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Russia's foreign policy is fueled by natural gas

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© St. Petersburg Times,
published June 24, 2001

"I looked the man in the eye. . . . I was able to get a sense of his soul."

It sounds like something out of a bodice-ripping romance novel. But it was President Bush describing his recent tete-a-tete with Russian President Vladimir Putin.

Nonetheless, Bush wasn't sufficiently smitten with Putin's ice-blue eyes to back off plans to build a missile defense shield, even if nobody is sure it would work. And Putin promptly warned that if America plows ahead, Russia will ignore arms control treaties and upgrade its nuclear arsenal.

It's the sort of saber-rattling, Cold War stuff that captures headlines.

With relatively little attention, though, Putin has been busy with another foreign policy venture that could go a long way toward strengthening Russian might. It involves a low-tech commodity that should be very familiar to Bush the oilman: natural gas.

Last month, Putin consolidated his power by ousting the head of Gazprom, Russia's natural gas company, and replacing him with a Putin protege.

Why is this significant? Because Gazprom is to gas what Coca-Cola is to soft drinks and McDonald's is to hamburgers.

Based in Moscow, Gazprom is the world's largest natural gas company, controlling a quarter of the earth's known reserves. It holds a near monopoly on the Russian market and supplies a third of the natural gas used by the rest of Europe.

By 2020, as demand increases for clean sources of energy, gas is expected to account for more than 60 percent of Europe's energy consumption. Gazprom likely will supply much of that.

As we saw in the United States during the 1970s energy crises, when OPEC raised prices, those who control energy supplies can affect a lot of other things. That's why the United States and its allies tend to view Gazprom with alarm.

Russia is using natural gas as a way of binding other countries closer to Moscow. Last winter, it shut off supplies to the former Soviet republic of Georgia, ostensibly for "technical reasons." The real purpose, experts say, was to keep Georgia from closing two Russsian military bases on its soil.

After pro-democracy forces toppled Slobodan Milosevic last year, Putin rewarded Yugoslavia's new government by promising to turn the gas back on. (Gazprom had shut it off when Belgrade's unpaid bill hit $300-million.) Shivering Yugoslavs treated Putin like a hero -- it's a good bet they'll have to show their appreciation in other ways some day.

"Gazprom has become the most important instrument of Russian foreign policy,' says Jacek Palasinski of Wprost magazine, which tracks the company. "It provides the missing divisions, the clout of an army."

And the army is marching steadily forward.

Later this summer, if all goes as planned, a huge rig will begin laying pipeline across the Black Sea to take natural gas from Russia to Turkey. The pipeline will not only increase Turkey's large dependence on Russian gas, it will bolster Russian influence in an enormously important and volatile part of the world.

"Both economically and politically, this project is extremely significant for Russia,' Fiona Hill, an analyst at the Brookings Institution, told the New York Times. "It is seen as a major coup for the Russian government."

The new pipeline beat out a route -- bypassing Russia and going through Azerbaijan -- that was favored by the United States.

And how's this for a spy-versus-spy angle? Roger Boyes, a British expert on Gazprom, says the company has been urging Putin to stop the construction of competing pipelines to the West.

"One conspiracy theory, entertained by American oilmen, is that Gazprom money has been finding its way into offshore companies and from there on to Armenian arms dealers," Boyes writes in the Times of London. "The logic: As long as there is conflict in Azerbaijan and Chechnya, building pipelines will look a risky business for Western investors and keep them at arm's length."

Gazprom, which operates from a 35-story headquarters in Moscow, also is a major force in Russia. It employs 340,000 people and accounts for 8 percent of Russia's gross domestic product and more than a fifth of its tax receipts. It owns hotels, has stakes in several financial institutions and recently helped Putin by wresting control of an independent TV network from a Putin enemy.

Eventually, Russian's natural gas company might prove too powerful for Putin. Says Boyes: "Gazprom -- sinister, strong and secretive -- has the capacity to survive a president as sinister, strong and secretive as Vladimir Putin."

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