Tuesday, February 14, 2006

U.S.-Russia Dialogue: Energy Concerns

No matter what the formal topic of discussion was for any particular session, sooner or later someone would bring up the question of energy (oil, gas, nuclear). Given that this had been a major topic of discussion at the G-8 ministerial, it is not surprising that it also dominated our conversations as well.

What exactly is "energy security"? One of the American participants suggested that U.S. investment and technical expertise could be quite valuable in helping Russia get more energy to consumers. One of the Russians shot back that having Russia supply larger quantities of energy at lower prices may indeed be an American priority, but it isn't automatically a Russian one--that Russia should be in no hury to deplete its energy reserves, particularly, as another participant pointed out, the ongoing recovery of the Russian economy has meant surging domestic demand.

Another Russian participant noted that, effectively, there are two major energy "blocs" in the world--OPEC and Eurasia (my formulation of his concept). OPEC is less reliable for the U.S.; continued problems with Iraq, a clash with Iran, hostile populations in other OPEC states reduces OPEC's reliability. Russia, on the other hand, could become a more reliable partner to the U.S., but others took that to mean that the U.S. should watch out and ensure it doesn't alienate both "energy blocs" at the same time.

Is the Conoco-Phillips model the guiding one for American involvement in the Russian energy sector--a minority stake with the Russian major calling most of the shots? What role should Russian independent firms play in the development of the country's energy sector--and should American firms be allowed to work with those private firms, or only with state-dominated or Kremlin-friendly majors? Should Russia take the lead in formulating a global system for nuclear fuel with appropriate safeguards so that more states can take advantage of nuclear energy for power generation but not be able to develop a weapons program? Some of the issues that were discussed.

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