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Russia’s Arctic Oil Grab

Russia’s Arctic Oil Grab

Within the next year, the Kremlin is expected to make its claim to the United Nations in a bold move to annex about 380,000 square miles of the internationally owned Arctic to Russian control. At stake is an estimated one-quarter of all the world's untapped hydrocarbon reserves, abundant fisheries, and a freshly opened route that will cut nearly a third off the shipping time from Asia to Europe.

The global Arctic scramble kicked off in 2007 when Russian explorer Artur Chilingarov planted his country's flag beneath the North Pole. "The Arctic is Russian," he said. "Now we must prove the North Pole is an extension of the Russian landmass."

In July, the Russian ship Akademik Fyodorov set off, accompanied by the giant nuclear-powered icebreaker, to complete undersea mapping to show that the Siberian continental shelf connects to underwater Arctic ridges, making Russia eligible to stake a claim. Around the same time, Defense Minister Anatoly Serdyukov announced the creation of an Arctic military force tasked with backing up Moscow's bid. _CSMonitor

Russia certainly sounds serious about this Arctic seafloor grab. But will there be enough global demand for oil remaining -- once these expensive arctic wells come in -- to pay back the huge investment which will be required to hold and develop this territory?

The future of the great Chindian economic boom may not be as exalted as conventional forecasters have thought. North American and European economies have been cutting back on oil demand, and a lot of analysts are beginning to think that the emerging economies may follow suit -- at least until they can work out the troubling bugs in their systems.

There is bleaker demand outlook for next year, according to recent reports by Opec and the International Energy Association, the organisation based in Paris that represents 28 major consuming nations.

Some fear oil prices could to sink as far as during the 2008 downturn, when Brent, the European benchmark, dipped to $36 a barrel from a high of $147.

"The prices could very easily go into free fall," says Jason Schenker, the president of Prestige Economics in Texas. "A lot of oil producers are going to feel a lot of pain." _thenational

If conventional oil producers are due to feel a lot of pain in the not-so-distant-future, imagine the pain which Russia will feel -- if it overextends itself by trying to develop the deep energy resources of an ice-bound Arctic? Russia already needs oil prices of $125 a barrel just to balance the budget. If the nation goes all-out to seize and develop Arctic energy resources, the budgetary requirement for oil price could go up to $200 a barrel.

Russia is a sick and dying nation, with sky-high rates of suicide, alcoholism, HIV, Tuberculosis, depression, crime, poverty, child abuse etc. and quite low birthrates among the core Russian population. The core Russian population is shrinking and being slowly replaced by outsiders with no loyalty to the Russian nation.

Russia will not be able to hold onto Siberia for many more decades. How much less will Russia be able to keep Arctic developments profitable and keep Arctic shipping lanes open -- in the face of a coming global cooling?

Putin is playing a fool's game, a Potemkin game of one - upmanship. As long as he is playing against Obama, his bluffs are likely to succeed. But if he ever plays against a real opponent, Russia and Russians will suffer badly.

By. Al Fin




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Leave a comment
  • Anonymous on August 18 2011 said:
    Dr. Fin does not spend enough time detailing the Russian economy's exquisite dependency on the price of oil and gas. If the global economy continues downward into a long-term slowdown, Russia is in a deep economic hole, as global demand for energy is suppressed.

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