Can Western-Style Private Capitalism Compete With Russian and Chinese State Capitalism in Developing Energy Sources? The Future of Europe May Depend on It

By Joe Rothstein
Editor, USPolitics.einnews.com

February 20, 2009

Not that many years ago, U.S. oil companies held a virtual monopoly on the resources and know-how required to develop major new oil fields.

Those days are long gone. Today, the Russians, the Chinese, and others are quite capable of competing with the likes of ExxonMobile, Chevron and ConocoPhillips.

What's more, the Russians and Chinese practice state-sponsored capitalism. When the Chinese set their sights on developing the oil resources of a country such as the Sudan, for instance, they offer all of the development assets a U.S. oil company might bring----and more. They can also provide the management and labor to build the ports, the soldiers and sailors to protect supply lines, the training of the Sudanese military to take on the job of protection, the weapons for them to use, and they can even offer to help Sudan at the UN if the human rights issues get too sticky for them there.

It's a fact of energy resource development life these days that the U.S./western model of capitalism is under severe assault by the newly aggressive Russian and Chinese model. And through state-sponsored capitalism those two countries are exerting growing influence throughout Africa, the Middle East and elsewhere.

Vaclav Bartuska, the Czech Republic's ambassador-at-large for energy security, called my attention to all of this over coffee the other day as we discussed the future of energy resource development, particularly as it will impact Europe.

Bartuska achieved prominence earlier this year by serving as a key member of a Czech and European Union team that negotiated a truce in the natural gas dispute between Russian and the Ukraine. For weeks during a frigid January period Russia withheld all natural gas deliveries through the pipeline that transits the Ukraine, causing considerable hardship to people in many nations.

The Czech Republic held the rotating presidency of the EU during the crisis and Czech Prime Minister Mirek Topolanek and the Czech foreign ministry were thrust into the center of the controversy. It's a measure of the confidence that EU anchor nations such as Germany and France had in the Czechs that they let the smaller nation lead the crisis talks.

The dispute ended with a new 10-year delivery contract and the stationing of monitors in the Ukraine to protect against Russian concerns that the Ukraine was diverting portions of the gas supply. But Bartuska believes that the new arrangement is more of a temporary truce than an end-all solution. The region goes through this type of supply crisis nearly every year, he says. There's no reason to expect that it won't occur again.

To reach an agreement in January, Bartuska spent more than 5 hours in negotiations personally with Vladimir Putin and even more time with Ukrainian leaders. The key to resolving the dispute he says, was convincing both the Russians and the Ukrainians that the EU would not be held hostage to unreasonable pricing. There are alternatives to the Russian gas, he says, and if need be the EU is prepared to develop them. One of those alternatives could be the building of a series of liquefied natural gas plants, an idea he floated earlier this month during a round of talks in Abu Dhabi.

Bartuska was in Washington, D.C. as featured speaker at a forum on energy security challenges to Europe and America in Eurasia sponsored by the Jamestown Foundation.

Given the January Ukrainian crisis and last summer's invasion of Georgia by the Russians, many countries in the region are increasingly fearful of supply lines that run through Russia or over which Russia has dominant influence.

Bartuska is realistic about Russia's long term central role in the continent's energy future, but he is on the hunt for alternatives so that the EU will not be held hostage to Russia's economic or foreign policy. Despite many competing interests among EU member countries, the organization was unified in its determination not to be blackmailed during the January Ukrainian crisis, he says. He believes the necessity for future reliable and sustainable energy sources will keep EU member nations working together to find long term solutions.

Bartuska believes that U.S. energy companies can play a vital role in this effort by helping to develop newly discovered Kazakhstan oil fields. Chevron, ExxonMobile and ConocoPhillips are all active in Kazakhstan and aggressive development by these companies could blunt the influence of both the Chinese and Russians, both of whom are competing for pipeline routes to tap Kazak resources.

As the Obama administration gets its sea legs on the U.S. ship of state, it will no doubt focus on the potentially huge decisions in the offing related to Eurasian energy development. Every bit as important as who builds and deploys weapons is the question of who controls the energy resources that power Europe, India and much of Asia.

Can western style capitalism prevail against state sponsored capitalism? Much may depend on how that competition plays out.

Joe Rothstein, editor of US Politics Today, is a former daily newspaper editor and long-time national political strategist based in Washington, D.C.

See all previous articles by Joe Rothstein here.