Russia balked by Governor Palin 0

From Investor’s Business Daily:

It’s as if "Saturday Night Live" satires of Sarah Palin are better cues for gauging media coverage than a possible vice president whose Alaskan leadership is drawing attention from powerful international players.

Media coverage wasn’t entirely absent, but the visit Monday of a delegation from Gazprom in Moscow to Palin’s energy aide didn’t draw attention the way a shouter at a Palin rally or speculation about Palin’s shoes did. But in the Kremlin, Alaska’s on the radar and the media is missing it.

Gazprom is a $107 billion Russian gas giant that controls 17% of the world’s natural gas reserves. It’s controlled by Vladimir Putin’s government, and some of its KGB-trained corporate leaders switch jobs in and out of Russia’s government like musical chairs.

"They made no bones about wanting to be the most highly capitalized company in the world, and their business is gas," said Marty Rutherford, deputy commissioner of the Alaska Department of Natural Resources, one of the Alaskans asked by Gazprom officials for the visit.

"Gazprom wants to have as much power and monopoly leverage as possible," explained Anders Aslund, senior fellow at the Peterson Institute. "You can’t produce gas without Gazprom visiting you."

According to Alaska Department of Natural Resources Commissioner Tom Irwin, the Russians’ interest was piqued by Palin’s move to develop state energy resources, after decades of inaction. The Russians were "very professional," showing what what they could do for Alaska as gas producers. They didn’t bring up Palin or the election.

"But what’s significant," Irwin said, "is what the governor has done. Under her leadership, the state has made a major decision that the best use of our resources is in a natural gas pipeline through Canada."

Rutherford explained that they’ve seen an upswing in international interest ever since Palin signed off on a plan to build a 1,715-mile pipeline across Canada to the Lower 48 and then got it passed in Alaska’s legislature in August.

Irwin and Rutherford said they thought the Russians seemed most interested in new projects for liquefied natural gas terminals, which could eventually make natural gas part of a global market and less attached to long-term contracts and fixed pipelines.

The risk is that it could also make gas supplies more vulnerable to global petro-tyrants who control gas supplies and prices based on politics — as has happened with oil.

Gazprom is the main tool used by Russia to control its neighbors through energy.

Last year, for instance, Russia cut off gas to western Europe to intimidate it. And last summer, Russia unleashed war on Georgia to gain control of Europe’s only energy pipeline independent of Russia. It’s now sending naval ships to patrol the Caribbean’s narrow sea lanes through which 64% of the U.S.’s imported energy must pass.

Gazprom is also at the heart of Russia’s plan to form a global gas cartel, like OPEC for oil. But so far, Gazprom has a habit of gaining control of resources but not boosting output: "Production has not increased," noted Aslund, "and they are not developing their own gas resources."

The Alaskan officials politely told the Russians America’s energy needs would come first. "We think our nation needs our gas and we think (the Alaska TransCanada pipeline) is the most appropriate thing to do," said Irwin.

Could Gazprom eventually get a foothold on Alaska’s energy through the Alaska TransCanada pipeline? Not likely. The pipeline license requires the operator to produce gas. And, Irwin explained, the state would keep firm control over the mission to deliver the 4 trillion cubic feet to the U.S. each day through the Canadian pipeline route.

"We set the pipeline up with open access so that there would be no monopoly," said Irwin. "It’s critical for Alaska to maintain open access (to producers) to keep prices down. We’ll make money off volume, and sending gas to the U.S. market that badly needs gas brings the volume."

So even if Gazprom produced natural gas, it wouldn’t be able to get control of energy supplies to exert political control, the officials said.

"There’s worldwide interest," Irwin said. "But our country can’t keep being subservient to foreign suppliers. Look at the history of Gazprom: They say ‘if you don’t do this, we will raise your prices’ " — or cut supplies, Irwin said.

Alaska’s re-emergence as a major world energy player tells us a lot about how a Palin vice presidency could shape up. Alaskans in the energy sector say Palin has been a far-sighted leader in developing the state’s energy resources.

"I wish other people in other states would get to see her as we get to see her," Irwin said. "The bottom line is we will get the gas line in operation and there will be bidders, and we have the strong will of the governor who has made this happen."

Posted under Uncategorized by Jillian Becker on Saturday, October 18, 2008

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