Russian President Vladimir Putin has been nominated for the Nobel Peace Prize. The International Center for Research on Biofuels and Patents in Zurich has chosen Putin for his alternative fuel initiatives in Russia.

The Swiss organisation says its main goal is to prevent future wars over oil.

The centre proposed Putin for his ideas on developing energies based on nanotechnology. It also praised the President for his efforts to reduce Russia’s reliance on fossil fuels.

Surely?

Front page of the Guardian newspaper yesterday was a story about rising fears of an energy crisis this winter in the UK.

Britain faces the prospect of power shortages and soaring prices this winter after the National Grid warned of a shortfall in electricity-generating capacity yesterday. The alert coincides with a surge in gas prices, which are now 40% higher than in continental Europe, and the confirmation that a vital import plant in South Wales will not be operational this winter.

The UK’s energy infrastructure is literally creaking at the seams. Top this off with problems importing gas from mainland Europe because of a lack of pipelines to cross the sea, and you can see why energy costs way more in the UK than it does elsewhere in Europe.

What does this mean for Russia, you ask? Simple - it means that energy - or, rather, Britain’s lack of energy - is going to be high in the public consciousness. And where do the public think their energy comes from? Yep, you guessed it - Russia.

I can’t think of anything more likely to keep Russia as the evil energy giant on the front pages of newspapers across the United Kingdom. Say goodbye to closer relations with Russia in the forseeable future…

(Although, to give the Guardian credit, they didn’t mention Russia in their report).

First up is Josh over at Registan, quickly followed by Ben at NewEurasia.

Russia has planted its flag on the North Pole seabed, under the Artic ice.  Here’s a picture, courtesy of NTV:

Cute, huh? 

I was going to write about this story in far more detail, but others have explained far better than I could the reasons why Russia is so keen on claiming the North Pole as its own, and why Canada, Denmark and all the others want it too (hint: oil, shipping lanes, global warming and nationalism all combined into one big messy frozen pie). 

While it’s been a fun story, Russia’s actions this week have been little more than expensive grandstanding. 

So, I’m off to watch telly instead. 

Russia’s Gazprom are to cut off gas to Belarus, in a row over unpaid bills.  According to Gazprom, Belarus are more than $450 million behind in payments, and so they are left with no choice but to cut supplies by 45% from Friday (August 3rd).

As this cutoff seems to be related to Belarus’ reluctance, or inability to pay its bills, rather than a direct political crisis, I don’t really have a problem with this.  Business is business. 

I’m more worried about whether this will impact on supplies to downstream customers.  Approximately 20% of all the gas that Gazprom supplies to EU countries goes through Belarus. 

According to Gazprom, plans are in place to ensure supplies:

Gazprom spokesman Ilya Kochevrin said: “Should Belarus start illegal offtake of gas, we have a concrete plan so customers get their gas. If they do that, we will go to court and increase supplies via alternative [routes].”

I will be impressed if Gazprom manage to pull this off without compromising the supplies to their other customers.

The Russian Duma has today voted in favour of allowing Gazprom to form its own private army. Reuters reports:

A law backed by 341 lawmakers in the 450-seat State Duma lower house of parliament gave Gazprom, and oil pipeline monopoly Transneft, special exemption from strict limits on private businesses wielding arms.

The two state-controlled companies will for the first time be allowed to employ their own armed operatives instead of contracting an outside security firm. Their armed units will also have access to more weapons and more freedom to use them than private security companies.

The stated reason: to ensure the protection of gas pipelines and facilities from militants.

My cynical response: so much for the mighty Russian army.

Anyway, opponents of the bill are warning that today’s move risks opening a pandoras box, as they believe that where Gazprom leads, other Russian companies are sure to follow.

The only silver lining, I suppose, is that the bill still has to pass the Federation Council, and be approved by Putin before it becomes law.

The Financial Times is distinctly unimpressed by Gazprom’s posturing in the British energy market:

For all its macho posturing, all Gazprom has managed to acquire so far in the UK is Pennine Natural Gas, in Wilmslow, Cheshire, which has about 600 customers. Pennine employs just 12 people in the UK - hardly the path to world domination.

While the Russians have been teasing their British counterparts, the Spanish have managed to snap up Scottish Power and the Malaysians have built a stake in Centrica.

But if Gazprom wants to be taken seriously as a western shareholder-friendly company then it must put its money where its mouth is and launch a takeover bid.

Ouch.

In a rather mysterious statement, Gazprom announced earlier this week that it planned to increase its presence in Britain. 

A Gazprom spokesman confirmed:

“In the near future there will be a deal to further increase the customer base on the British market. Anyone who will be in London for the Wimbledon tennis tournament will know about it.”

Speculation immediately centred on Centrica, owner of British Gas, and their shares have risen considerably.

But I’d imagine such a big move for such a strategic British company would raise some already high-up eyebrows in the British government, and would probably, therefore, be doomed to failure.

More likely, Gazprom is concentrating on developing its British market share bit by bit, and is likely to make a move for a smaller mid-size British company. 

Australia and Russia have signed a deal allowing Australia to supply uranium to Russian nuclear reactors.

Initially this struck me as rather odd - I’d always assumed that Russia was pretty much self-sufficient when it comes to uranium.

But, interestingly, Russia doesn’t mine anywhere near enough uranium to fuel all its nuclear reactors (military or civilian) or to cover the massive amount of uranium it has agreed to export to other countries.

Take a look at these numbers from 2000:

• 3,260 tonnes: Uranium mined in Russia
• 8,000 tonnes: Uranium used in Russian reactors
• 16,000 tonnes: Uranium exported abroad

Although production is on the increase, Russia used or exported seven times as much uranium as it was able to produce in 2000.

The only way that Russia can fuel its nuclear reactors, and meet its export obligations is to dip into its steadily diminishing stockpile of uranium, which currently stands at around a half a million tonnes. At the current rate of depletion, Russia’s uranium stockpile will be gone entirely in little more than 20 years.

An excellent post about EU-Russia relations and energy over at Moscow Rules, including one of the most astute observations on Russia’s approach to international law that I’ve read in quite a while:

Signing a Charter is politics and can be fudged: ratification is Law and Russia, the land of signing-and-stamping stuff, appreciates the difference.

The Charter in question, by the way, is the Energy Charter.  The author thinks Russia was between a rock and a hard place when it was signed, and that the EU’s determination to secure an unfair deal is going to come back and bite.

I thoroughly recommend reading the whole post.

Seriously - could this BBC article be any more uncritical of Gazprom?

Rosneft have taken out a loan of $13 billion.   Mosnews reports that the loan is to:

to finance large acquisitions in Russia and abroad.

I wonder what they plan to spend it on.  Anyone got any ideas?

Tim Newman has an article up at TCS daily correcting some misinformation about oil and gas Production Sharing Agreements, using both Russia and Iraq as case studies. 

Russia’s economy may have its problems, but the country’s size, plus the enormous boom its energy industry has enjoyed have combined to make Russia the 10th largest economy in the world, by overall size.  The Economist Intelligence Unit (they of The Economist magazine fame) estimate that Russia’s economy in 2006 was worth $986.6 billion, a startling $223.3 billion increase on the previous year.

The Russian government is, as you’d expect, bullish:

Russian First Deputy Prime Minister Dmitry Medvedev said Saturday, Jan. 27, that the nation’s GDP topped $1 trillion and it will become the world’s 6th largest economy, overtaking Italy, France and Britain in two years.

Presumably he’s basing this prediction on a continued rapid increase in oil and gas revenues.  I think he’s perhaps being a little too optimistic (to put it mildly), but we’ll see.  Check back in 2009. 

Joseph Nye (the soft power guy) offers up four reasons why Russia will not be a major power in 2020:

1. They are failing to diversify away from energy and develop a broad based economy rapidly enough. 
2. They need a rule of law that protects entrepreneurs and helps foster a middle class that will support a democratic market economy. 
3. They have a terrible situation in demography and public health, and have not invested in an adequate social safety net. 
4. Their current bullying attitudes in the energy area are destroying trust and undercutting their soft power in other countries.

I think he’s pretty much nailed it when it comes to identifying what Russia is doing wrong at the moment.  In particular, I like the way he has also identified particular structural strengths and weaknesses that Russia is either failing to take advantage of (energy wealth), or failing to take seriously enough (demography / health).

Having said that, though, I’m not sure that - even if the Russian government fails to find solutions to the problems that Nye identifies - Russia won’t still be a major power in 2020 (in the sense that it will have roughly the same impact on global and regional affairs that it enjoys today). 

2020 is only 13 years away and, unless there are some dramatic global shifts, energy is still going to be an important indicator of power in 2020.  I can’t see Russia losing its edge in that arena. (Nor, to be honest, do I see Russia losing its nuclear power, or its military edge over the majority of its neighbours).  

I can think of a number of (mainly Middle Eastern) oil-rich states that have kept going for years on the back of oil wealth, without addressing the underlying structural problems within their society and economy, and I see no reason why Russia can’t do the same.

The problem that Russia will face, of course, is the same one that every petro-state faces - keeping a population content is relatively easy while the money continues to flow in.  Keeping them happy when the money runs out is another matter altogether.  And, make no mistake - at some stage, the oil money will run out. 

Image courtesy of Waffler.  Thanks to Robert Amsterdam for first bringing Nye’s comments to my attention.