- Part I: The Geopolitical significance of Ukraine today
- A decisive vote against NATO
- On February 14 Ukraine's Election Commission declared
Viktor Yanukovych the winner in that embattled country's Presidential runoff
vote, defeating former Prime Minister and Orange Revolution instigator
Yulia Tymoshenko. Contrary to the positive spin Washington is trying to
put on the events, they mark the definitive death of Ukraine's much-touted
- The relevant question at this juncture is what the defeat
of Ukraine's Orange Revolution signifies for the future of the Eurasian
Heartland, as British geopolitician Halford Mackinder termed the region?
Even more significantly, what does it imply for a two-decade long Pentagon
attempt to weaken and ultimately cripple Russia as a military power in
Washington's awesome and overly ambitious agenda of Full Spectrum Dominance?
- To understand the long-term significance of the Ukraine
vote for the future global geopolitical balance of power we should go back
to the original Orange Revolution of 2004. Viktor Yushchenko was the hand-picked
candidate of Washington, and especially the neo-conservatives around the
Bush Administration, in their attempt to split Ukraine from its historic
and economic ties to Russia and bring the country, along with neighbor
Georgia, into NATO.
- Ukrainian economic and political geography
- A look at the map will indicate just how strategic Ukraine
is for both NATO and for Russia. Not only does the country directly border
Russia to its east, but it also provides the transit route for most Russian
natural gas pipelines to western Europe -- some 80% of all Russian gas
exports from which the country earns dollars, a vital economic lifeline
- Perhaps equally vital for Russia, in terms of her ability
to maintain a credible defense against ever-growing NATO encirclement of
its land area, is the Russian leasing rights to Ukraine's Black Sea port
of Stevastapol, home to Russia's Black Sea Naval Fleet. The Fleet leases
an additional home port in Odessa, in an agreement between Russia and Ukraine.
This politically sensitive bilateral treaty for the Black Sea Fleet basing
is not due to expire until 2017, if not renewed. Following the Russia-Georgia
conflict in August 2008, Ukraine's President Yushchenko began making noises
about prematurely terminating that treaty, thereby depriving Moscow of
its strategically most important naval base. Russian navy ships have used
Stevastopol since Russia annexed the region in 1783.
- The eastern part of Ukraine bordering Russia is home
to more than 15 million ethnic Russians and remains literally the bread
basket of eastern Europe, with some of the richest soil on earth. In 2009
Ukraine was the world's third largest grain exporter after the USA and
EU, and ahead of Russia and Canada. Ukraine's famous black soil, chornozem,
is considered the most fertile in the world, and covers two-thirds of Ukraine.
The area around the rivers Dnieper and Dniester is the only place in the
world where the width of the so-called 'sweet' black soil reaches 500 km.
This soil is exceptional in providing very high quality harvests and belongs
to the national wealth. Western agribusiness companies such as Monsanto,
Cargill, ADM and Kraft Foods are reportedly salivating over the prospect
of an end to the internal Ukrainian political stalemate in hopes of exploiting
- The Ukrainian Donetsk region in the eastern Donets Basin
or Donbas is the political base of newly elected President Yanukovych.
It is the most populous region of Ukraine and the center of its coal,
steel and metallurgy industries, science centers and universities. Ukraine's
Donbas contains an estimated 109 billion tons of coal as well as oil and
- Overall, Ukraine is one of the richest regions in all
Europe for natural resources including granite, graphite, and salts. It
provides a rich source for metallurgical, porcelain, chemical industries,
for production of ceramics and building materials.
- In short, capture of the Ukraine in 2004 was a prize
of strategic geopolitical importance for Washington in its bid for what
the Pentagon terms 'Full Spectrum Dominance'-control of the entire planet:
land, air, oceans, and outer space. As the British father of geopolitics,
Sir Halford Mackinder wrote in his seminal 1919 book, Democratic Ideals
- Who rules East Europe commands the Heartland:
- Who rules the Heartland commands the World-Island:
- Who rules the World-Island commands the World.
- For Mackinder, the Heartland integrally included Ukraine
and Russia. By chopping off Ukraine from Russia in a de facto US-led coup
called the Orange Revolution, Washington came a giant step nearer to a
complete domination not only of Russia and the Heartland, but also of all
Eurasia, including what would then become an encircled China. No wonder
that the Bush-Cheney administration invested so much energy to install
their man, Yushchenko, as President and de facto dictator. His task was
to bring Ukraine into NATO. What he did for his countrymen was clearly
of no concern to the Bush planners.
- Yushchenko almost succeeded but for the ill-conceived
adventure of Georgia's hand-picked Rose Revolution President, Mikhail Saakashvili
in August 2008, sending troops to reclaim the seccessionist region of South
Ossetia and Abkhazia for Georgia just weeks before NATO ministers would
vote on Ukrainian and Georgian NATO membership. The swift Russian military
response in stopping the Georgian attack and routing Saakashvili's rag-tag
forces also stopped dead any chance that Germany or other NATO countries
would OK NATO membership, and with it the pledge to come to the defense
of either Georgia or Ukraine in a war against Russia.
- Significance of the Orange Revolution
- The "revolution" that swept Viktor Yushchenko
into power on a wave of US dollars and support from US-backed NGOs, was
initially conceived at the Washington-financed RAND corporation. RAND had
studied the swarming pattern of bees and similar phenomena, and applied
these to modern mobile communication, text messaging and civil protest
as tactics for regime change and covert warfare.
- As I describe in some detail in my book, Full Spectrum
Dominance: Totalitarian Democracy in the New World Order, the transformation
of Ukraine from independent former Russian republic to a pro-NATO US satellite
was accomplished by the so-called 'Orange Revolution' in 2004. It was overseen
by John Herbst, appointed US Ambassador to Ukraine in May 2003, just months
before the events were set off. As the US State Department euphemistically
described his activities:
- During his tenure, he worked to enhance US-Ukrainian
relations and to help ensure the conduct of a fair Ukrainian presidential
election. In Kiev, he witnessed the Orange Revolution. Prior to that, Ambassador
John Herbst was the US Ambassador to Uzbekistan, where he played a critical
role in the establishment of an American base to help conduct Operation
Enduring Freedom in Afghanistan.
- The man Washington decided to back in its orchestrated
regime change in Ukraine was Viktor Yushchenko, a fifty-year old former
Governor of Ukraine's Central Bank who had been the point man in Ukraine
for the savage IMF "shock therapy" deindustrialization of the
country during the 1990's. Yushchenko's IMF program had devastating consequences
for his countrymen. Under his 1994 IMF program, Ukraine was forced to abandon
exchange controls and let the currency fall. He oversaw the currency demands
as head of the central bank, which within days saw the price of bread increase
by 300%, electricity prices by 600%, public transportation by 900%. By
1998 Ukrainian real wages had fallen by 75% compared with 1991 when the
country declared independence. He was clearly Washington's man for what
they wanted to do in Ukraine.
- Yushchenko's wife Kateryna, an American citizen born
in Chicago, had been an official in both the Reagan and George H.W. Bush
administrations, and in the US State Department. She had come to Ukraine
as a representative of the US-Ukraine Foundation whose Board of Directors
included Grover Norquist, one of the most influential conservative Republicans
in Washington. Norquist had been called 'the managing director of the hard-core
right, and was a key political figure behind the consolidation of right-wing
organizations in support of the George W. Bush Presidency.
- The central focus of Yushchenko's slick campaign for
President was to advocate membership for Ukraine in NATO and the European
Union. His campaign used huge quantities of orange colored banners, flags,
posters, balloons and other props, leading the media inevitably to dub
it the 'Orange Revolution.' Washington funded 'pro-democracy' youth groups
to play a particularly significant role organizing huge street demonstrations
that helped him win the re-run of a disputed election.
- In Ukraine the pro-Yushchenko movement worked under the
slogan Pora ('It's Time') and they brought in people who had helped organize
the 'Rose Revolution' in Georgia: Chair of Georgia's Parliamentary Committee
on Defense and Security, Givi Targamadze; former member of the Georgian
Liberty Institute; and Georgia's youth group, Kmara. The Ukrainian opposition
leaders consulted the Georgians on techniques of non-violent struggle.
Georgian rock bands Zumba, Soft Eject and Green Room, which had supported
the 'Rose Revolution,' now organized a solidarity concert in Kiev to support
Yushchenko's 2004 campaign.
- A Washington-based PR firm called Rock Creek Creative
also played a significant role in branding the Orange Revolution by developing
a pro-Yushchenko website around the orange logo and its carefully-staged
- When Yushchenko lost the 2004 election to Viktor Yanukovych,
several elements worked in concert to create an aura of fraud around the
results, and to mobilize popular support for a new run-off. Using the
Pora and other youth groups, especially election monitors, in coordination
with key western media such as CNN and BBC, a second election was organized
that allowed Yushchenko to squeak out a narrow margin of victory in January
2005 and declare himself President. The US State Department reportedly
spent some $20 million to secure a US-friendly outcome in the Ukraine Presidency.
- The same US Government-backed NGOs that had been in Georgia
produced the results in Ukraine: the George Soros' Open Society Institute,
Freedom House (whose head at the time was former CIA Director James Woolsey),
the National Endowment for Democracy and its subsidiaries, the National
Republican Institute and the National Democratic Institute. According to
Ukrainian reports, the US-based NGOs, along with the conservative US-Ukraine
Foundation, were active across Ukraine, feeding the protest movement of
Pora and Znayu, and training the crucial poll watchers.
- President Viktor Yushchenko, Washington's man in Kiev,
moved immediately to disrupt economic links to Russia, including shutting
off Russian natural gas into western Europe via Ukrainian transit pipelines.
This move was used by Washington to try to convince EU countries, especially
Germany, that Russia was an "unreliable partner." Some 80% of
Russia's gas was exported via Ukrainian pipelines that had been built during
the Soviet Union era when the two countries were one economic and political
entity. Yushchenko also worked closely with US-backed President Mikhail
Saakashvili, Washington's man in neighboring Georgia.
- The final result of the 2010 Ukrainian elections was
an overwhelming rejection by voters of Yushchenko, the "hero"
of the Orange Revolution, who received barely 5% of the vote. After five
years of economic and political chaos, Ukrainians clearly want some kind
of stability. Opinion polls in Ukraine show a majority opposed to joining
- Western media depictions of incoming Ukrainian President
Viktor Yanukovych as some kind of Moscow puppet, however, appear wide of
the mark; his major industrial backers want harmonious economic relations
with the European Union as well as with Russia.
- Yanukovych announced that his first official trip abroad
will not be to Moscow but rather to Brussels to meet with leading EU officials.
After that, he will immediately fly to Moscow, where President Medvedev
has signalled anticipation of improved cooperation by re-instating Russia's
Ambassador to Kiev after months of political tensions between Yushchenko
and Moscow had put the appointment on hold.
- Most significantly, however, and contrary to his predecessor's
¤relentless attempts to pull Ukraine into NATO on Washington's urgings,
Yanukovych announced he would not meet with NATO officials in Brussels.
In interviews with Ukrainian media, Yanukovych has clearly stated that
he will not try to bring Ukraine into either the EU or, most importantly
for Moscow, into NATO.
- Yanukovych has pledged to focus instead on Ukraine's
economic crisis and political corruption. Regarding Moscow, he has added
that he will welcome Russia into a consortium that would jointly operate
Ukraine's natural gas pipeline network, restoring influence that Yushchenko
and his highly ambitious Prime Minister Yulia Tymoshenko tried to cancel.
Another important signal not welcomed in NATO circles was his announcement
that he would extend Russia's strategically vital lease on the naval base
at the Ukrainian port of Sevastopol due to expire in 2017.
- Russia's new Geopolitical Calculus
- It's clear that Yanukovych's bitter election opponent,
Orange Revolution veteran and former Prime Minister Yulia Tymoshenko, has
bitterly opposed Yanukovych's policy, at the very least because she is
fighting for her political ambitions and is known to be a sore loser. After
her challenge to the February election results failed in Ukrainian courts,
she announced she would use her parliamentary coalition to block Yanukovych.
Under normal procedures, she should have resigned as Prime Minister after
the Yanukovych victory (by a margin of one million votes) was certified,
as President-elect Yanukovych asked on February 10. She refused. She was
supported as the preferred Presidential candidate by Germany's Angela Merkel
and other EU leaders.
- The Yanukovych victory was backed by some of the country's
most powerful business oligarchs including Ukraine's richest man, steel
and football billionaire, Rinat Akhmetov. Like Yanukovych, he comes from
the east steel region of Ukraine. Also backing Yanukovych was Dmitry Firtash,
a gas trading billionaire, who owns Rosukrenergo jointly with Gazprom of
Russia, and whose trading business was cut last year by Prime Minister
- The Ukrainian Parliament delivered a vote of no confidence
on March 3 against the sitting government of Prime Minister Tymoshenko,
by a majority of 243 out of 450. This was the death knell for Tymoshenko's
faction of the 2004 Orange Revolution and it opens up the possibility of
finally breaking a political stalemate among Ukraine's political factions
that has existed since shortly after the 2004 Orange Revolution. The ball
is now clearly in Yanukovych's court.
- In the late 1990's before she co-led the Orange Revolution,
Yulia Tymoshenko was president of Ukraine's United Energy Systems, a privately
owned importer of Russian natural gas into Ukraine. She was accused by
Moscow of illegally reselling enormous quantities of stolen Russian gas
and avoiding tax on the sales during the late 1990's, whence she got the
nickname in Ukraine as "gas princess."
- She was also accused of having given her political patron,
former Prime Minister Pavlo Lazarenko, kickbacks in exchange for her company's
stranglehold on the country's gas supplies. Lazarenko was sentenced to
prison in California for extortion, money laundering, fraud and conspiracy
and was accused of murder in the Ukraine.
- Assuming that Yanukovych is now able to proceed with
stabilizing the country along the neutral lines noted following the defeat
of the Tymoshenko government, Moscow gains a major shift in the political
tectonic plates that comprise the Eurasian Heartland, even with a strictly
- First, the strategic military encirclement of Russia
-- via NATO's attempted recruitment of Ukraine and Georgia -- is now clearly
blocked and off the table. Russia's access to the Black Sea via Ukraine's
Crimea appears assured as well.
- In effect, the neutralization of Ukraine knocks a huge
hole in Washington's strategy of total encirclement of Russia. It breaks
a geographic crescent of NATO or prospective NATO states stretching from
Poland to Ukraine to Georgia on the periphery of Russia and her closely
allied Belarus. Belarus President Alexander Lukashenko successfully resisted
a similar Ukraine-style Rose Revolution, warding off strong US State Department
funding of anti-Lukashenko NGO's in the country. Belarus remains a centrally
planned economy to a large extent, to the irritation of the free market
Western governments, especially Washington. Belarus is economically tied
to Russia, which accounts for half of its trade and it has no plans to
enter NATO or the EU.
- This altered geopolitical configuration in central Eurasia
after the defeat of the Orange Revolution gives a strong boost now to Russia's
long-term energy strategy-a strategy that we might call Russia's North-South-East-West
- Part II: Russia's New Geopolitical Energy Calculus
- Russia's North-South-East-West energy strategy
- The defusing of major Washington military threats is
far from the only gain for Moscow in having a neutral but stable Ukrainian
neighbor. Russia now vastly improves its ability to expand the one great
power lever it has, outside of its remaining and still formidable nuclear
strike force. That lever is to counter Washington's relentless military
pressure by cleverly using export of the world's largest reserves of natural
gas, a fuel much in demand in Western Europe and even in UK where North
Sea fields are in decline.
- According to west European industry estimates, demand
within the European Union countries for natural gas, especially for use
in electric power generation where it is seen as a clean and very efficient
fuel, is estimated to rise some 40% from today's levels over the next twenty
years. That increase in gas demand will coincide with a decline in current
gas output from fields in the UK, Netherlands and elsewhere in the EU.
With Ukraine's shift from hostile opposition to Moscow to what Yanukovych
terms 'non-aligned' neutrality -- with an early emphasis on stabilizing
Russian-Ukrainian gas geopolitics -- Moscow suddenly holds a far stronger
array of economic options with which to neutralize Washington's game of
military and economic encirclement.
- When Yushchenko and Georgia's Saakashvili took the reins
of power in their respective countries and began taking steps with Washington
to join NATO, one of the few means available for Putin's Russia to re-establish
some semblance of economic security was its energy card. Russia has by
far the world's largest known reserves of natural gas. Interestingly, according
to US Department of Energy estimates, the second largest gas reserves are
in Iran, a country also high on Washington's target list.
- Today, Russia is clearly pursuing a fascinating, highly
complex multi-pronged energy strategy. In effect it is using its energy
as a diplomatic and political lever to 'win friends and influence (EU)
people.' Putin's successor as President, Dmitry Medvedev, is well suited
to the role of overseeing gas pipeline geopolitics. Before becoming Russian
President, he had been chairman of the state-owned Gazprom.
- High-stakes Eurasian chess game
- In a sense, the Eurasian land area today resembles a
geopolitical game of three-dimensional chess between Russia, the European
Union member countries, and Washington. The stakes of the game are a matter
of life and death for Russia as a functioning nation, something clearly
Medvedev and Putin well realize at this point.
- US attempts at the military encirclement of Russia included
not only the Rose and Orange Revolutions in 2003 and 2004, but also the
highly provocative Pentagon missile 'defense' policy of placing US-controlled
(not NATO-controlled) missiles in key former Warsaw Pact countries on Russia's
direct perimeter. As a result, Moscow has developed a remarkable and complex
energy pipeline strategy to undercut a clearly hostile US military strategy
that has used NATO encirclement, missile deployments, and 'color revolutions,'
including the attempted destabilization of Iran during summer 2009 with
a 'Green Revolution' or what Hillary Clinton flippantly dubbed the 'Twitter
Revolution.' All of these US moves have attempted to isolate Russia and
weaken her potential strategic allies across Eurasia.
- For Russia, which recently surpassed Saudi Arabia as
the world's largest oil producer and exporter, sales of its natural gas
abroad has a significant advantage in that Moscow is better able to control
the price and market of gas. Unlike oil, whose price is tightly controlled
by a cartel of Big Oil (and their Wall Street co-conspirators such as Goldman
Sachs, Morgan Stanley, JP Morgan Chase), natural gas is far more difficult
for Wall Street to manipulate on a short-term speculative basis as with
- Because gas, unlike oil, is dependent on construction
of costly pipelines or LNG tankers and LNG port terminals, it tends to
have a price fixed by bilateral long-term agreements between buyer and
seller. That gives Moscow a degree of protection against events such as
the brazen Wall Street manipulation of oil prices in 2008-2009 from a record
high of $147 a barrel down to below $30 only months later, manipulations
which devastated Moscow's oil earnings at just the time the global financial
crisis cut off credit to Russian banks and companies.
- With Yanukovych now President in Ukraine, the way appears
clear for a rational gas supply and transit contract from Russia's Gazprom
to and through Ukraine, and continuing on to western Europe. Fully half
of Ukraine's domestic energy comes from natural gas and the overwhelming
bulk of that gas, some 75%, comes from Russia.
- At this point it seems a stable settlement has been reached
between the Russian and Ukrainian governments on pricing for imported Russian
gas. As of January 2010 Ukraine has agreed to pay prices close to western
European levels for its gas, and at the same time she will get significantly
higher transit fees from Russia's state-owned Gazprom for transporting
Russian gas through to western Europe. Some 80% of Russian gas exports
went through Ukraine up until now.
- That's about to change dramatically however, with the
implementation of Russia's long-term pipeline strategy, a strategy designed
to make Russia less vulnerable to future political shifts such as the 2004
Ukraine Orange Revolution.
- After the 2004 Ukraine Orange Revolution, Moscow's western
pipeline strategy until now has been to bypass both Ukraine and Poland
through construction of an underwater gas pipeline, Nord Stream, running
from Russia directly to Germany. Poland's Foreign Minister Radek Sikorski
is a Washington trained neo-conservative . As the previous Defense Minister,
he played a central role in Poland's missile defense agreement with Washington.
Sikorski's Poland today is bound closely to NATO, including agreeing to
Washington's militarily provocative missile deployment policies, and he
is trying at every turn, so far unsuccessfully, to block construction of
- Nord Stream was especially vital for Russia when it looked
possible that Washington might succeed in pulling Ukraine into NATO after
the Orange Revolution. Today the alternative Baltic Sea pipeline assumes
a different importance for Russia.
- The Nord Stream gas pipeline from Russia's port of Vyborg
near St. Petersburg to Greifswald in northern Germany, goes beneath the
Baltic Sea in international waters, completely bypassing both Ukraine and
Poland. When Nord Stream was announced as a joint venture between two major
German gas companies, E.ON and BASF with Russia's Gazprom, and with former
German Chancellor Gerhard Schroeder as board member, Sikorski, then Poland's
Defense Minister, compared the German-Russian gas deal to the Molotov-Ribbentrop
pact -- the 1939 pact between Nazi Germany and the Soviet Union which divided
Poland between the two.
- Sikorski's logic was not so precise but his emotional
- In late 2009 Sweden and Finland joined Denmark in finally
granting passage rights through their portion of the Baltic Sea for the
pipeline. Construction of the multi-billion dollar project is due to begin
this April and gas deliveries are to begin in 2011. When a second parallel
pipeline, due to start construction in 2011, is completed, Nord Stream
anticipates a full capacity of 55 billion cubic meters of gas a year, enough
to fuel 25 million households in Europe, according to the Nord Stream website.
- With Nord Stream's primary gas route directly from Russia
to its major clients in Germany, along with a stable transit agreement
through Ukraine, the likelihood of a disrupted supply of Gazprom deliveries
to northern Europe becomes remote. Nord Stream will allow Moscow's Gazprom
to use a more flexible gas diplomacy and to greatly lessen future vulnerability
to transit country supply disruptions such as it has had in recent years
from a hostile Ukraine.
- At the end of 2009 in Minsk, just as Nord Stream was
clearing the final political hurdles, Russian President Dmitry Medvedev
met with Belarus officials. Medvedev said that Russia was considering a
second leg of its large Yamal-Europe gas pipeline through Belarus if future
demand from western Europe warranted, stating, "I think the more possibilities
there are for Russian gas supplies to Europe, the better it will be for
both Europe and Russia."
- In addition, in a notable geopolitical shift, the UK
has just signed a long-term contract with Gazprom to import gas via the
Nord Stream to meet more than 4% of UK gas demand by 2012, as Britain shifts
from being a gas exporter to a gas importer. Presently, in addition to
the UK and Germany, Gazprom now has contracts to supply Denmark, The Netherlands,
Belgium and France, making it a major new factor on the EU energy supply
- The Russia-Turkey South Stream Pipeline Strategy
- Meanwhile, Washington, bitterly opposed to Nord Stream,
attempted unsuccessfully to block it by proxy through back-door support
for Poland and other EU opposition.
- In a second major front in what could be called the Russia-USA
pipeline wars, the US has initiated competing proposals to build gas pipelines
to serve the countries of southern and southeastern Europe. Here Washington
is openly backing what is called the Nabucco pipeline project. Moscow is
promoting what it calls its South Stream project, the southern Eurasian
sister to the Nord Stream in the north of Europe.
- On December 12, 2009 the government of Bulgaria, a former
Warsaw Pact member now in NATO and the EU, announced that it would participate
in Moscow's South Stream project despite considerable pressure from Washington.
- In June 2007, Gazprom and Italy's ENI concern signed
a Memorandum of Understanding for the South Stream project to design, finance,
construct and manage the South Stream. ENI, Italy's largest industrial
company, created in the 1950's by Italy's legendary Enrico Mattei, is also
partly state-owned and has been involved in the Russian gas business since
the early 1970's.
- South Stream's offshore section is to run under the Black
Sea from the Russian coast to the Bulgarian coast, a length of around 550
miles at a maximum depth over two kilometers and have a full capacity of
63 billion cubic meters, even larger than Nord Stream.
- From Bulgaria, South Stream will split into two arms,
the northern section stretching to Romania, Hungary, the Czech Republic
and Austria and the southern arm going through Bulgaria to southern Italy.
The new pipeline is expected to become operational in 2013.
- Gazprom has an agreement to provide Italy with gas until
2035 and South Stream will be the main vehicle for that. South Stream AG,
the 50-50 Gazprom-ENI joint venture is registered in Switzerland. To date
Gazprom has signed transit agreements for the pipeline with the Republic
of Serbia and Greece and Hungary. In January 2008, Gazprom bought 51%
of the Serbian state oil monopoly NIS to secure its presence there.
- An indication of the pressure that Washington has put
on Bulgaria over its participation in Russia's South Stream is that Bulgaria
also signed up to take part in the Nabucco project in December 2009. Commenting
on the dual signings, Bulgaria's Prime Minister Boyko Borisov told the
press, "Nabucco is a priority of the European Union while the Russian
South Stream is moving forward very quickly and many European countries
are joining it almost daily."
- On March 3, 2010 the new Croatian government of Prime
Minister Jadranka Kosor signed an agreement in Moscow with Russian Prime
Minister Vladimir Putin allowing the pipeline to pass through Croatian
territory, setting up a 50-50 joint venture to realize the construction.
- Kosor said that the agreement 'On the Construction and
Exploitation of a Gas Pipeline on Croatian Territory' creates a legal basis
for Croatia's involvement in South Stream, allowing the parties to set
up a 50/50 joint venture. Two days later, in what seemed a snowballing
enthusiasm for Gazprom's project, the Bosnian Serb Republic announced that
it, too, will join the South Stream gas pipeline project. It proposes to
build a 480 km pipeline in northern Bosnia and link it to the South Stream
pipeline, bringing the total number of participating countries that have
signed deals with Gazprom to seven.
- In addition to Serb Bosnia, Gazprom's partners now include
Bulgaria, Hungary, Greece, Serbia, Croatia and Slovenia. It almost retraces
the Balkan route of the controversial Berlin-to-Baghdad railway that played
such a decisive geopolitical role in British machinations that ultimately
led to World War I following the assassination of the Austro-Hungarian
heir to the throne, Archduke Francis Ferdinand.
- The central issue for the two competing pipeline projects,
South Stream and Nabucco, is not who will buy their gas. As noted, natural
gas demand across Europe is expected to rise dramatically in coming years.
Rather it's the question of where the gas will come from to fill the pipeline.
Here Moscow now clearly holds the trump cards.
- In addition to gas directly from Russia's gas fields,
a major component of South Stream gas is to come from Turkmenistan and
from Azerbaijan and possibly at some point from Iran. In December 2009
Russian President Dmitry Medvedev went to Turkmenistan to sign major agreements
on energy cooperation.
- Until the breakup of the Soviet Union in 1991, Turkmenistan
was a republic of the Soviet Union, the Turkmen Soviet Socialist Republic,
Turkmen SSR. It is bordered by Afghanistan to the southeast, Iran to the
south and southwest, Uzbekistan to the east and northeast, Kazakhstan to
the north and northwest and the Caspian Sea to the west. Russia's Gazprom
until now has been the dominant economic partner of the country, which
has newly confirmed huge gas reserves. Turkmen gas has been vital for the
supply chain of Gazprom and dates back to the era when Turkmenistan was
an integral part of the Soviet Union and the Soviet economic infrastructure.
- When 'President for Life,' Saparmurat Niyazov, known
as 'Türkmenbas¸y' or 'leader of the Turkmens,' died unexpectedly
in December 2006, Washington began entertaining hopes of weaning the new
President, Gurbanguly Berdimuhamedow, away from Russia and into the US
orbit. To date they have met with little success.
- The Medvedev-Berdimuhamedow December agreements included
new agreements for Turkmen long-term gas supplies to Gazprom which will
fill the South Stream pipeline either directly or by replacing Russian
gas to the same -- meaning Nabucco is left out in the cold there.
- Nabucco high and dry...
- The active pipeline diplomacy of Russia and Gazprom in
recent months has dealt a devastating blow to Washington's favored alternative,
Nabucco, which is planned to run from the Caspian region and Middle East
via Turkey, Bulgaria, Romania, Hungary with Austria and further on to Central
and Western European gas markets, some 3,300 km, starting at the Georgian-Turkish
and/or Iranian-Turkish border. End station would be Baumgarten in Austria.
The project is parallel to the existing US-backed Baku-Tbilisi-Erzurum
oil pipeline and could transport 20 billion cubic meters of gas a year.
Two-thirds of the pipeline would pass through Turkish territory.
- Following a two day visit to Ankara in April 2009, US
President Obama appeared to have won a major victory for Nabucco when Turkey's
President Erdogan agreed to sign on to the project in July 2009, after
several years of delay. Nabucco is an integral part of a US strategy of
total energy control over both the EU and all Eurasia. It explicitly has
been conceived to run entirely independent of Russian territory and is
aimed at weakening the energy ties between Russia and Western Europe. Those
energy ties were considered a significant reason why the German government
along with France refused to back Washington's push to bring Ukraine and
Georgia into NATO.
- Today the future of Nabucco is in grave doubt. The problem
is that Russia's Gazprom has all but locked up long-term gas contracts
with all the potential suppliers of gas for Nabucco, leaving Nabucco high
and dry. Thus, Azerbaijan, Uzbekistan, Turkmenistan, Iran and Iraq are
being touted as potential suppliers to Nabucco.
- Until now the main gas supply for Nabucco should be Azerbaijan,
the source of large oil reserves captured by a BP-led Anglo-American consortium
bringing Baku oil from the Caspian Sea to the west, independent of Russia.
That Baku-Tbilisi-Ceyhan oil pipeline was a major reason Washington backed
the 2004 Georgian 'Rose Revolution' that put dictator Mikhail Saakashvili
- In July 2009 Russia's Medvedev and Gazprom CEO Alexei
Miller went to Baku and signed a long-term contract to buy all the gas
from the Azeri Shah Deniz-2 offshore field, the same field Nabucco hopes
to tap for its pipeline. Azerbaijan's President Aliyev seems to be playing
a cat-and-mouse game with both Russia and EU-Washington, to play one off
against the other for the highest price. Gazprom agreed to pay an unusually
high price of $350 per thousand cubic meters for their Shah Deniz gas,
a clear political not economic decision by Moscow that owns controlling
interest in Gazprom. In early January 2010, the Azeri government also
announced sale of a portion of its gas to neighboring Iran, another blow
to Nabucco supply.
- All potential gas suppliers to the US-backed Nabucco
pipeline to the EU are in doubt as Moscow outflanks USA
- Even were Azerbaijan to agree to sell gas and Nabucco
to buy it on competitive terms to Gazprom, industry sources say the Azeri
gas alone would not suffice to fill the pipeline. Where could the remaining
gas come from? One possible answer is Iraq; the second is Iran. Both would
entail huge geopolitical problems for Washington, to put it mildly.
- Currently, even a minimal agreement between Turkey and
Azerbaijan for delivery of Azeri gas to Nabucco is in serious doubt. Despite
the highly publicized Turkish government decision in 2009 to finally join
Nabucco, the vital talks between Turkey and the Azeri government remain
stalemated. Despite repeated interventions from US Special Envoy on Eurasian
Energy Richard Morningstar to force a final deal, talks remain deadlocked
as of this writing. Adding to the woes of Washington's Nabucco dreams,
one of the key partners of the Nabucco, Austria's OMV, told the Dow Jones
wire service at the end of January that the Nabucco pipeline would not
be built if demand is too low.
- In terms of other options being proposed by some in Washington,
for Iraqi gas to flow into Nabucco it would have to go through the Kurdish
regions of both Iraq and of Turkey, giving the Kurdish minorities a potential
major new revenue source, something not so very welcome in Istanbul. Iran
as a potential gas source is at present not in the Washington calculus
because of the tensions over Iranian nuclear plans, but more because of
Iran's enormous influence over the future of Iraq, where they exercise
significant influence on the majority Shi'ite population there.
- Uzbekistan and Turkmenistan, though both have significant
natural gas reserves, are even more politically and geographically unlikely
as sources of gas for essentially an anti-Russian project. Their distance
would mean skyrocketing costs, pricing it far above gas from Gazprom's
- In a true exercise of Byzantine diplomacy, Turkish Prime
Minister Recep Tayyip Erdogan invited both Russia and Iran to join the
Nabucco project. According to RIA Novosti, Erdogan stated, "We want
Iran to join the project when conditions will allow, and also hope for
Russia's participation in it." Then, just weeks after a formal signing
of the Nabucco agreement with the US, during Putin's visit to Ankara in
August 2009, Turkey granted Russia's state-run natural-gas monopoly Gazprom
use of its territorial waters in the Black Sea, where Moscow wants to route
its South Stream pipeline to deliver gas to Eastern and Southern Europe.
In exchange, Gazprom agreed to build a pipeline across Turkey from the
Black Sea to the Mediterranean.
- In early January 2010, the Turkish government furthered
its growing ties with Russia during a two day visit to Moscow by Prime
Minister Erdogan during which energy and the South Caucasus were discussed.
Washington's Radio Liberty calls it a "new strategic alliance"
between the once-bitter Cold War rivals. Significantly, Turkey is also
- This is no passing fad. Press in both countries speak
openly of a Russo-Turkish "strategic partnership." Today Turkey
is Russia's largest market for export of Russian oil and gas combined.
As well the two countries are discussing plans for Russia to build Turkey's
first nuclear power plant to meet Turkey's electricity demand. Bilateral
Turkish-Russian trade last year reached $38 billion making Russia Turkey's
largest trade partner. The figure is expected to grow some 300% over the
next five years, creating a solid and expanding pro-Russia trade lobby
in Turkey. The two countries are in detailed negotiation over some $30
billion in new trade agreements, including Turkey's nuclear power plant,
as well as the South Stream, Blue Stream Turkish-Russian gas pipelines
and a Samsun-Ceyhan oil pipeline from Russia to Turkey's Mediterranean
- Indicating how many land mines could explode in the face
of Nabucco's backers, especially in Washington, the Turkish parliament
on March 4, 2010 approved a bill on the construction of the Nabucco pipeline.
But the same day the US House of Representatives Foreign Affairs Committee
passed a non-binding resolution calling the World War I-era killing of
- The vote led to the immediate recall of Turkey's Ambassador
to Washington as a protest, and will possibly lead to even closer cooperation
between Moscow and Ankara on matters of mutual interest, including South
- The European Union has just approved a $3 billion general
economic stimulus that includes $273 million for Nabucco. At an estimated
final cost of $11 billion, that is hardly convincing support for Nabucco.
Moreover, the money is being frozen until a final go-ahead for Nabucco
is clear, indicating that the countries of the EU are hardly as eager as
Washington to back the risky Nabucco counter to Moscow's South Stream.
The EU has said if there is no firm agreement between Nabucco backers and
Turkmenistan for gas supply within six months, the money will be used for
- The combination of neutralizing the threat of Ukraine
in NATO, starting construction of the strategically important Nord Stream
Russian pipeline to Germany and westwards, and Russia advancing its South
Stream gas pipeline plans has effectively rendered Washington's Nabucco
pipeline counter-strategy impotent. These developments ensure that Russia's
role as Europe's largest energy supplier is secure. In recent years Russia
has grown to become the source for almost 30% of EU oil imports and by
far the largest share of its natural gas. That has enormous strategic geopolitical
significance, a point not missed in Washington.
- However, with its role in Europe seemingly shored up
and the Orange Revolution de facto rolled back, Russia's policymakers are
increasingly turning to the east and the energy demands of its cooperation
partner and former Cold War foe, China.
- Moscow Goes East
- At the end of 2009, precisely as planned and to the surprise
of Washington, Russia opened the East Siberia-Pacific Ocean (ESPO) oil
pipeline, a four-year construction project costing some $14 billion. The
pipeline now allows Russia to export oil directly from its East Siberia
fields to China as well as South Korea and Japan, a major step in closer
economic integration between especially Russia and China. The pipe now
runs to Skovorodino just north of the Chinese border on the Bolshoy Never
River. >From here at present the oil is loaded onto rail tank cars for
transport to the Pacific port of Kozmino near Vladivostok. The port alone
cost $2 billion to build, has capacity to handle 300,000 barrels of crude
per day, with oil quality comparable to that of Middle Eastern oil blends
now dominating the market. Transneft, the Russian state pipeline monopoly,
spent another $12 billion to lay the 2,700-km ESPO pipeline through east
Siberian wilderness, to connect the area's various oil fields being developed
by Russian oil majors Rosneft, TNK-BP and Surgutneftegaz.
- The final link of pipeline to the port of Kozmino is
due to be completed in 2014, costing an added $10 billion and resulting
in a pipeline almost 4800 kilometers long, a distance greater than from
Los Angeles to New York. Moscow and Beijing have also agreed to build a
spur pipeline from Skovorodino to Daqing in China's Heilongjiang province
in northeastern China, the center of its energy and petrochemical industry
and site of China's largest oilfield. When completed, the pipeline will
carry eastward an annual 80 mm tons of oil from Siberia, including 15 mm
tons to China through an additional spur.
- An indication of the priority that energy-hungry China
places on Russian oil, China has loaned $25 billion to Russia in exchange
for oil deliveries over the next two decades. In February 2009, when world
oil prices dropped to $25 a barrel from a record high $147 some six months
before, Russian oil giant Rosneft and pipeline operator Transneft were
on the brink of collapse. Beijing, in a deft and swift move to insure future
oil from Russia's East Siberia fields, stepped in and through the state-owned
Chinese Development Bank offered loans to Rosneft and Transneft of $10
billion and $15 billion respectively, a $25 billion dollar investment to
accelerate the construction of the pacific pipeline. For its part, Russia
agreed to develop further new fields, build the ESPO leg for Daqing from
Skorovodino to the Chinese border, a distance of some 43 miles, and supply
China with at least 300,000 barrels of highly in-demand sweet or low sulfur
crude oil per day.
- Beyond the Russian border, in the Chinese interior, Beijing
will construct a domestic pipeline approximately 600 miles long to Daqing.
The Chinese loan was made at 6% interest and would require Russian oil
be sold to China for $22 per barrel. Today the average international oil
price has recovered to some $80 a barrel, meaning China has locked in a
golden prize. Rather than renege on the price deal, Moscow has clearly
decided the strategic advantages of the China link outweigh possible revenue
loss. It retains price control over the rest of the oil flowing through
the ESPO pipeline on to the Pacific for other Asian markets.
- Whereas the energy markets of Western Europe pose a relatively
stagnant demand prospect, those of China and Asia are booming. Moscow is
making a major shift eastwards in light of that fact. At the end of 2009,
the Russian government released a comprehensive energy report entitled
"Energy Blueprint for 2030." It calls for substantial domestic
investment in the East Siberian fields, and speaks of a shift in oil exports
toward Northeast Asia, with the share of the Asia Pacific region in Russian
exports growing from 8% in 2008 to 25% over the next years. That will have
significant political consequences for both Russia and Asia, especially
- China passed Japan several years ago to become the world's
second major oil importing nation after the United States. The issue of
Chinese energy security is of such paramount importance for China that
Prime Minister Wen Jaibao has just been named to head a cross-ministry
National Energy Council to coordinate all issues of China's energy policy.
- Russian begins LNG deliveries for Asia
- A few months before the completion of the ESPO oil pipeline
to the Pacific, Russia began its first ever deliveries of Liquified Natural
Gas (LNG) from the Gazprom-led Sakhalin-II project, a joint venture that
includes Japan's Mitsui and Mitsubishi as well as the Anglo-Dutch Shell.
For Russia the project will give her invaluable experience in the rapidly
expanding global LNG market, a market not dependent on fixed long-term
- China has also made forays into other countries in the
former Soviet Union area to secure its energy needs. Late in 2009 the first
stage of a pipeline, known variously as the Central AsiaChina Gas
Pipeline or the TurkmenistanChina Gas Pipeline, was completed. It
brings natural gas from Turkmenistan across Uzbekistan to southern Kazakhstan
parallel to the existing Bukhara-Tashkent-Bishkek-Almaty pipeline.
- Within China, the pipeline connects with the existing
West-East Gas Pipeline that crosses China and supplies cities as far as
Shanghai and Hong Kong. Some 13 billion cubic meters (bcm) are supposed
to go through the pipeline in 2010, increasing to over 40 bcm by 2013.
Ultimately the pipeline could supply more than half of China's current
natural gas consumption.
- It marked the first pipeline to bring Central Asian natural
gas to China. The pipeline from Turkmenistan will be connected to a branch
line from western Kazakhstan, scheduled to open in 2011 and which will
supply natural gas from several Kazakh fields to Alashankou in China's
Xinjiang Province. Little wonder that Chinese authorities were none too
pleased with ethnic Uighur riots in July of 2009, which the Chinese government
claimed was instigated by the Washington-based World Uyghur Congress (WUC)
and its leader Rebiya Kadeer, who reportedly has close ties to the US Congress'
regime-change NGO, the National Endowment for Democracy. Xinjiang is becoming
ever more strategically important to future Chinese energy flows.
- Far from a threat to Russia's energy strategy as some
western commentators claim, the Turkmen-China gas pipeline in effect serves
to deepen the economic ties within the countries of the Shanghai Cooperation
Organization, SCO, at the same time it locks up for China a major portion
of Turkmen gas that might have gone to the floundering Nabucco pipeline
favored by Washington. That can only be to the geopolitical advantage
of Russia which would lose a major economic influence were Nabucco to succeed.
- The SCO, founded in 2001 in Shanghai by the heads of
state of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan,
has evolved into what might be called Halford Mackinder's worst nightmare-a
vehicle for welding close economic and political cooperation of the key
Eurasian land powers independently of the United States. In his widely-publicized
1997 book, The Grand Chessboard, former US National Security Adviser Zbigniew
Brzezinski bluntly stated, "It is imperative that no Eurasian challenger
emerges capable of dominating Eurasia and thus of also challenging America.
The formulation of a comprehensive and integrated Eurasian geostrategy
is therefore the purpose of this book." He added the warning, "Henceforth,
the United States may have to determine how to cope with regional coalitions
that seek to push America out of Eurasia, thereby threatening America's
status as a global power." In the wake of the events of September
2001, events which many Russian intelligence experts doubted to be the
work of a rag-tag band of Muslim Al Qaeda fanatics, the SCO has begun to
take the character of the very threat that Brzezinski, a student of Mackinder,
warned of. In a recent interview on The Real News, Brzezinski also bemoaned
the lack of any coherent Eurasian strategy, notably in Afghanistan and
Pakistan, on the part of the Obama Administration.
- Russia also moves North to the Arctic Circle
- Completing Russia's new geopolitical energy strategy,
the remaining move is to the north, in the direction above the Arctic Circle.