Chris Doss The Russia Journal ---------------------------- eurasianet.org April 23, 2002 ECHOES OF VENEZUELA REVERBERATE IN EURASIA By Ariel Cohen
The repercussions of the failed coup against Venezuelan President Hugo Chavez extended halfway across the world to the shores of the Caspian, where the leaders of the littoral nations are set to meet to discuss dividing the sea's abundant energy resources. Instability in Venezuela, the world's fourth-largest oil supplier, has Eurasian states scrambling to seize the moment of opportunity for their own energy sectors.
Like leaders in Turkmenistan, Uzbekistan, Georgia and Azerbaijan, Venezuelan
politicians use their countries' oil riches as leverage when negotiating with the United States and Europe. With the world's fourth-largest oil supply held hostage, 60-year-old Pedro Carmona became an unlikely coup leader. Carmona, the head of Venezuela's largest chamber of commerce, had earned a reputation
for authoritarian leanings. On April 9, weeks after starting to protest the appointment of Chavez cronies to the board of the state oil company, Carmona
and Venezuela's largest trade union group organized a general strike. Two days later, the military shot at a massive opposition march, killing 16 protesters. The military kicked out Chavez, and appointed Carmona as head of
a junta. Carmona promptly dissolved the National Assembly, Constitution, courts and public offices - he later told Venezuelan newspapers he had done this "to facilitate a rapid transition to new elections" - but the plotters soon gave in to popular revolt and reinstated Chavez on Sunday April 14.
The two-day drama echoes the 1991 Russian coup attempt that killed the Soviet Union. Like the Communist bureaucrats who seized and then lost the Kremlin, Carmona blamed staff for his failure, claiming that numerous people wrote and rewrote decrees dissolving public institutions during the chaos. But while the Soviet Union was a foundering economy, Venezuela's state-controlled oil company is the United States' third-largest supplier.
Diplomats in Washington are pointing fingers in the wake of charges that the
Bush administration failed to adequately condemn an antidemocratic coup. But
whatever the diplomatic fallout, energy analysts and foreign policy experts agree that the episode raises serious long-term questions about the political risk in the United States' three biggest suppliers - Saudi Arabia, Iraq and Venezuela. While nobody suspects Venezuela of harboring terrorists, the coup
attempt has made its oil supply seem as vulnerable to manipulation as any Persian Gulf nation's. This realization is pushing the United States to seek
new sources of energy.
Compared to Venezuela, Russia and the Caspian nations look very stable. On April 18, a week after Chavez returned, Russian President Vladimir Putin delivered his State of the Federation address to the parliament. The address
focused on the necessity to improve the state bureaucracy and assure faster economic growth and more foreign investment. Moreover, Putin spoke little about Russian foreign policy, generally acknowledging that Russian military competition will be much less important than economic competition.
He dedicated seven out of nine paragraphs to the Commonwealth of Independent
States (CIS), clearly making relations with the former Soviet republics a top priority in Russian foreign policy. The leading opportunities for absorbing foreign investment - and some of the most fruitful joint venture prospects between Russia and its former republics - lie in the energy sector. Russia clearly is striving to connect its desire to become a major player in the global energy markets with its dominant role in the "near abroad."
One way to boost Russia's standing with oil purchasers and would-be oil exporters is to develop private companies' capacity. CEO Mikhail Khodorkovsky of Yukos Oil, Russia's fastest-growing company, addressed this on April 16, when he joined Mikhail Friedman and Petr Aven of the Alfa-Group, which includes the Tyumen Oil Company, for a symposium at the US-Russian Business Council. The speakers agreed that Russia's economy needs to grow more steeply than the 3.5 to four percent annual rate currently forecast by Economic Development Ministry. Critically, in light of Venezuela's turmoil, they assert that Russia can conduct an energy policy independent from the OPEC cartel, eventually boosting production to the Soviet-era level of around 450
million tons a year.
Other Russians also seem eager to bring modern technology and salesmanship to the nation's natural resources. Leonid Grigoriev, a prominent Russian economist and an advisor to the Ministry of Energy, says Siberia has the largest coal resources on the planet. He says these can produce competitively priced power if they acquire modern technology. More broadly, the Putin Administration is sparing no effort to organize the post-Soviet countries in
the Caucasus and Central Asia into the Eurasian Economic Union (EEU) and Eurasian Energy Community (EEC), which will coordinate oil and natural gas exports from Russia, Kazakhstan, Azerbaijan and Turkmenistan.
Putin often conducts phone conferences with the Kazakhstani president Nursultan Nazarbayev and other regional leaders to discuss energy policy. He
also planned to press Azerbaijan, Iran, Kazakhstan, and Turkmenistan toward an agreed method for dividing the Caspian Sea's resources at the Caspian summit in Ashgabat on April 23. [For background see the Business and Economics archive].
Even though Putin enjoys more stability and has focused more squarely on energy investment than Chavez, Russian coordination efforts are moving too slowly to make them a short-term substitute for Venezuelan supply. So far, plans to form a unified Central Asian energy network have run into bureaucratic resistance and ineptitude. If Putin overcomes this resistance, these organizations may help him counter-balance the increasingly unstable Gulf producers and increase Russia's influence along its periphery. This would provide a multiplier to Putin's geo-economic strategy.
As Venezuela's reputation founders, many multinational energy firms already have put down stakes in Russia. ExxonMobil, which has strong ties to the Bush administration, has invested over $10 billion in the Sakhalin-1 oil and gas fields and expressed interest in building a natural gas pipeline from Sakhalin to Japan. Royal Dutch Shell is in talks with Gazprom and Russian Prime Minister Mikhail Kasyanov about buying out Gazprom's share in the giant Sakhalin-2 project, promising to invest $8-10 billion. On April 16, British-American conglomerate BP announced it would spend $375 million to raise its stake in Sidanko, which previously went through a bruising bankruptcy, from 10 percent to 25 percent.
Chaos in Venezuela and violence in the Middle East can only make Russia and Eurasia look increasingly attractive for energy investors. Provided they can
steer a common course with leaders in neighboring countries - and can preserve financial transparency - Putin and Russian oil companies may boost their country's influence by skillfully taking advantage of its competitors'
increasing political risk.
Editor's Note: Ariel Cohen, Ph.D. is Research Fellow at The Heritage Foundation and author of Russian Imperialism: Development and Crisis (Greenwood/Praeger, 1998).