By Rozhin Salah, Linda Rashid, Deya Aso, Arez Osman, Ahmed Yousef:
On 1 January, 2006, Russia cut off gas supplies to Europe because of a dispute over gas prices with the transit country Ukraine; this conflict was summarized on a cover of ‘The Economist’ in which Putin, instead of a gun, holds the pump in his hands (Economist, 1).
Russia has used its natural resources to put economic and political pressure on its neighboring buyers. In other words, gas has played a major role in enhancing Russia’s diplomacy. Yet, there are questions regarding Russia’s capability in using gas as a political weapon.
How long can Russia cut off selling gas to its buyers? Can countries currently dependent on Russian gas increase their energy/gas security through finding other gas producers or reducing their gas dependency? This paper will examine Russia’s gas capability and subsequently Russia’s gas diplomacy.
Russian Internal Gas Dynamics
Russia, with around 24 percent of the world’s proven reserves, has the largest gas proven reserves in the world (Bahgat, 4). Iran and Qatar respectively hold second and third places with 15.8% and 14%. Russia is the second largest producer of dry natural gas in the world. Gazprom, a Russian national gas and oil company, has a monopoly over exporting gas. Gazprom owns the world’s largest gas reserves, controlling 72% of Russian gas reserves and 17% of global gas reserves (Gazprom). More importantly, the company with 170.7 thousand kilometers of pipelines has the world’s largest gas transmission system (Gazprom). The gas market in some aspects is different from the oil market since oil is a global commodity while gas is a regional commodity. In the gas market, having land borders with other countries is important since dry natural gas should best be transited by pipelines and through countries. Exporting liquid natural gas (LNG) is more costly compared to dry natural gas and requires more sophisticated technologies. The large Russian territory has enabled Gazprom to sell more than 50 percent of its gas for internal consumption and the rest to more than 30 countries, mostly its neighbors and European countries (Gazprom). For a gas-dependent country, finding a geographically close gas-exporting country is important because this reduces the transit costs.