The Geopolitics Of Energy

Authored by Andreas Andrianopoulos via The Strategic Culture Foundation,

Some brief notes on the situation around the world with respect to the influence that energy has on political developments.

1. The Middle East

The Middle East continues to play a major role in the global energy scene. Notwithstanding changes that have occurred in the political situation of many countries in the area — i.e., Libya, Iraq, Qatar, and Iran — the Middle East still remains one of the most important providers of oil and natural gas in the world. This is why many global powers, namely the United States, China, and Russia, keep a close eye on developments there. Events in Iraq, Iran, and on the Arabian peninsula continue to ring alarm bells in major world capitals, since whatever happens there has severe repercussions on the price of energy. This in turn affects the economic welfare of many parts of the world and puts huge strains on the diplomatic efforts of major countries to design policies to deal with the resulting problems.

The antagonism between Saudi Arabia and Iran sets off a variety of political reverberations affecting the countries of the Persian Gulf, unsettling the situation between Turkey, Syria, and Iraq, and entangling Russia and the United States in the ensuring imbroglio.

The countries of North Africa, Egypt, and of course Israel/Palestine are part of the same puzzle that mixes energy and diplomacy at every step of the way.

2. The Russian Federation

Russia plays a crucial role in the politics of global energy. Russia is one of the world's most important exporters of oil and natural gas. This means that apart from playing a pivotal role in the formation of world energy prices, its presence, behaviour, and diplomatic manoeuvring is of paramount importance when it comes to energy security and the possibility of preventing or causing peripheral animosities or establishing peace and stability.

The role of the Russian Federation cannot be viewed apart from what is happening in the energy-rich, formerly Soviet Central Asian republics. The so-called -Stans (Kazakhstan, Uzbekistan, Azerbaijan, and Turkmenistan) are major players in today’s energy markets. Whatever they do, however, cannot be seen as separate from what Russia is doing or from Russia’s intentions. Although some of them, primarily Azerbaijan, have initiated projects that are not aligned with Moscow's goals, they nevertheless need to behave in ways that do not upset their powerful northern neighbour on whom they are heavily reliant, to some extent, for their welfare (due to their dependence on oil and gas pipeline networks).

Politics is therefore deeply intertwined with energy in most of those cases, bringing diplomacy front and centre as a determinant of behaviour and economic outcomes.

3. Latin America

There have been many upsets in Latin America in recent years, creating uncertainty about how energy is managed. Venezuela, for starters, embarked upon policies that unsettled markets and led to unpleasant outcomes. Under President Chavez and then his successor Maduro after the former’s death, foreign companies were expelled, all energy facilities nationalized, and the decision was made to "spread all the wealth around" to the people. The end result was that all foreign investment dried up, the state went bankrupt, and foreign aid was needed to sustain some level of energy availability! Something similar happened in Bolivia, and Brazil has been rocked by scandals in its oil sector, while Petrobrazil has been dashed against the rocks, taking its country’s new socialist leadership along with it.

The rising hopes of economic well-being in the continent collapsed in the disasters that followed their newly emergent leaderships’ policies of nationalization, reducing those budding economies to ruins.

4. Northern Europe

Europe's problem is that, with the exception of North Sea oil and gas, it relies entirely on imports to provide it with a comfortable level of energy. Thus, events in the Middle East and the Russian stance toward the continent determines whether it is adequately supplied with energy or faces shortages.

The deposits in the North Sea have kept some European states (Britain and Scandinavia among others) well supplied for quite a while. But unfortunately there is a strong suspicion that these deposits are diminishing at a dangerous rate. As a result Europe will gradually become dependent on imports from the Middle East, North Africa, Russia, and the Atlantic (Angola, Brazil, Mexico, and the US). The situation is disquieting since Japan, and more recently, China, are seeking to buy their own supplies from the same sources.

Europe is obviously going to face difficulties in the future, but those problems can be resolved by Russia, on the one hand, and the discovery of shale gas and oil through fracking in the USA and Canada on the other. This opens up many opportunities for diplomacy to explore ways to establish new alliances and understandings. But Europe will ultimately be dependent on the goodwill of other countries.

5. The United States

After taking over the reins of world dominance from Britain, the USA continued to pay particular attention to events in the Middle East. Although the Americans had energy deposits of their own, they nevertheless wanted to safeguard the stability of world supplies, mainly to guarantee the security and welfare of most of their allies. Although their total dependence on supplies from the Gulf and North Africa never exceeded 12% of their annual needs, they were well aware of the fact that for Europe and Japan, stability in those regions was crucial for the unobstructed flow of energy. In the event of disruption, the USA would also find itself in a difficult situation. This was because its allies would be rushing to purchase oil from the same suppliers that served America's needs. Angola, Venezuela, Brazil, Mexico, and the North Sea would be stretched to their limits in order to quench the energy thirst of the world. And this equation has become more complicated as China and India have entered a phase of high energy consumption.

Thus, American involvement in the affairs of the Middle East has become a regular occurrence, leading to strange compromises, especially with respect to developments in the Islamic world. The defence of Saudi Arabia continued even after the attacks on 9/11, despite the fact that most of the terrorists who killed themselves were Wahabi devotees who came from the Saudi lands or from other Gulf states. The need for energy produced most of these strange bedfellows.

Things started to change after the fracking and shale gas revolution. The United States suddenly realized that it could not only became absolutely self-sufficient in oil and gas, but it also emerged as one of the most important exporters to the rest of the world. That automatically signalled two things:

a. The USA no longer needed to be a silent ally to those regimes in the Arab world that did not fully comply with American principles and ideas.

b. It was not imperative for the USA to worry so much about the supply of energy to its allies, either due to their excessive dependence on Moscow (i.e., Europe) or because they might block the USA from its own supply networks (in Angola and Latin America).

America could now establish, perhaps with Canadian help, its own supply routes and offer solutions that provided alternatives to either Russia or to some 'difficult', friendly countries in the Middle East. In the years of the Obama presidency this became very obvious, as the US turned its back on events in the Arab World and opened up corridors of communication with Iran. Under President Trump these priorities have not really changed, but the American administration has adopted a more business-oriented approach. That is, contacts have focused more on eventual 'deals' than on issues of ideology or democratic principles.

Relations are judged now more on the eventual results than on declarations of higher values and the pursuit of pure ideals. Thus, the USA cut deals with the Saudis while maintaining warm relations with Qatar, a regime detested by the Saudis. The private meeting with President Putin in Helsinki, which enraged State Department officials, may have largely focused on energy, the Arab world, and Islam.

America is also important for China's energy needs. It can prohibit access, through the Strait of Malacca in Malaysia/Indonesia, to millions of tons of oil destined daily for Chinese ports. It can also create havoc at the ports of Myanmar for supplies moving by land to southeastern China. By causing problems in the East China Sea, the US could isolate Chinese navigation and disrupt energy imports to that country.

China has now been incorporated into the global commercial system. They produce cheaply, so that the rest of the world buys freely. If the West stops buying, mainly due to higher costs (and energy is crucial among them), they stop producing. But this leads to significant unemployment. This may have devastating effects for the China’s colossal urban network, which might not hold up under the strain ...

In short the USA will play a pivotal role in energy matters in the near future, as a producer/supplier of energy, a military superpower keeping a close watch over global networks of supply, and as a world power extending its diplomatic reach to encompass issues of energy security and transport.

Energy Geopolitics

International politics today, as shown above, revolves around issues of energy. Countries enter into alliances and break off partnerships because of the energy deals they have entered into or broken away from. Countries like Iran, Saudi Arabia, Qatar, the Arab Emirates, Azerbaijan, Kazakhstan, and Turkmenistan pivot the focus of their attentions on the global scene because of their position, either prominent or less so, within the energy matrix. Global powers, like the USA, China, and Russia, either utilize their energy deposits or are driven by their needs to embark upon foreign-policy initiatives influenced by issues relating to energy.

Energy has transformed geopolitics so that it plays out as geoeconomics, since financial gains or losses are directly related to a country’s position within the hierarchy of political influence. Today, power emanates not from the territory one can occupy, but from the spread of markets one can control or influence. To a very large extent this is due to energy. What deposits a country commands, what transportation networks it controls, and how many lesser powers or state entities depend on its abilities and resources define its role in the international community and in the overall power architecture.

The role played by energy will not diminish in the future. Under the various transformations that will emerge, resources will always be important for the lives of nations and their peoples. War and peace will continue to be decided by those sitting at the tables where energy deals are negotiated. It will be very difficult to think of geopolitics apart from energy.