Monday, June 04, 2007

Is the Bear back?

Russia is "happening" again. Or is it another Potemkin ruse? With international observers watching intently two short-timer leaders will rub shoulders at the G-8 meeting this week. And it looks like Putin has brought an attitude.
When President Vladimir Putin delivered a stinging critique of US foreign policy at a security conference in Munich in February, stunned politicians in the audience described it as the most anti-Western speech made by a Russian leader since the Cold War.

But Mr Putin was only just getting started.

In the past five months his fury over American plans to erect a missile defence shield in eastern Europe has become increasingly evident. [More]
Putin flat creeps me out. His KGB demeanor and the growing signs of authoritarianism trigger too many old memories for many of us Boomers. Perhaps most irritating is how successful this hardliner has been for the Russian people.
Other dangers remain: corruption, the inefficiency of the state apparatus, high levels of social inequity. But generally Russia is in better shape today than seven years ago, when Putin assumed power. Russia now needs more than anything to strengthen law and order and to restore the institutional capacity of the state. Democracy is also needed, but only later, when the rule of law has been established. There is, of course, a danger that the leadership will use political centralization to line everyone up along the ‘vertical of power’ and eliminate opposition in order to live in serene comfort at the citizens’ expense—and perhaps also to embark on the occasional escapade. This has happened in Russia before. But one must choose the lesser of two evils. Strengthening law and order is only possible under a centralized system. Without centralization, there is no chance at all of it happening; unbounded chaos and lawlessness would rule. This seems to be the choice facing Russia today. [More]
There was a time children when Russia was our most ardently wooed customer. Friends of mine traveled to the USSR and were seduced by the prospect of long-term trading bonanzas with the Russians. For myself, I couldn't see how their vodka-soaked economy could ever generate any trade wherewithal.

But the world's appetite for energy changed all that. And to be fair (or at least make a halfhearted attempt) I'm not sure we really know what energy reserves still lay unrealized in the vast interior of Russia.
But there's one place -- Russia -- where reserve estimates just seem to go up and up. In its annual statistical survey of world energy, BP PLC (BP ) has recently revised its estimates of Russia's total proven oil reserves to 69.1 billion barrels, 6% of the world's total, up from 45 billion bbl. in 2001. But according to auditors with a worm's-eye view of what's actually going on in the depths of Siberia, such estimates may just scratch the surface of Russia's real potential. According to a recent study by Dallas-based energy reserve auditors DeGolyer & MacNaughton, whose clients include leading Russian energy companies such as Gazprom and Yukos, Russia's true recoverable reserves are between 150 billion bbl. and 200 billion bbl. That's up from industry estimates of 100 billion bbl. a few years ago.

Why such a big gap in the estimates? Because it's one thing to be sitting on oil reserves, another to be able to exploit them commercially. In Russia's main oil-producing region in western Siberia, proven reserves represent just 18% to 24% of all oil in the ground, in contrast to about 45% in Western oil-producing regions such as Alaska and the North Sea. But as Russian oil companies adopt technologies, such as horizontal wells and computerized reservoir management systems, the estimated recovery rates are being revised. Thanks to new techniques, which make it possible to obtain oil even from apparently depleted fields, Russian oil companies already have managed to boost their output by 50% since 1998. "The biggest thing is the [new] technology being deployed in western Siberia. The results are beginning to show," says Martin Wiewiorowski, senior vice-president of DeGolyer & MacNaughton in Moscow. [More]
But compared to the extraordinary human effort displayed by the Chinese, Russia is basing its future on extraction - mining, drilling, logging, etc. Simply put they are selling their country watt by watt.

Hey - it works for for Saudis.

As long as we insist on all the cheap energy we want, the consequences will be supporting governments like Putin's and strong-arm despots who are even worse.

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