil and gas become clear. First, is the diversity of supply sources for oil. Second is the physical leash of a pipeline.

Sure, there is the politics of oil Wars have been, and are being fought. The U.S. cutting oil exports to Japan, in part, drew them into attacking the United States in World War I. However, oil moves around the planet in a variety of ways, but it crosses oceans by tanker. With natural gas, most of it is transported via pipeline. The connection between the source and the consumer is hardwired (so to speak). This is changing, but it is expensive. Natural gas must be cooled (and kept cold) to transport it by ship. At the receiving end, it must be warmed back to a gaseous state for distribution.

Any place the pipeline runs gains both a stake and power in the system. This is what the world saw on January 1, when the Ukraine "diverted" (or stole, depending on how you look at it) natural gas intended for other areas in Europe. This threatened to damage Russia's relationships with other EU nations, but also to cost them a fair amount of money. It also showed that the Ukraine would (and could) stop the transport of gas. Of course, Russia could cut the tap to the Ukraine, but it could not do so without cutting supplies to the rest of Europe. An interesting dilemma. It changes the political stakes, and the stakeholders to some extent. However, it also points to a broader issue. Those on the pipeline are connected at the hip.

What does the network of oil and gas pipelines crisscrossing the "stans," Turkey, Iran and Russia, on its way to markets in China, India, and beyond mean to the relationships of all those nations?

Picture is from the EIA Azerbaijan Country Analysis

What are the forces that will drive who controls those governments? Certainly, the effort will be to controls those governments. Looking at the current "players," the prime suspects are the UK, US, China and Russia. All competing for their share of the profits off that network. The relationships between the nations on the network also become critical - as does stability that would keep those lines from coming under attack. History in both Iraq and Africa show just how vulnerable they can be.

An easy prediction woe that these little lines on the map will represent heartache, death, and suppression - not freedom and improved quality of life for the people of those nations.