rise of a new global energy elite could leave US out in the cold

[dajoki]

Newsweek
http://www.msnbc.msn.com/id/12617717/site/newsweek/

The Energy Wars
The rise of a new global energy elite means high oil and gas prices are here to stay.

WEB-EXCLUSIVE COMMENTARY
By Michael Hirsh

Updated: 6:55 p.m. ET May 3, 2006

Newsweek
Updated: 6:55 p.m. ET May 3, 2006

May 3, 2006 - It is a mantra of the globalization crowd. In today’s global economy, we are told, all that really matters is which country produces the best brains and skills. The world is flat, after all. The playing field is leveled. Wrong, wrong and wrong. What also matters, we are learning, is who controls the world's energy resources. Evo Morales's abrupt decision earlier this week to nationalize Bolivia's natural-gas industry was only the latest worrisome move in a long-term trend. Morales, a leftist elected president last December, was apparently influenced by a meeting he had in Havana last Saturday with Venezuelan President Hugo Chavez, who's rocketed to international prominence by doing much the same thing to his country's oil industry. President Chavez, sitting atop his growing pile of petrodollars, has gleefully thumbed his nose at Washington’s efforts to rein him in. Similarly, Iranian President Mahmoud Ahmadinejad is defiantly enriching uranium and sneering at Western threats of sanctions. And he obviously thinks he can, perhaps because no one is threatening to cut off Iran's oil exports as part of the forthcoming sanctions plan.


The would-be czar of this new global energy elite is Vladimir Putin. Having spent the better part of his six years in office wresting control of his nation's vast oil and gas resources, the Russian president is now playing a brass-knuckle game of power politics. When Putin partially cut off gas supplies to Ukraine and therefore to Western Europe in the first three days of the year—mainly to bully Ukrainian President Viktor Yuschenko into taking a lower price—the European Union went into a state of near panic. According to the Energy Charter Secretariat in Brussels, by 2020 the Western Europeans are expected to get half their gas from Russia, which commands 28 percent of world gas reserves, more than any country in the world. Suddenly the Europeans realized there weren’t that many alternative suppliers. Putin’s Kremlin-controlled gas monopoly, Gazprom, has hired German Chancellor Angela Merkel's predecessor, Gerhard Schröder, as a consultant. Gazprom deputy CEO Alexander Medvedev admitted at an economic forum earlier this month that even Britain’s flagship utility, Centrica, should be considered a potential takeover target. "With our present financial strength, it is very difficult to find a company which is not on our watch list," he said.

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The Bush administration may think it has one trump card in Iraq. U.S. interests obviously lie with the vast proven and potential Iraqi oil fields, said to be the world's largest. The Iraqi oil ministry has signed about 40 memorandums of understanding, many with U.S. companies, according to industry sources. Under them, the majors such as ExxonMobil, Chevron and ConocoPhillips are giving technical advice "free" to the ministry (a typical get-in-the-door strategy for the industry). Challenged at a congressional hearing in March, CENTCOM commander Gen. John Abizaid was frank in suggesting that, while oil was not the reason America went to war, it may provide a critical reason for staying. "The United States and its allies have a vital interest in the oil-rich region," Abizaid said. "Ultimately it comes down to the free flow of goods and resources on which the prosperity of our own nation and everybody else in the world depend."


But after three years of explosive anger against the U.S. occupation, it would be foolish to think that the Iraqi government, too, won’t catch the nationalist bug that’s spreading worldwide, in what appears to be an outgrowth of both antiglobalization sentiments and anti-Americanism. “I think the likelihood is high that American companies will have some significant position in Iraq,” says J. Robinson West, head of Petroleum Finance Corp. “On the other hand I think it’s highly unlikely that the petroleum sector will be dominated by American companies. We really didn't go to war over oil, and I think at this late date we don't want to make it look like we did.” ExxonMobil spokesman Russ Roberts adds, "The Iraqi oil belongs to the Iraqi people. If the Iraqi people determine that they want the help of international oil companies in developing their resources, then ExxonMobil would certainly be interested in participating."

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Washington appears as helpless in preparing for this crisis as it did in anticipating Hurricane Katrina. As we have seen in recent weeks, Congress is still dithering over such silly proposals as a $100 rebate to gasoline customers. But Republican leaders are balking at sponsoring proposals that could really make a difference, like a new gasoline tax that would change U.S. consumption habits and a serious increase in CAFE (corporate average fuel-economy) standards, which require automakers to meet an average mileage requirement. With the GOP facing a bitter fight for control of the Congress later this year, such measures are considered too politically painful. There could be a lot more pain for Americans down the road, however, at the hands of Putin and his energy-rich allies.