It's Not Just Gas Prices. Biden's Russian Energy Ban Could Reorder the World
Russia’s time as the world’s energy superpower might soon be coming to an end. Under President Vladimir Putin’s watch, the country has supplied vast amounts of natural gas and oil to Europe, Asia, and other corners of the globe. But the West’s crackdown on Russian energy in response to Putin’s invasion of Ukraine could signal a new era in the global energy markets, one that sees Russia fade in influence while other budding powers scramble to fill the void.
President Biden announced Tuesday that the U.S. would ban imports of Russian oil. The British government also said it would do the same. By taking aim at one of Russia’s most lucrative industries, Western leaders hoped to ratchet up the pressure on Russian leader Vladimir Putin to end the war in Ukraine, the largest land invasion since World War II.
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On the same day of Biden’s announcement, gas prices hit their highest level ever. According to AAA, the national average price for a gallon of gas reached $4.17, a new record. If other nations join the U.S. and the U.K. in crimping the flow of Russian oil, you can expect gas prices to climb higher. “When prices rise anywhere, they rise everywhere,” says Michael Klare, a retired professor of peace and world studies at Hampshire College and an energy expert.
Klare is the author of many books about global energy markets and geopolitics. In Resource Wars, he wrote about climate change and the competition for increasingly scarce natural resources would fuel the conflicts of the 21st century. Blood and Oil examined the link between America’s interventionist foreign policy and its onetime reliance on imported oil. And in The Race for What’s Left, he foretold what he called the “era of tough oil,” shining a light on the kinds of dangerous, climate-wrecking technologies like fracking and deepwater drilling needed to find and produce the remaining oil left on earth. Time and again, Klare’s writings have proved prescient about the future of energy in this country and around the world.
Rolling Stone spoke with Klare on Tuesday morning about how the crisis in Ukraine has laid bare the flaws and fault lines of the world’s energy system. This moment, he says, could accelerate the transition away from dirty fuels and to fully embrace clean energy — not only to save the climate but to harden America’s own national security in the event of future wars like Russia’s right now. “If we don’t take action now, our national security will be at even greater risk from climate than virtually anything else,” Klare says.
President Biden announced a ban today on importing Russian oil. What’s the significance of this move?
The significance is not great in terms of its impact on U.S. oil supplies. It’s about 8 percent of our oil imports. It’ll contribute to a trend of higher prices, because global supplies are shrinking. And any reductions in global supplies are gonna raise prices. There’s no avoiding that. The question is whether European countries are going to do likewise — countries like Germany that depend on Russian oil imports much more than we do. Germany has not yet cut off oil imports from Russia. If other countries started cutting off the flow of Russian oil, which is like 10 percent of global imports, then there will be a real contraction of imports and prices will rise everywhere.
That would also mean gas prices in the U.S. — which just hit a new record — will continue to go up. Is that right?
This announcement is symbolic for us but if European countries all did it, and China and India were to follow suit, then there would be a huge contraction of what’s available on the market. That’s gonna drive up prices everywhere because oil is a global product.
To say that Russia’s invasion of Ukraine has sent shockwaves across the global energy market is an understatement. Just how important is Putin’s Russia in that market?
Russia is unique because it’s a giant producer not only of oil but also of natural gas. It doesn’t have the world’s largest supply of oil — Saudi Arabia does — but Russia is among the leading three [oil] producers along with the U.S. and Saudi Arabia, producing about the same amount on a daily basis. But in terms of natural gas, Russia has no competition because it has such mammoth reserves. For this reason, Europe has become over time heavily dependent on Russian natural gas.
Americans don’t quite appreciate what that means. In the U.S. we’re focused on mobility and mobility here comes from gasoline. We’re concerned with oil. In Europe, it’s different. Natural gas plays a much bigger role there than it does here in terms of electricity generation, heating people’s homes, powering factories. Natural gas is a much more important player in Europe and also in Asia. China relies on Russian gas increasingly so.
Has Russia always been an energy giant in the way it is today?
Russian energy has played a key role in geopolitics for more than a century. Around the start of the 20th century, Russia was the leading producer of oil, which came from Baku, now the capital of Azerbaijan. The Nobel family that established the prizes for peace and scientific advancements — they made their money in Baku selling petroleum from what was then Russia to Europe. The Rothschilds made a lot of money there too. You can go to Baku and see the palaces of the oil magnates of that day. It’s also where Stalin got his start, as a communist organizer in the oil industry.
In World War I, Baku was attacked, and it played a very big role in World War II as a major target of the German Nazi armies when they invaded the Soviet Union. Germany had no oil of its own and one of its major targets was the oil fields in the Caucasus. Many people argue because Hitler diverted his forces to try to capture Stalingrad, he lost the war. By failing to capture Baku and its oil, that was a decisive turning point in the war. During the Cold War, when Europe first built pipelines to Russia (then called the Soviet Union) this was a huge fight between U.S. and European allies. Ronald Reagan was furious.
Now, there’s a new chapter that’s been a fight over the Arctic because a lot of Russian oil and gas is located north of the Arctic Circle in areas that Russia claims. It competes with Norway, which is a major oil and gas producer in the Arctic, but also Canada and the United States, which have claims on large parts of the Arctic.
What has Russia’s war on Ukraine revealed about the global energy system as it exists today?
What the Russian attack is doing is accelerating a process in my mind of the breakdown of the globalized energy industry. This is what I suspect will happen. What had been an increasingly interconnected global energy industry, there will now be a greater disconnect in the global energy industry. It’s going to be very hard to reconstruct the kind of relationships that the West had with Russian energy before this war. Shell and BP were major investors in Russian oil and gas, and they provided crucial investments and technology to develop Russia’ reserves. Even if the war ends soon, I don’t see companies going back to Russia anytime soon.
But those companies — ExxonMobil, Shell, BP — profited handsomely from their Russian partnerships. Putin even awarded Rex Tillerson, then Exxon’s CEO and Trump’s future secretary of state, the Order of Friendship, a high honor in Russia. Couldn’t these companies’ decisions to cut ties with Russia be a temporary move to save face?
So long as Putin or his cronies are in power, and there’s a risk of another Russian aggression and more sanctions, no Western company is going to invest in Russian energy for the near future. That means the disappearance of a major source of energy supply. The loss of technology and the sanctions the Biden administration has imposed many of them are specifically targeted at cutting off the flow of funds to Russian energy companies for the purpose of investment. So Russia’s energy production is destined to decline over time. Because as I say, the remaining reserves are in the Arctic or in more difficult areas like deep underground or in shale formations. Russia needs that western technology to continue to maintain output at prewar levels, and without it, its production is going to decline.
Look at Venezuela. Venezuela probably has as much as oil as anybody on the planet, and it’s difficult to produce, and since western companies pulled out and Maduro put his cronies into the national oil company, Venezuela has more or less disappeared as a major producer.
Who benefits from Russia’s decline as a global energy power? And how does that shift global geopolitics?
People are going to turn back to the Middle East as they always have. They’ll ask Saudi Arabia to pump out more oil and that gives Saudi Arabia more clout, which has been diminished in recent years, partly because of the outrage over the assassination of Jamal Khashoggi and partly because there was a sense that the era of oil was coming to an end. Now I believe that the era of oil is coming to an end. But because of Russia’s invasion of Ukraine, and the harsh immediate cut-off from oil supply from Russia, the world’s supplies have shrunk and people still use oil and prices have risen, and so the notion that the age of oil is coming to a close seems a little premature. Even though over the long term I still think it’s the case, that 10 or 20 years from now, most people will be buying electric cars. As for natural gas, Qatar, Nigeria, Malaysia, Indonesia are all major producers. Egypt is becoming a producer. There’s gas in the Caspian Sea area. These are all disparate sources of supply that will have to be collected together to make up for Russia.
Many of those countries you mentioned aren’t anything close to what we’d call democracies. Nor is the other big player we haven’t mentioned: China. Where does China fit into this larger reordering of the global energy equation?
China has recognized that it’s going to need a lot more oil and natural gas to keep its factories humming along. It’s become a major importer of oil, replacing the U.S. as the world’s largest importer. it’s had to change its foreign policy accordingly, and it’s pushed China closer to Russia. But China has also made huge efforts over the past 10 years to develop closer ties with the Persian Gulf countries and with Africa. China now has very close ties with Angola, with Guinea, and other oil producers in West Africa. This has been a long term effort by China to diversify its supplies, and China understands that it has to have close ties with those places. The Chinese military has evolved accordingly. Just as the U.S. built up a naval presence in the Gulf region, China has built up a military presence in the Indian ocean. It has a major base in Djibouti, a very strategic location by the Red Sea and the Indian Ocean.
Republican lawmakers and politicians have responded to the current spike in energy prices to call for more domestic oil drilling. “Drill, dummy, drill” was how one put it. What do you make of that response?
There’s no place on the planet where you can stick a drill in the earth and oil comes out tomorrow. That’s a delusion to think that. What we’re talking about is invading environmentally sensitive areas with costly technology and no guarantee you’ll get oil 5 years from now. By then the climate will be significantly threatening to our survival.
This is a moment to think about which path we’re gonna go on. I think this is going to eb a fierce political battle in the U.S., Europe, and everywhere. There will be those who say the answer is to “Drill, baby, drill” at whatever environmental cost and damn the climate. I personally believe that would be catastrophic for the planet and future populations. We know we have to be going in the opposite direction or we risk catastrophic consequences.
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