04 mars 2008
Russia's TGK-4 delays taking bids again - source
MOSCOW, March 4 (Reuters) - Russian power producer TGK-4 (TGKD.MM: Quote, Profile, Research) will now accept bids for the government's stake in the company on April 7, after postponing the date from March 25, a source close to the deal told Reuters on Tuesday.
TGK-4 was supposed to be sold in December 2007, and this would be the third time it has postponed the date for accepting the bids. (Reporting by Olga Popova, Writing by Simon Shuster, editing by Will Waterman)
26 février 2008
Enel prend le contrôle de plus de 50% du russe OGK-5
MILAN - Le numéro un italien de l'éléctricité Enel a annoncé vendredi avoir acquis plus de 50% de la compagnie de production d'électricité russe OGK-5, selon les résultats provisoires de l'OPA lancée sur le groupe russe dont il détenait déjà 37,15%.
Enel détient environ 52,89% d'OGK-5 et fera connaître les résultats définitifs de l'offre dans les prochains jours, a précisé le groupe.
Le numéro un italien de l'électricité avait pris pied dans le capital de la société lors de sa mise en vente aux enchères en juin 2007.
OGK-5 est l'une des six entreprises "grossistes" de production d'électricité en Russie, issue du monopole d'Etat SEU en cours de privatisation.
OGK-5 détient quatre centrales thermiques situées dans les régions russes en plus forte croissance, dont l'Oural, et représente 4% de la production d'électricité russe.
La société russe a réalisé au premier semestre 2007 un chiffre d'affaires de 13,75 milliards de roubles (382 millions d'euros) pour un bénéfice net de 33 millions d'euros environ.
La réforme du monopole d'Etat d'électricité vise à rénover un système en grande partie vétuste en y attirant des capitaux privés (les besoins totaux sont estimés à quelque 120 milliards de dollars) et à faire face à une forte hausse de la demande.
L'allemand EON a de son côté pris le contrôle d'une autres des six sociétés issues de SEU, OGK-4 qui exploite cinq centrales (quatre à gaz et une à charbon), soit 6% de la capacité totale de production d'électricité thermique de Russie.
De son côté, le groupe public français EDF a confirmé être candidat au rachat d'OGK-1.
ENEL
(©AFP / 15 février 2008 11h53)
13 février 2008
StatoilHydro s'associe à Gazprom et Total pour l'exploitation du gisement gazier géant Chtokman
LEMONDE.FR avec AFP | 25.10.07 | 14h33 • Mis à jour le 13.02.08 | 09h41
Le géant pétrolier norvégien StatoilHydro va devenir partenaire du groupe public russe Gazprom et du français Total dans l'exploitation du gigantesque gisement gazier russe de Chtokman, ont indiqué , jeudi 25 octobre, le Kremlin et StatoilHydro.
L'accord-cadre qui va être signé aujourd'hui prévoit "une part de 24 % dans l'entreprise chargée du développement de Chtokman, dans laquelle Gazprom (51 %) et Total (25 %) sont les deux autres partenaires", souligne StatoilHydro, indiquant qu'il fournira plus de détails après la signature de l'accord.
A cette occasion, "Vladimir Poutine et le premier ministre norvégien Jens Stoltenberg ont noté que ce projet multilatéral constitue un débouché vers de nouvelles frontières stratégiques de coopération dans la sphère énergétique", a déclaré de son côté le Kremlin.
Le groupe français Total s'était déjà vu attribuer, en juillet, 25 % de la nouvelle société chargée de l'étude, du financement, de la construction et de l'exploitation des infrastructures de Chtokman, gisement situé dans le Grand Nord russe, rappelle le Kremlin.
Gazprom avait indiqué, en septembre, qu'il choisirait d'ici à la mi-octobre un deuxième partenaire sur une "short list" constituée des candidats initiaux à l'exploitation de Chtokman : les norvégiens Statoil et Norsk Hydro (à l'époque candidats séparément), les américains ConocoPhillips et Chevron.
La première phase de développement de Chtokman prévoit la production de 23,7 milliards de mètres cubes de gaz naturel par an. Les premières livraisons de gaz par gazoduc devraient intervenir en 2013 et celle de gaz liquéfié en 2014.
27 janvier 2008
RosUkrEnergo
The history of RosUkrEnergo (RUE) dates to July 2004, when it replaced EuralTransGas as the official importer of gas to Ukraine. EuralTransGas had itself in 2002 replaced Itera, an “equally opaque” trading company that had played a similar intermediary role between Turkmenistan and Ukraine. In 2005, Naftohaz Ukrayiny secured 36 bcm of Turkmen gas from RUE in a barter deal that gave the intermediary firm some 37.5% of the Turkmen flow. RUE sold this gas in turn to EU countries, providing the vast majority of its $3 billion in sales and $500 million in profit. As noted above, the January 4 agreement only increased RUE’s role. It also yielded the firm a 50 percent share in the new UGE venture that will supply gas to Ukrainian domestic industries. Until May 2006, the ownership and operations of RUE remained murky. Registered in Zug, Switzerland, it is owned jointly on an equal basis by Gazprom and by the Centragas holding company, an umbrella corporation run by Austria’s Raiffeisen bank on behalf of a group of Ukrainian investors that it refused to identify despite pressure from Western officials. Officials in Russia and Ukraine had repeatedly accused one another of ownership in the company while themselves denying any participation. Despite these denials, the participation of high-level Russian and Ukrainian officials in RUE’s operations cannot be doubted. Aleksandr Medvedev, the director of Gazprom’s export arm, is one of eight members of the board of RUE. Konstantin Chuychenko, the head of Gazprom’s legal department and a longtime associate of Putin, is a co-director of RUE, while Gazprom banking subsidiary chairman Andrei Akimov also sits on the board.
In a March 2006 press conference, Yushchenko declared that he had no knowledge of RUE’s true ownership. However, after his resignation, former State Security Service (SBU) chief Oleksandr Turchynov said that the government had ordered him to investigate the company - before Yushchenko ordered him to abandon the inquiry last summer. Turchynov declared that this investigation had uncovered the involvement of the known organized criminal Semyon Mogilevich, the former president Leonid Kuchma, and the then little known businessman Dmytro Firtash. There are also reported links to the Russian FSB. In response, current SBU chief Ihor Drizhchany denied that his organization had ever undertaken any criminal investigation into RUE. Information soon started to flow even more quickly.
The Wall Street Journal reported on April 23 that investigations into RUE were under way. On April 24, Global Witness (a nonpartisan, multinational NGO) released a devastating report entitled "It’s a Gas: Funny Business in the Turkmen-Ukraine Gas Trade." In addition to its criticism of the practices of President Niyazov and Gazprom, the report detailed the involvement of “top Ukrainian public officials” in RUE, and heavily criticized the opaque ownership structure of the company. Finally, on April 26, Gazprom-owned newspaper Izvestia announced that Dmytro Firtash and Ivan Fursin, two Ukrainian businessmen, are the owners of RosUkrEnergo. Holding company Centragas confirmed Izvestia’s report in a statement, saying Firtash owned a 90 percent stake in Centragas, and Ivan Fursin a 10 percent stake. Firtash is director of the Cyprusbased investment company Highrock Holdings, as well as board chairman of Estonian fertilizer factory Nitrofert, according to Global Witness. Fursin owns an Odesa bank and a movie theater, and, as the Russian newspaper Izvestia reported, is also president of a branch of Highrock Holdings. The newspaper also reported that Highrock was owned by Mogilevich.
In a parliamentary debate earlier this year it was alleged that Mogilevich, a reputed organized crime boss who is on the FBI’s "most wanted" list on charges of being involved in a stock fraud, was involved in the company. Firtash was previously involved in two other
gas trading firms with Zeev Gordon, an Israeli lawyer who also represents Mogilevich. Mogilevich denied any involvement in RUE; Gordon said he had not met Firtash through Mogilevich; finally, Firtash insists while he met with Mogilevich, he never had any business
dealings with him. Firtash’s background was probed by Austria’s Raiffeisen Bank, which subsequently cleared him of wrongdoing. However, this verdict was not quite as important as that of the court of public opinion, in which numerous doubts still remain.
The opaque nature of RUE’s operations and ownership structure would raise questions in any country. In a nation such as Ukraine, which is eager to join the WTO and to demonstrate its ability to abide by accepted business practices and international commercial
standards, the continued role of RUE is simply unacceptable. If it continues in its present form, RUE will not only endanger Ukraine’s energy future, but likely its Euro-Atlantic aspirations as well.
Source : Hudson Institute's Center for Eurasian Policy (2006)
30 août 2007
Enel : OPA sur le russe OGK-5
Le groupe énergétique italien Enel a obtenu l'autorisation d'acquérir la société russe OGC-5 dont il détient déjà 30%. Il s'agira de la première compagnie d'électricité russe à passer à 100% sous contrôle étranger.
"L'agence a autorisé Enel à acquérir 70% d'OGK-5 qui, ajouté à sa participation existante, lui permet de monter à 100% du capital", a déclaré une porte-parole des autorités de la concurrence russes.
Fulvio Conti, président directeur général d'Enel, avait indiqué auparavant que son groupe lancerait une offre sur le groupe russe après avoir obtenu l'autorisation des autorités de la concurrence russes. La décision pourrait être prise d'ici la fin septembre.
Bonnes perspectives de croissance
En juin dernier, Enel est devenu le premier investisseur stratégique du secteur électrique en investissant 1,5 milliard de dollars dans OGK-5, soit 17 cents par action, soit de plus de 15% que le prix du marché. Il est possible que le groupe italien doive verser une prime similaire sur les 70% restants. L'acquisition de ces parts devrait coûter quelque 3,6 milliards à Enel.
OGK-5 possède de bonnes perspectives de croissance. La société dispose de quatre centrales thermiques, d'une capacité totale de 8.700 mégawatts, situées dans des zones fortement industrialisées.
Source: Enviro2B
Mandat d'arrêt contre le patron du groupe pétrolier russe Roussneft
Poursuivi par la justice russe pour fraude fiscale et activités illégales, Mikhaïl Goutseriev, 49 ans, l'ex-patron du groupe pétrolier Roussneft (8e major russe avec 17 millions de tonnes de pétrole extraites en 2006), s'était engagé à ne pas quitter le pays. Mardi 28 août, le tribunal municipal de Moscou a annoncé qu'un mandat d'arrêt avait été lancé contre lui, alors qu'il ne se trouve plus en Russie. La presse russe évoque comme possible refuge Londres ou Bakou, en Azerbaïdjan. Certains titres rapprochent ce cas du sort de Mikhaïl Khodorkovski, l'ancien patron du géant pétrolier Ioukos, qui avait politiquement défié le président Vladimir Poutine, et purge, pour "fraude fiscale", huit ans de prison.
Certains commentateurs estiment que le groupe de Mikhaïl Goutseriev attire les convoitises du pouvoir qui ambitionne de créer un conglomérat pétrolier. Les déboires de cet homme d'affaires originaire d'Ingouchie (république voisine de la Tchétchénie) ont commencé en 2006, après qu'une procédure judiciaire a été lancée contre lui. Le fisc lui réclame 105 millions d'euros d'arriérés fiscaux.
Contraint de quitter son poste à la tête de Roussneft en juillet, M. Goutseriev s'était plaint, dans une lettre ouverte publiée sur le site Internet de son groupe, d'être la cible d'une "traque sans précédent" de la part des autorités fiscales et judiciaires. Quelques heures plus tard, la lettre avait été retirée du site et le patron de Roussneft démentait, affirmant qu'il était en passe de céder à bon prix le contrôle de sa société à Basic Element, le groupe de l'oligarque Oleg Deripaska, proche du Kremlin.
Le 10 août, un tribunal de Moscou annonçait le gel de 100 % des actions de l'entreprise, empêchée le même jour de procéder à une nouvelle émission d'actions. Roussneft disait vouloir faire appel de cette décision. Selon le politologue Konstantin Belkovski, cité par le quotidien Vedomosti du 29 août, ces péripéties judiciaires sont le produit d'une lutte entre le groupe d'Oleg Deripaska et la major Rosneft, le numéro un du pétrole russe dirigée par Igor Setchine, un proche de Vladimir Poutine, pour le contrôle de Roussneft.
Il y a une semaine, nouvel épisode obscur : le fils de Mikhaïl Goutseriev, Tchinguizkhan, 22 ans, a été retrouvé mort à son domicile moscovite officiellement d'une hémorragie cérébrale. Des proches de la famille ont cependant raconté qu'il avait eu un accident de voiture dans la capitale russe. Légèrement commotionné, il était rentré chez lui. L'accident n'a pas été répertorié par la police de la route.
Marie Jégo
Article paru dans le Monde du 30.08.07
Bruxelles pourrait freiner les appétits russes dans le secteur de l'énergie
Les ambitions russes dans le domaine de l'énergie inquiètent Bruxelles. Engagée dans le processus de libéralisation de l'énergie, qui exige notamment des Etats membres qu'ils diminuent leur contrôle sur les champions nationaux et séparent les activités de production et de distribution, la Commission européenne pourrait reculer sur ce chapitre, introduisant des mesures de contrôle qui permettraient aux Etats de se protéger des appétits étrangers.
Ces mesures pourraient être avancées dès le 19 septembre, selon le Financial Times (FT) du jeudi 30 août, à l'occasion de la publication par la Commission d'un nouveau plan destiné à améliorer la concurrence sur le marché européen de l'énergie. Si à cette occasion Bruxelles doit réaffirmer son attachement au principe de la séparation entre production, acheminement et fourniture de l'énergie, la Commission devrait néanmoins proposer une série de mesures permettant de protéger l'activité transport, la plus menacée par la libéralisation.
Première visée, selon le FT : la Russie. L'activisme des champions russes sur le marché européen, avec par exemple le rapprochement opéré entre Gazprom et l'italien ENI, est perçu par plusieurs Etats membres comme une menace pour leur indépendance énergétique. Ce sont eux qui poussent Bruxelles à prendre des mesures de protection.
FAIRE DE L'ÉNERGIE UN SECTEUR "STRATÉGIQUE"
D'après le FT Deutschland, publication sœur du Financial Times, les craintes de Bruxelles pourraient être explicitement inscrites dans le document du 19 septembre, qui mettrait en garde contre les situations "dans lesquelles l'investissement est déterminé par des motivations autres que les seules motivations économiques". Une allusion claire au comportement de Gazprom, fréquemment accusé d'être, sur le sol européen, le bras armé du Kremlin dans sa politique de puissance.
Le Financial Times cite quelques-unes des pistes envisagées par les fonctionnaires européens. Première possibilité : l'instauration d'une "clause de réciprocité", qui pourrait éloigner du marché communautaire des Etats tels que la Russie, mais aussi l'Arabie saoudite, où les entreprises européennes connaissent de sévères restrictions à l'investissement. Autre hypothèse, la Commission pourrait s'arroger un droit de contrôle sur les acheteurs éventuels des réseaux de transport d'énergie. Voire déclarer "stratégique" le secteur de l'énergie, excluant de fait les pays extra-européens de la compétition.
Une telle mesure provoquerait certainement de vives réactions, alors que la France et l'Espagne sont régulièrement tancées par Bruxelles pour leurs velléités de faire de l'énergie un secteur stratégique, protégé des appétits étrangers.
Benoît Vitkine
16 avril 2007
Russian giant may sell direct to UK
By Andrew Cave (Telegraph.)
Russian gas giant Gazprom has reiterated its ambitions to be a major player in the UK, as part of efforts to become a truly global group.
Analysts have speculated that Gazprom could attempt a takeover of Centrica
The company, which provides a quarter of Europe's wholesale gas to domestic suppliers, is reported to be mulling plans to cut out the middle man and sell direct to households in Britain - the only fully liberalised energy market in Europe.
One report said it planned to use its own brand name for a domestic sales push, undercutting Centrica's British Gas brand and other suppliers. Another claimed the Russian company might team up with UK energy producers to build gas-fired power stations in Britain. Analysts have speculated for more than a year that Gazprom could attempt a takeover of Centrica.
Philip Dewhurst, a spokesman for Gazprom Marketing and Trading, a Gazprom subsidiary in the UK, said: "There are no immediate plans to launch a direct UK consumer gas business but we cannot rule it out.
"We want to become a global energy player and have very large reserves. We have a small business retail company that we bought in the UK eight months ago and it is going very well with sales up 300pc since we acquired it. We do not undercut because we have a big position in the market. People come to us because we have access to reliable supplies of gas."
Rivals gave a muted response. Richard Frost, spokesman for nPower, which has 2.5m UK gas customers, said: "The market is very competitive at the moment and so we know what tough competition looks like. We're confident that we will be able to respond to any new entrants."
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Last week, Gazprom announced a €400m (£270m) joint venture in Germany with energy supplier Soteg to build an 800mw power station.
23 novembre 2006
Rosenergoatom to build 7 floating thermal power plants by 2015
MOSCOW, November 23 (Itar-Tass) - Russia’s Rosenergoatom concern is planning to build a fleet of seven autonomous thermal power plants by 2015, in addition to the floating nuclear power plant, already under construction in Severodvinsk, deputy director general of the company Sergei Krysov said on Thursday.
"Gazprom displayed considerable interests in floating nuclear power plants, as it needs at least five floating power units to develop new deposits," Krysov said.
"To develop the Shtokman field, at least two 200-megawatt floating plants will be needed, and at least three power units for new Yamal deposits," he added.
According to Rosenergoatom, one floating station saves approximately 150 million cubic meters of gas a year, and in these terms, it fully pays back after seven or eight years of operation.
Krysov said the use of floating power plants is considered at present in Russian regions where the installation of ground-based units is unprofitable. These facilities can also be used for water desalination, if dedicated equipment is installed, he added.
The company executive reminded that Rosenergoatom had begun the implementation of the project to build a floating nuclear power plant. The construction might be completed by 2010. The floating reactor will have five radiation protection barriers, and will be able to withstand a 6-magnitude earthquake and a plane crash. The autonomous reactor will occupy an area of six hectares.
THE NEW WORLD OIL ORDER, Part 1 Russia attacks the West's Achilles' heel
Source: Asia Times
URL Source: http://www.atimes.com/atimes/Central_Asia/HK22Ag01.html
Published: Nov 21, 2006
Author: W Joseph Stroupe
Post Date: 2006-11-21 13:44:19 by JohnA
24 Comments
Russia has found the Achilles' heel of the US colossus. In concert with its oil-producing partners and the rising powerhouse economies of the East, Russia is altering the foundations of the current US-led liberal global oil-market order, insidiously working to undermine its US-centric nature and slanting it toward serving first and foremost the energy-security needs and the geopolitical aspirations of the rising East.
All this is at the impending incalculable expense of the West. What is increasingly at stake is secure US access to global energy resources - strategic US energy security - because the West's traditional control respecting those global resources is seriously faltering in the face of the compelling strategies undertaken by Russia and its global partners.
The US giant is increasingly at risk as it faces what is gradually but now more widely being recognized as Russia's clever exploitation of US foreign energy dependency and the hemorrhaging of its all-important economic-geopolitical capital: its traditional global energy leadership and dominance via its onetime virtually all-pervasive oil majors.
US Senator Richard Lugar, who recently labeled Russia an "adversarial regime" that increasingly uses its growing energy dominance as a powerful geopolitical weapon, has warned of economic "catastrophe" for the United States, notwithstanding its status as a superpower. Consequently, informed and reasoned leaders such as Lugar increasingly see the US in energy-based jeopardy.
Such leaders clearly do not put blind trust in the conventional wisdom that keeps insisting the US giant has no Achilles' heel and is virtually immune to the efforts on the part of comparatively smaller powers such as Russia and its partners to undermine the current US global position of supremacy.
Backing up the mounting concerns of such leaders as Lugar, as reported on October 1 by The Guardian Unlimited, widely respected energy economist Professor Peter Odell, who was an adviser to Tony Benn, the British energy minister in the late 1970s, and who has since worked for a host of different foreign governments, said he was not being alarmist or controversial when he recently warned that the West was at imminent risk of losing access to global energy resources as a result of Russia's global oil grab.
Odell warned that at any time Russian and Chinese state-owned oil companies, backed by certain rich members of the Organization of Petroleum Exporting Countries who are closely aligned with the two, could make hostile takeover bids for key Western oil majors such as BP-Shell, ExxonMobil and/or Chevron, thereby gutting what little remains of the Western oil majors' control over the global markets and thereby further threatening US access to strategic resources.
Odell warned that the Western oil majors were already losing their leadership of the global oil system, had now been reduced to controlling a mere 9% or 10% of the world's reserves, and were unable to win new production rights or even hold on to those granted by current PSAs (production-sharing agreements). Recent developments regarding Russia's Sakhalin-1 and Sakhalin-2 projects, in which the position of the Western oil majors is being threatened, illustrate the ominous trend that is accelerating worldwide.
To rock the US colossus forcefully out of its position of global dominance and credibly threaten to inflict economic and geopolitical "catastrophe" on the West, Russia and its strategic partners need not exceed, nor individually even remotely match, US economic, political or military strength in a conventional head-to-head contest of might.
Instead, they need only to exert effectively their mounting energy-based strengths against US vulnerabilities in that same sphere, not in a conventional head-on confrontation but instead by going after the Achilles' heel by employing a clever asymmetrical end-run strategy around the US. This targets the foundations of the current US-dominated liberal global oil-market order, a strategy that leaves the US giant with significantly reduced secure access to, and control over, global strategic resources.
Once that goal is accomplished, without ever a conventional confrontation with the US giant, then the US economy can be effectively and powerfully held hostage to the political and economic aspirations of Russia and the rising East.
Conventional wisdom holds that neither the West in general nor the US in particular can be effectively targeted with the energy weapon any time soon. This is because the structure of the global oil market prevents targeted oil embargoes from being effective. Once oil is sold on the global market, no producer can control where it does or does not go, the argument says. Additionally, the argument continues, producers attempting an embargo cannot afford to withhold their products for long enough to damage the targeted economy lest their own economies, which are inordinately dependent on oil and gas exports, themselves collapse.
The clear insinuation is that any talk of an energy-based economic checkmate of the West is merely hyperbole and sensationalism.
But these arguments are already in the process of collapsing under their own weight in the face of an entirely new array of mounting trends and developments that constitute an impending and grave threat to the strategic energy security of the West.
In its recent report "National Security Consequences of US Oil Dependency", the US Council on Foreign Relations disagrees with such reassuring conventional wisdom and the myths and assumptions associated with it. It warns that the US faces increasingly potent, negative political, economic and geopolitical consequences arising from its dependence on foreign energy resources. The report laments that the US is "insufficiently aware of its vulnerability" because its leaders and people have come to rely on reassuring myths and assumptions that do not square with the facts.
To understand why the conventional wisdom on this issue has become severely faulted and how Russia and its partners are already ominously succeeding in altering the fundamentals of the current US-dominated global oil-market order, it is first necessary to understand how the current oil markets work and how they have evolved over the past three decades since the Arab oil embargo of 1973-74.
Changing the world's oil markets In the era leading up to the embargo of 1973-74, crude-oil pricing and delivery were handled quite differently than now. That era featured the rigid, bilateral long-term supply contract resulting in considerably less global oil-market supply liquidity than now. It was an era when exporting states tended to conclude agreements individually with consumer states (usually through their national and multinational oil companies) over the price and delivery of crude oil.
Such contracts could be concluded for terms of one or two decades or even more. In that era of rigid bilateral oil contracts, the oil market was much less open and dynamic, and far less able to adjust to supply disruptions, than it is now. Oil tended to be "locked up" within the long-term supply contracts, thus significantly limiting supply liquidity, or fungibility, of oil.
The structure of the global oil market was neither designed nor implemented with a focus on the key requirement of high liquidity because, prior to the 1973-74 Arab embargo, no one envisaged the now-obvious key requirement for the market to adjust rapidly and naturally to a cutoff of oil to one or more importing nations resulting from a targeted embargo or a supply disruption.
Naturally, in that era it was in the interest of any individual exporting state to conclude a sufficient number of rigid bilateral long-term contracts with importing states so as to have most or all of its exportable oil accounted for and sold virtually at the time it was pumped out of the ground.
That being the usual case, if an exporting state or group of states for some reason either failed or refused to honor their commitment of deliveries to a particular consumer state, then that embargoed state found it necessary to meet the emergency by trying to acquire replacement crude-oil supplies from elsewhere, usually from third-party traders and/or by arranging with other buyers for their tankers to be diverted from their original destinations.
That ad hoc process involved many additional, intolerable risks, time delays, and much more complicated logistics and higher costs, all of which were entirely unacceptable over a period of anything more than the very short term. The old oil-market order did not naturally facilitate a compensating for such a supply disruption, and the effort to make it compensate was cumbersome and its risks were unacceptable.
Additionally, the psychological effects of an embargo greatly magnified its literal effects, leading to panic buying by consumers, resulting shortages, higher prices and ripple effects throughout the economy. That helps explain why the US could be effectively targeted in 1973-74 by the Arabs. Though that targeting was not nearly perfect, it was sufficient to inflict much of the intended pain. As the months wore on, the US could not afford to continue to rely on the intolerable and significantly less secure ad hoc logistics it was forced to resort to in its effort to replace the oil that the Arab nations were refusing to ship. Recently declassified British government documents from that time reveal that both the US and Britain were actively planning for a seizure of Middle East oilfields, illustrating how intolerable the combined physical and psychological effects of the embargo were.
Of note is the ominous fact that at that time the US imported only about 36% of its oil, whereas now it imports nearly 60%, making it far more vulnerable to the energy weapon if Russia and its partners only partially succeed in changing the current liberal global oil order so as to revive even a partial level of effectiveness of a targeted embargo.
US and Britain create a liberalized market In the aftermath of the 1973-74 crisis, events and the markets themselves gradually evolved to alter radically the nature of the global oil market, thereby dramatically increasing crude oil's former comparatively low degree of fungibility.
This means that as long as the current US-backed liberal oil market is globally adhered to, if a group of exporting nations attempts another targeted embargo, oil from other exporters could be rapidly and naturally exchanged or substituted to replace the lost oil. The global market has evolved from rigidity to dynamism, and from low to very high liquidity.
Over time, the US had come up with an ingenious idea that impacted directly on the issue. Through deregulation and the creation of oil-futures contracts and spot oil markets in New York and London, the old foundations and the market dominance of the rigid, bilateral long-term supply contracts was undermined in favor of much shorter-term contracts.
Extremely liquid oil-futures contracts ("paper oil") that looked forward only a few months to a few years at most and that could be freely and openly bought and sold on a daily basis on the new exchanges replaced the traditional, rigid, discrete long-term supply contracts negotiated directly between exporting and importing states. The global oil-market order was becoming tremendously liberalized, open and highly liquid under US leadership and control.
The new oil exchanges created in the early 1980s provided a way for speculators to profit from the buying and selling of "paper oil" as well as for exporters and importers to sell, buy and arrange for physical delivery of oil. The spot exchanges also facilitated the factoring in of a much wider range of market forces in real time in determining the daily global price of oil. Oil-export startups, those attempting to establish themselves as oil exporters, favored the spot markets as opposed to the rigid long-term supply contracts because, with their limited track record and credibility, they had a hard time successfully negotiating long-term contracts.
However, they could sell on the spot markets by undercutting the price of the more established exporters and get a foothold. Thus the new arrangement encouraged a flourishing of new exporters and a global supply that very comfortably outpaced global demand.
By the mid- to late 1980s, the new oil-market arrangements in New York (and later in London) had been firmly established and were enjoying phenomenal success. While some exporters refused to drop entirely the traditional rigid bilateral long-term supply contracts in favor of the spot markets, up until today most oil is marketed on the exchanges. Oil-futures contracts are freely bought and sold on the exchanges and oil for physical delivery is bought comparatively "at the last hour" on the spot market, where delivery to the importing nation is then arranged.
Global effects of the new order Under the new market arrangement, nearly all oil became highly visible and instantly accessible because the traditional long-term supply contracts became the minor factor while the spot markets and highly liquid oil-futures contracts became the major factors.
In effect, this radically raised the visibility, accessibility and fungibility of global oil supplies to unheard-of heights and made it possible for oil lost for some reason in one part of the market to be easily, naturally and almost instantly replaced by oil from another part of the market.
In effect, the new exchanges facilitated the creation of one virtual global pool of oil denominated in US dollars into which nearly all exporters sell their oil and out of which nearly all importers purchase oil, all on a daily basis.
A discrete global pool of oil does not physically exist anywhere on the planet, of course. But it does exist in a virtual sense, powerfully mimicking a literal global pool of oil, because the structure and presence of the new exchanges and the global adherence and devotion to them ensures that oil is bought, sold and delivered largely as if such a pool literally exists. And the global dominance of the West's oil majors, whose task it has been to capture global oil supplies for full incorporation into the new US-led liberal global oil-market order, has been the key factor perpetuating the global dominance of that order.
As long as the Western oil majors hold global sway and the US-backed liberal order is globally adhered to, therefore, any attempt to target the US with an oil embargo, as by the efforts of an exporter or group of exporters refusing to sell to the US, would fail miserably because the US would merely draw oil elsewhere from the global pool to suffice its needs.
Importantly, the US and Britain accomplished two goals of profound importance and value with the creation of their new liberalized global oil-market order. First, they prevented the enacting of any targeted oil embargo, and they greatly enhanced the leverage of the West's oil majors, their de facto state sponsors and the West's financial institutions in the new market arrangement while simultaneously fundamentally undermining the leverage of producers, thus powerfully bolstering the strategic energy security of the West.
Second, they consolidated and powerfully solidified the role of the US dollar as the unquestioned international currency, since the one virtual global pool of oil created and maintained by the new liberalized market order is denominated in US dollars alone.
But it is crucial to understand that the West's immunity from a targeted embargo is assured only as long as the current liberal, highly liquid US-led global oil market is unwaveringly adhered to. Once the movers and shakers (now Russia and its producing and consuming partners) begin again to revert to the rigid bilateral long-term supply contracts conducted privately between producers and consumers, thereby incrementally altering the foundations of the global oil-market order by decreasing its level of liquidity, then the real potential for a revoking of a significant measure of oil's fungibility exists.
This means that the ability to enact an effective targeted embargo is once again incrementally revived. A meaningful loss of fungibility of oil would spell potential economic-geopolitical doom for the West. This is the Achilles' heel of the West.
As we shall see, it is that very Achilles' heel Russia and its partners have found and are already energetically exploiting in a bid to shift the US colossus out of its current position of global dominance.
Swiftly mounting anxiety on the part of increasing numbers of the globe's key energy-hungry economies in the East as respects energy security is already fueling incremental abandonment and circumvention of the US-dominated liberal global oil market.
This is in favor of a proliferation of private, state-to-state long-term supply contracts and agreements awarding equity stakes in production acreage to the consumer states. As a consequence, the US-led order is already beginning to suffer a wavering of international adherence and support. Russia continues to lead the global race to establish a new energy order that fundamentally threatens the current US-led one.
The same factor of mounting anxiety over energy security is also fueling the accelerating global trend toward the establishment of new oil and gas exchanges in the Middle East and the East as de facto rivals to the New York and London exchanges.
These new exchanges have two very prominent and significant features. First, they are bringing together primarily the globe's producers and the rising economies in the East to facilitate new Asia-centric (rather than US-centric) energy pricing and security arrangements. Second, they are denominated in currencies other than US dollars or are being structured with the autonomy and sophistication to switch from dollars to other currencies.
The reign of the US-backed current oil market has been a frighteningly short one, barely two decades. It could turn out to be more of a stint than a reign as its fundamentals could be altered to revive the possibility of an effective targeted embargo. And it is already being altered along those lines.
Bogdan Titomiroff
