In spite of prolonged droughts and ensuing water shortages and subsequent billion $ investments in water infrastructure, what remaining arable food growing areas are destined to be sold off in one way or another. The Mary River dam would have done more than damage a fragile eco-system, it would have covered arable land and caused much ecological damage and now, Queensland Labor has planned the sell off of Darling Downs to make a few $’s in royalties and massive profts for major financial contributors.

Around the world in another socialist government also known for previous experiments in agriculture and social experiments, they too are suffering from droughts and if you think it wont affect us here, then think again.

Russia is a major food exporter, but record temperatures this summer are expected to halve exports; there are also fears the government could start an export ban to protect domestic supplies, which will result in a food price inflation. President of the Russian Grain Union, Arkady Zlachevsky says there is hope that Siberian crops will help improve the total output; however, non-political commentators believe a forecast if 11 million tonnes is more accurate than exports of 14 to 15 million tonnes.

Russia had agreed to sell 180 thousand tonnes of wheat to Egypt after shunning a similar offer from the United States. Grain prices last week reached $240 per tonne, up from $180. It doesn’t matter where it is, if the product is more scarce, then demand will push the price up, whatever the commodity.

The company runs the second-largest field there, in the U.S. called Thunder Horse and operates the largest U.S. oilfield, Alaska’s Prudhoe Bay.

The Tiber discovery, which could hold more than 3 billion barrels of oil equivalent, follows another massive nearby find in the Kaskida field in 2006 and if both are developed, they could boost BP’s output in the Gulf to around 650,000 barrels of oil equivalent day during the next 15 years.

Globally, BP produced about 4.1 million barrels a day in the second quarter (2009).

In 2010, about 14% of crude oil production in the lower 48 American states will come from four deepwater Gulf of Mexico oil fields, two of which (Atlantis and Thunder Horse,) are operated by BP, says the U.S. EIA (Energy Information Administration). These discoveries will boost the relative importance of BP’s North American portfolio, which already represents about 40% of BP’s global business, which co-incidentally is also what the USA uses of the total world oil production.

BP has had a chequered past in the USA not always so triumphant in these waters. The company has taken a few hits, with the Thunder Horse field delayed by three years before starting in 2008 and Atlantis was also postponed.

A 2005 explosion at BP’s Texas City refinery killed 15 workers and the company agreed to plead guilty to criminal environmental charges related to the blast.

Then in 2006 the U.S. regulators sued BP for manipulating the propane market and later that year, BP was forced to shut down a bulk of the oil output at Prudhoe Bay following the discovery of corrosion in some pipelines.

BP’s latest discovery is one of the deepest oil fields ever drilled. The Gulf of Mexico holds its own as considering the first well out of sight of land was drilled in 1947. Bob Fryklund (a consultant with HIS), claims the Gulf – thanks to deeper areas made exploitable by new technology – is part of the offshore “Golden Triangle,” that also comprises West Africa and Brazil.

Brazilian offshore finds are the largest – Petroleo Brasileiro’s Tupi field is estimated to contain some 8 billion barrels of oil equivalent or 93 days (based on the worlds consumption of 85.7 million barrels a day) and while the Brazil government is quite stable, the continuity is not as assured as the Gulf of Mexico as they look to follow the lead of other resource-rich countries such as Russia and Venezuela by proposing new laws that put the state-owned oil company in the driver’s seat of development of newly discovered reserves.

Given the financial quagmire of the USA and the highly questionable value of the US$, it is a question of how the Americans can actually pay for their addiction on energy; with less than 5% of the worlds population but using almost 40% of the worlds oil and no real industry or agricultural exports to pay for it, sooner or later someone will turn the tap off.

Just as Kevin Rudd is weighing up borrowing more money to pump into the economy to make it look like its business as usual, so too is China wondering how much more money to pump into the American economy to buy Chinese manufactured goods.

And before China it was the Japanese and Saudis and many other punters looking for a quick $.

So what comes first, the chicken or the egg when the cost of buying all these consumer goods kept climbing, was it due to rising energy costs and competition for other resources?

An interesting and perhaps telling indicator is that Saudi Arabia was one of the biggest oil exporters and funders to the USA; however, as their oil well ability to meet demand has been slipping (at almost the same percentage rate as the North Sea supplies to the UK, which is also in financial turmoil) so too has their cash injections into the American economy.

There would be quite a few of concerned Saudi princes these days as the USA’s ability or commitment to support the regime is increasingly questionable.

Canada is the biggest supplier to the USA followed by Venezuela, and although America consumes less due to a collapsed financial system (some $9 trillion in debt), people selling to the USA must be wondering what the real dollar value is of the currency the Americans are paying with.

Based on figures posted on the U.S. Department of Energy Web site, Venezuelan exports to the U.S. fell 5.4 percent to 1.39 million barrels a day in the second quarter and jumped to second place from third, leapfrogging Saudi Arabia, which shipped 32 percent less fuel.

Venezuela continues to send the bulk of its oil exports to the U.S., five years after President Hugo Chavez started seeking to diversify his nation’s customer base away from the country he calls “the empire.”

So, if you need to sell your oil to an *‘enemy’ to keep a constant income stream to support your social policies to prevent local unrest, what do you – that is Canada, *Venezuela, Saudi Arabia – do when the value of the payment is no longer there … can you afford to dig for, extract and refine a product that eventually you will never effectively be paid for ?

Nobody seem to be willing to admit the emperor has no clothes and the cost of finding oil (all the major oil finds are long gone) is going up while the public can only afford to pay so much.

Peak Oil has arrived and this concentrated energy source is no longer abundant and tighten belts we must.

Prime Minister Vladimir Putin’s speech at the opening ceremony of the World Economic Forum – Davos, Switzerland -January 28, 2009

Good afternoon, colleagues, ladies and gentlemen,

I would like to thank the forum’s organisers for this opportunity to share my thoughts on global economic developments and to share our plans and proposals.

The world is now facing the first truly global economic crisis, which is continuing to develop at an unprecedented pace.

The current situation is often compared to the Great Depression of the late 1920s and the early 1930s. True, there are some similarities.

However, there are also some basic differences. The crisis has affected everyone at this time of globalisation. Regardless of their political or economic system, all nations have found themselves in the same boat.

There is a certain concept, called the perfect storm, which denotes a situation when Nature’s forces converge in one point of the ocean and increase their destructive potential many times over. It appears that the present-day crisis resembles such a perfect storm.

Responsible and knowledgeable people must prepare for it. Nevertheless, it always flares up unexpectedly.

The current situation is no exception either. Although the crisis was simply hanging in the air, the majority strove to get their share of the pie, be it one dollar or a billion, and did not want to notice the rising wave.

In the last few months, virtually every speech on this subject started with criticism of the United States. But I will do nothing of the kind.

I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasised the US economy’s fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism.

The time for enlightenment has come. We must calmly, and without gloating, assess the root causes of this situation and try to peek into the future.

In our opinion, the crisis was brought about by a combination of several factors.

The existing financial system has failed. Substandard regulation has contributed to the crisis, failing to duly heed tremendous risks.

Add to this colossal disproportions that have accumulated over the last few years. This primarily concerns disproportions between the scale of financial operations and the fundamental value of assets, as well as those between the increased burden on international loans and the sources of their collateral.

The entire economic growth system, where one regional centre prints money without respite and consumes material wealth, while another regional centre manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback.

I would like to add that this system has left entire regions, including Europe, on the outskirts of global economic processes and has prevented them from adopting key economic and financial decisions.

Moreover, generated prosperity was distributed extremely unevenly among various population strata. This applies to differences between social strata in certain countries, including highly developed ones. And it equally applies to gaps between countries and regions.

A considerable share of the world’s population still cannot afford comfortable housing, education and quality health care. Even a global recovery posted in the last few years has failed to radically change this situation.

And, finally, this crisis was brought about by excessive expectations. Corporate appetites with regard to constantly growing demand swelled unjustifiably. The race between stock market indices and capitalisation began to overshadow rising labour productivity and real-life corporate effectiveness.

Unfortunately, excessive expectations were not only typical of the business community. They set the pace for rapidly growing personal consumption standards, primarily in the industrial world. We must openly admit that such growth was not backed by a real potential. This amounted to unearned wealth, a loan that will have to be repaid by future generations.

This pyramid of expectations would have collapsed sooner or later. In fact, this is happening right before our eyes.

Esteemed colleagues,

One is sorely tempted to make simple and popular decisions in times of crisis. However, we could face far greater complications if we merely treat the symptoms of the disease.

Naturally, all national governments and business leaders must take resolute actions. Nevertheless, it is important to avoid making decisions, even in such force majeure circumstances, that we will regret in the future.

This is why I would first like to mention specific measures which should be avoided and which will not be implemented by Russia.

We must not revert to isolationism and unrestrained economic egotism. The leaders of the world’s largest economies agreed during the November 2008 G20 summit not to create barriers hindering global trade and capital flows. Russia shares these principles.

Although additional protectionism will prove inevitable during the crisis, all of us must display a sense of proportion.

Excessive intervention in economic activity and blind faith in the state’s omnipotence is another possible mistake.

True, the state’s increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state’s role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing.

Ladies and gentlemen,

Unfortunately, we have so far failed to comprehend the true scale of the ongoing crisis. But one thing is obvious: the extent of the recession and its scale will largely depend on specific high-precision measures, due to be charted by governments and business communities and on our coordinated and professional efforts.

In our opinion, we must first atone for the past and open our cards, so to speak.

This means we must assess the real situation and write off all hopeless debts and “bad” assets.

True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalisation, bonuses or reputation. However, we would “conserve” and prolong the crisis, unless we clean up our balance sheets. I believe financial authorities must work out the required mechanism for writing off debts that corresponds to today’s needs.

Second. Apart from cleaning up our balance sheets, it is high time we got rid of virtual money, exaggerated reports and dubious ratings. We must not harbour any illusions while assessing the state of the global economy and the real corporate standing, even if such assessments are made by major auditors and analysts.

In effect, our proposal implies that the audit, accounting and ratings system reform must be based on a reversion to the fundamental asset value concept. In other words, assessments of each individual business must be based on its ability to generate added value, rather than on subjective concepts. In our opinion, the economy of the future must become an economy of real values. How to achieve this is not so clear-cut. Let us think about it together.

Third. Excessive dependence on a single reserve currency is dangerous for the global economy. Consequently, it would be sensible to encourage the objective process of creating several strong reserve currencies in the future. It is high time we launched a detailed discussion of methods to facilitate a smooth and irreversible switchover to the new model.

Fourth. Most nations convert their international reserves into foreign currencies and must therefore be convinced that they are reliable. Those issuing reserve and accounting currencies are objectively interested in their use by other states.

This highlights mutual interests and interdependence.

Consequently, it is important that reserve currency issuers must implement more open monetary policies. Moreover, these nations must pledge to abide by internationally recognised rules of macroeconomic and financial discipline. In our opinion, this demand is not excessive.

At the same time, the global financial system is not the only element in need of reforms. We are facing a much broader range of problems.

This means that a system based on cooperation between several major centres must replace the obsolete unipolar world concept.

We must strengthen the system of global regulators based on international law and a system of multilateral agreements in order to prevent chaos and unpredictability in such a multipolar world. Consequently, it is very important that we reassess the role of leading international organisations and institutions.

I am convinced that we can build a more equitable and efficient global economic system. But it is impossible to create a detailed plan at this event today.

It is clear, however, that every nation must have guaranteed access to vital resources, new technology and development sources. What we need is guarantees that could minimise risks of recurring crises.

Naturally, we must continue to discuss all these issues, including at the G20 meeting in London, which will take place in April.

Our decisions should match the present-day situation and heed the requirements of a new post-crisis world.

The global economy could face trite energy-resource shortages and the threat of thwarted future growth while overcoming the crisis.

Three years ago, at a summit of the Group of Eight, we raised the issue of global energy security. We called for the shared responsibility of suppliers, consumers and transit countries. I think it is time to launch truly effective mechanisms ensuring such responsibility.

The only way to ensure truly global energy security is to form interdependence, including a swap of assets, without any discrimination or dual standards. It is such interdependence that generates real mutual responsibility.

Unfortunately, the existing Energy Charter has failed to become a working instrument able to regulate emerging problems.

I propose we start laying down a new international legal framework for energy security. Implementation of our initiative could play a political role comparable to the treaty establishing the European Coal and Steel Community. That is to say, consumers and producers would finally be bound into a real single energy partnership based on clear-cut legal foundations.

Every one of us realises that sharp and unpredictable fluctuations of energy prices are a colossal destabilising factor in the global economy. Today’s landslide fall of prices will lead to a growth in the consumption of resources.

On the one hand, investments in energy saving and alternative sources of energy will be curtailed. On the other, less money will be invested in oil production, which will result in its inevitable downturn. Which, in the final analysis, will escalate into another fit of uncontrolled price growth and a new crisis.

It is necessary to return to a balanced price based on an equilibrium between supply and demand, to strip pricing of a speculative element generated by many derivative financial instruments.

To guarantee the transit of energy resources remains a challenge. There are two ways of tackling it, and both must be used.

The first is to go over to generally recognised market principles of fixing tariffs on transit services. They can be recorded in international legal documents.

The second is to develop and diversify the routes of energy transportation. We have been working long and hard along these lines.

In the past few years alone, we have implemented such projects as the Yamal-Europe and Blue Stream gas pipelines. Experience has proved their urgency and relevance.

I am convinced that such projects as South Stream and North Stream are equally needed for Europe’s energy security. Their total estimated capacity is something like 85 billion cubic meters of gas a year.

Gazprom, together with its partners – Shell, Mitsui and Mitsubishi – will soon launch capacities for liquefying and transporting natural gas produced in the Sakhalin area. And that is also Russia’s contribution to global energy security.

We are developing the infrastructure of our oil pipelines. The first section of the Baltic Pipeline System (BPS) has already been completed. BPS-1 supplies up to 75 million tonnes of oil a year. It does this direct to consumers – via our ports on the Baltic Sea. Transit risks are completely eliminated in this way. Work is currently under way to design and build BPS-2 (its throughput capacity is 50 million tonnes of oil a year.

We intend to build transport infrastructure in all directions. The first stage of the pipeline system Eastern Siberia – Pacific Ocean is in the final stage. Its terminal point will be a new oil port in Kozmina Bay and an oil refinery in the Vladivostok area. In the future a gas pipeline will be laid parallel to the oil pipeline, towards the Pacific and China.

Addressing you here today, I cannot but mention the effects of the global crisis on the Russian economy. We have also been seriously affected.

However, unlike many other countries, we have accumulated large reserves. They expand our possibilities for confidently passing through the period of global instability.

The crisis has made the problems we had more evident. They concern the excessive emphasis on raw materials in exports and the economy in general and a weak financial market. The need to develop a number of fundamental market institutions, above all of a competitive environment, has become more acute.

We were aware of these problems and sought to address them gradually. The crisis is only making us move more actively towards the declared priorities, without changing the strategy itself, which is to effect a qualitative renewal of Russia in the next 10 to 12 years.

Our anti-crisis policy is aimed at supporting domestic demand, providing social guarantees for the population, and creating new jobs. Like many countries, we have reduced production taxes, leaving money in the economy. We have optimised state spending.

But, I repeat, along with measures of prompt response, we are also working to create a platform for post-crisis development.

We are convinced that those who will create attractive conditions for global investment already now and will be able to preserve and strengthen sources of strategically meaningful resources will become leaders of the restoration of the global economy.

This is why among our priorities we have the creation of a favourable business environment and development of competition; the establishment of a stable loan system resting on sufficient internal resources; and implementation of transport and other infrastructure projects.

Russia is already one of the major exporters of a number of food commodities. And our contribution to ensuring global food security will only increase.

We are also going to actively develop the innovation sectors of the economy. Above all, those in which Russia has a competitive edge – space, nuclear energy, aviation. In these areas, we are already actively establishing cooperative ties with other countries. A promising area for joint efforts could be the sphere of energy saving. We see higher energy efficiency as one of the key factors for energy security and future development.

We will continue reforms in our energy industry. Adoption of a new system of internal pricing based on economically justified tariffs. This is important, including

for encouraging energy saving. We will continue our policy of openness to foreign investments.

I believe that the 21st century economy is an economy of people not of factories. The intellectual factor has become increasingly important in the economy. That is why we are planning to focus on providing additional opportunities for people to realise their potential.

We are already a highly educated nation. But we need for Russian citizens to obtain the highest quality and most up-to-date education, and such professional skills that will be widely in demand in today’s world. Therefore, we will be pro-active in promoting educational programmes in leading specialities.

We will expand student exchange programmes, arrange training for our students at the leading foreign colleges and universities and with the most advanced companies. We will also create such conditions that the best researchers and professors – regardless of their citizenship – will want to come and work in Russia.

History has given Russia a unique chance. Events urgently require that we reorganise our economy and update our social sphere. We do not intend to pass up this chance. Our country must emerge from the crisis renewed, stronger and more competitive.

* * *

Separately, I would like to comment on problems that go beyond the purely economic agenda, but nevertheless are very topical in present-day conditions.

Unfortunately, we are increasingly hearing the argument that the build-up of military spending could solve today’s social and economic problems. The logic is simple enough. Additional military allocations create new jobs.

At a glance, this sounds like a good way of fighting the crisis and unemployment. This policy might even be quite effective in the short term. But in the longer run, militarisation won’t solve the problem but will rather quell it temporarily. What it will do is squeeze huge financial and other resources from the economy instead of finding better and wiser uses for them.

My conviction is that reasonable restraint in military spending, especially coupled with efforts to enhance global stability and security, will certainly bring significant economic dividends.

I hope that this viewpoint will eventually dominate globally. On our part, we are geared to intensive work on discussing further disarmament.

I would like to draw your attention to the fact that the economic crisis could aggravate the current negative trends in global politics.

The world has lately come to face an unheard-of surge of violence and other aggressive actions, such as Georgia’s adventurous sortie in the Caucasus, recent terrorist attacks in India, and escalation of violence in Gaza Strip. Although not apparently linked directly, these developments still have common features.

First of all, I am referring to the existing international organisations’ inability to provide any constructive solutions to regional conflicts, or any effective proposals for interethnic and interstate settlement. Multilateral political mechanisms have proved as ineffective as global financial and economic regulators.

Frankly speaking, we all know that provoking military and political instability, regional and other conflicts is a helpful means of distracting the public from growing social and economic problems. Such attempts cannot be ruled out, unfortunately.

To prevent this scenario, we need to improve the system of international relations, making it more effective, safe and stable.

There are a lot of important issues on the global agenda in which most countries have shared interests. These include anti-crisis policies, joint efforts to reform international financial institutions, to improve regulatory mechanisms, ensure energy security and mitigate the global food crisis, which is an extremely pressing issue today.

Russia is willing to contribute to dealing with international priority issues. We expect all our partners in Europe, Asia and America, including the new US administration, to show interest in further constructive cooperation in dealing with all these issues and more. We wish the new team success.

Ladies and gentlemen,

The international community is facing a host of extremely complicated problems, which might seem overpowering at times. But, a journey of thousand miles begins with a single step, as the proverb goes.

We must seek foothold relying on the moral values that have ensured the progress of our civilisation. Integrity and hard work, responsibility and self-confidence will eventually lead us to success.

We should not despair. This crisis can and must be fought, also by pooling our intellectual, moral and material resources.

This kind of consolidation of effort is impossible without mutual trust, not only between business operators, but primarily between nations.

Therefore, finding this mutual trust is a key goal we should concentrate on now.

Trust and solidarity are keys to overcoming the current problems and avoiding more shocks, to reaching prosperity and welfare in this new century.

Thank you.

It is farcical that Brown and indeed the USA as well warn against protectionism when they have conducted it as a standard form of operation.

Gordon Brown.

The world is at risk of a “damaging spiral” of de-globalisation if countries do not co-ordinate their responses to the worldwide economic downturn said British Prime Minister Gordon Brown; announcing new measures to kick-start lending in the British economy, he said: ‘as important as today’s new measures are, it is clear once again that no country can solve what is a truly global financial crisis on its own; unless we come together to address these problems in a co-ordinated way, the world is at risk of a damaging spiral of de-globalising. It is fuelled by a combination of de-leveraging and national-only policy solutions’.  At a press conference to unveil a second major bank rescue package, Brown called for the ‘widest possible international agreement’, warning against protectionism.

Brown went on to say ‘this financial protection could be every bit as damaging to jobs and businesses in every part of the world, as the protectionism in trade has been in the past’.  Last week, Brown, himself a former finance minister, held meetings with the leaders of France and Germany over the international financial crisis, and also met with US Federal Reserve Chairman Ben Bernanke.

Britain, the current president of the G20 group of advanced and developing nations, will host a summit in London in April on the credit crunch and economic downturn, among other subjects. As well as pressing for co-ordinated international action on the slowdown, Brown has called for major reform of the world’s major global financial institutions such as the World Bank and the International Monetary Fund.

Authorities in Britain did not put a total price tag on the new measures announced, which came after a first package last October. But press reports suggested it was worth some STG200 billion ($A438.16 billion) overall. Key among the new measures is an insurance scheme to protect banks from
so-called toxic assets, announced less than four months after the government pledged STG37 billion ($A81.06 billion) to recapitalise Britain’s ailing banks.

© 2009 AFP

This is corporate government in action, bad business underwritten by the public purse.

As the size of the ‘spoils of war’ grew, so too did the need to be able to back up – via the military – manipulations by those who sought to control and live off the everyday needs of the populace to survive.

Recent history tells us that the Russians have long been a combatant of the American and the English monopoly, which in themselves wrested control from the Dutch, the Portuguese and to a lessor degree, the Spanish; invading and controlling resources has long been a productive enterprise.

Who controls what has long been secondary to end consumers, as long as they’re access is not restricted, so corporate governments have done deals, taken their slice of the pie both ways, by taxing the people to maintain ‘armed forces’ to ‘protect’ a country’s rights but as we will see – in the not too distant future – just as Russia has sent in armed troops to quell any threat to their position, so too will the American’s and English comprehend a sort of martial law, similar to regimes in Asia.

So why write an introduction to this seemingly unimportant story by Andrew E Kramer of the New York Times, when this is a problem that is well outside our region; the answer is simple, when those who have a monopoly sense competition, they don’t like losing. This is a well written article that proves that Russia / Putin is no fool and that the complacency of the ‘old guard’ is slipping; when two contrasting ideologies collide, they will be collateral damage.

Moscow: The titans of Russia energy industry gathered around an enormous map showing the route of a proposed new pipeline in Siberia. It would cost billions and had been years in the planning. After listening to their presentation, President Vladimir V. Putin frowned, got up from his chair, whipped out a felt pen and redrew the map right in front of the embarrassed executives, who quickly agreed to his alternative.  The performance, which was carried on state television in 2006, was obviously stage managed, but there was nothing artificial about its point. It was a typical performance for a leader who has shown an uncanny mastery of the economics, politics and even technical details of the energy business that goes well beyond a politician taking an interest in an important national industry.

“I would describe it as very much his personal project,” said Clifford G. Gaddy, a senior fellow at the Brookings Institution in Washington and an expert in Russia’s energy policy. “It is the heart of what he has done from the very beginning.”  Indeed, from his earliest days in power in 2000, Mr. Putin, who left the presidency in 2008 and became prime minister, decided natural resource exports and energy in particular would not only finance the country’s
economic rebirth but also help restore Russia’s lost greatness after the collapse of the Soviet Union.

Just this month, Mr. Putin’s personal immersion in the topic was on full display as he ordered natural gas shut off to Ukraine, in the process cutting supplies to Europe. It was portrayed by the Kremlin as a protracted commercial dispute with Ukraine. But the hundreds of thousands of shivering gas customers in the Balkans and Eastern Europe sent an unmistakable message about the Continent’s reliance on Russian supplies — and Mr. Putin’s willingness to wield energy as a political weapon.  When talking about energy, he often rattles off obscure statistics not often heard outside a Houston boardroom, like average daily production of fields and throughput capacity of pipelines.

Mr. Putin “clearly knows as much about BP’s business in Russia as I do,” Anthony B. Hayward, BP’s chief executive, once said after a meeting with him. In fact, the standoff in Ukraine was just one part of a far larger Russian playbook on natural gas policy under Mr. Putin. In the past year, Russia has formed a cartel-like group with Middle Eastern nations with the goal of dampening global competition in natural gas, sewn up sources of supply in Central Asia and North Africa with long-term contracts to thwart competitors and used its military to occupy an important pipeline route in Georgia.

And this broader struggle extends over a dozen countries from Azerbaijan to Austria. In its sprawl and slow pace, it is often compared to the 19th-century struggle for colonial possession in Central Asia known as the Great Game. In the modern variant, Mr. Putin, a master strategist, has proved far more effective than his European counterparts.

‘He has been thinking for some time; what are the means and tools at Russia’s disposal, to make Russia great?’ said Lilia Shevtsova, a researcher at the Carnegie Moscow Center. In the post-Soviet world, she said, Mr. Putin concluded that ‘military power would no longer be sufficient’.

A spokesman for Mr. Putin, Dmitri S. Peskov, said that the energy market ‘was, is and will remain a strategic sphere for Russia and that government leaders in Moscow should be versed in the topic’. Mr. Peskov denied the Kremlin used exports for political purposes. Of Mr. Putin’s deep personal knowledge of the business, he said the prime minister showed a similar attention to detail in other matters, too.

In this contest, Russia’s overarching goal is to prevent the West from breaking a monopoly on natural gas pipelines from Asia to Europe. Boris E. Nemtsov, a former Russian first deputy prime minister who is now in the opposition, said: ‘It is the typical behaviour of the monopolist. The monopolist fears competition’. As they did two years ago after a similar supply disruption, European officials have promised in the wake of the Ukraine dispute to take steps to diversify the Continent’s sources of gas to end its reliance on Russia, which supplies nearly 30 percent of the total. European dependence is expected to grow as North Sea gas fields decline.  At a conference in Budapest on Tuesday, Prime Minister Mirek Topolanek
of the Czech Republic called for a renewed effort to build the long-delayed Nabucco pipeline to bring Central Asian gas to Europe without passing through Russian territory.

But there is a reason the project has never gotten off the ground: as determined as Europe is to end its reliance on Russian gas, Mr. Putin is equally adamant about extending it.  The Nabucco pipeline was proposed in 2002 by executives from European energy companies with the express intent of undercutting Russia’s gas monopoly. It would pass through Turkey and Georgia to the Caspian Sea.  Under the best of circumstances, building an international pipeline is an intricate and arduous process, technically, financially and politically. However, Nabucco’s planners rapidly discovered that their biggest obstacle was not a mountain chain or a corrupt local politician, but Mr. Putin himself. When OMV, the Austrian energy company, formally
created a consortium for Nabucco in 2005, he responded with a competing idea: a pipeline called South Stream that would terminate at the same
gas storage site in Austria, but originate in Russia and bypass Ukraine by travelling under the Black Sea.

In a contest often compared to chess, this Russian countermove, like all good chess moves, was both offensive and defensive. To pay the hefty upfront construction costs, a pipeline needs both an assured source of supply and a market for the gas it transports. The South Stream pipeline would flood the gas market in south-eastern Europe, locking up the customers the bankers behind Nabucco were counting on to finance the project.  At the same time it would undermine Ukraine’s domination of gas lines headed west, one of the biggest obstacles to Russian domination of the European gas market.  But Mr. Putin did not stop there. Leaving nothing to chance, he also took steps to choke off potential sources of upstream gas supplies deep in Central Asia.

The race to secure these rich sources of natural gas unexpectedly accelerated in 2006 with the death of the eccentric and isolationist dictator of Turkmenistan, Saparmurat Niyazov. While energy executives around the world rushed to Ashgabat, the Turkmen capital, to meet the new leader, Gurbanguly Berdymukhammedov (a former dentist), Mr. Putin was the first to cut a big deal.  Smiling and holding shovels at a televised ceremony to mark the start of construction, Mr. Putin and Mr. Berdymukhammedov agreed in 2007 to build a pipeline north, to Russia, depriving Nabucco of potential supply. It was not until 2008 that European Union officials got to Ashgabat with a memorandum of understanding for a trans-Caspian pipeline that could link to Nabucco. It has yet to be acted upon.

Farther west, it was the same story.

In February 2008, Mr. Putin signed an agreement with Bulgaria — over the objections of the United States and in spite of Bulgaria’s status as a
new NATO member — making it a partner in the South Stream pipeline.  And in April 2008, Mr. Putin was in Athens, cutting a deal for a spur of South Stream. In this flurry of diplomacy he again beat his Western opponents. The United States State Department’s point man on Eurasian pipelines, Matthew J. Bryza, in Athens the next day, could only rue the signed deal. Mr. Bryza was left explaining to the Greeks: ‘If you have only one supplier of feta, you’re in a vulnerable position. The same for gas’.

The West still had an important pipeline partner in Georgia, a critical geographical link. But that all but evaporated in the brief war last summer. By 2007, a pipeline section had been laid across Georgia, the Baku-Erzurum pipeline, which is now used for local distribution but will become a part of the Nabucco pipeline, if it is ever built. This brought the struggle for Nabucco to a pivotal stage, for it was now playing out along a storied trade route in the petroleum business, and one highly sensitive to the Russians.

In the 19th century the Rothschild banking family and the Nobel brothers of Sweden had built a railroad and pipeline across Georgia to sell Baku oil, undercutting the near monopoly in the business, Standard Oil of the United States, which was supplying Europe with kerosene produced in America.

After the break-up of the Soviet Union, the revival of this pre-Bolshevik energy corridor became a major foreign policy goal of the United States, intended to strengthen the economic independence of former Soviet states and diversify world oil supplies away from the Middle East. At a narrow point, the pipeline route passes just south of the Russian-controlled enclave of South Ossetia and north of another Russian ally, Armenia.

The August war sent a chill through boardrooms in the West when, for example, Russian tanks scurried back and forth over one of the buried pipelines and one crew occupied a pumping station. Russia, said Svante Cornell, a specialist on Central Asia and the Caucasus at the School for Advanced International Studies at Johns Hopkins University sent a simple message: ‘We can blow this up at any time’. While his track record is very strong, Mr. Putin is not infallible. Last summer he made a rare mistake by locking in long-term contracts for Central Asian gas at close to the height of the market — $340 for 1,000 cubic meters in 2009. While Mr. Putin achieved his goal of depriving Nabucco of more potential sources, Russia is now selling that gas in a down market to Ukraine for an average of less than $240 per 1,000 cubic meters — one possible reason, energy experts have said, that Mr. Putin tried to force Ukraine to pay more for gas this winter.

Despite its best intentions, Europe is likely to remain dependent on Russian energy supplies for the foreseeable future and, perhaps, indefinitely if Mr. Putin has his way. And that reflects his long-held beliefs.  As far back as 1997, while serving as deputy mayor of St. Petersburg, Mr. Putin earned a graduate degree in economics, writing his thesis on the economics of natural resources.  Later, when scholars at the Brookings Institution analysed the text, they found 16 pages had been copied without attribution from a 1978 American business school textbook called “Strategic Planning and Policy,” by David I. Cleland and William R. King of the University of Pittsburgh Mr. Putin has declined to comment on the allegation.

Tellingly, the passages they say were plagiarized relate to the indispensable role of a chief executive in planning within a corporation the need for one man to have strategic vision and control.  END

A version of this article appeared in print on January 29, 2009, on page A1 of the New York edition.

http://topics.nytimes.com/top/news/international/countriesandterritories/russiaandtheformersovietunion/index.html?inline=nyt-geo

Copyright 2009 The New York Times Company

So at the end of the day, Putin – like so many before him – have gone from the student role to that of the master….

Russian gas supplier Gazprom ships gas via Ukraine to European countries; the Ukraine (last year) paid Gazprom $179.50 per 1,000 cubic meters of gas, less than half of the average price European countries are expected to pay this year. The Ukraine is refusing to pay $600 million which Russia claims is owed plus Russia is also demanding an increase in the price Ukraine pays for its gas. During a similar dispute between Ukraine and Russia in 2006 – which lasted just three days – several West European countries saw their gas supplies drop by 30 percent or more.

As Winter sets in, six countries – Bulgaria, Greece, Macedonia, Romania, Croatia and Turkey – all reported a halt in gas shipments from Russia through Ukraine. Croatia said it was temporarily reducing supplies to industrial customers and Bulgaria said it had enough gas for only “for a few days.”  In a strongly worded statement, the EU complained that that gas had been cut “without prior warning and in clear contradiction with the reassurances given by the highest Russian and Ukrainian authorities to the European Union.”

Up to Monday (Jan 5th), the EU has said that the dispute would not affect end consumers in the coming weeks. The sudden drop over the past day
however, increased the diplomatic pressure to find a solution. Ukraine and Russia are locked in a dispute over pricing and overdue payments, and Russia cut Ukraine off on Jan. 1 but had promised to keep gas moving to Europe.  Ukraine’s state gas company Naftogaz said Russia’s gas giant Gazprom had sharply reduced its shipments to Europe through pipelines crossing Ukraine, triggering the cuts.

With the ‘soviet union’ showing real cracks, the economic advisor to the Ukraine president is reported to have said ‘our Russian partners are playing cat and mouse with us, these actions today can lead to serious problems not only for the Ukrainian but also for the European gas transport systems’.
But Gazprom’s deputy chairman, Alexander Medvedev, blamed Ukraine’s Naftogaz for the reductions, Russia’s state-owned RIA-Novosti wire service reported. Medvedev was quoted as saying in London that Ukraine had shut three out of four transit gas pipelines Tuesday morning, ‘and the situation is getting worse’.  Naftogaz denied it was to blame for the drop in supplies and that it shut down the three pipelines. Naftogaz spokesman Valentyn Zemlyansky said Gazprom itself rerouted gas to just one out of the four, while the other three have no gas.  ‘we did not turn anything off, there is simply no gas there, there is zero, how can we shut anything down if there is physically no gas there’.

Russia had earlier said it was cutting gas to Ukraine by 20 percent, to compensate for what it claimed was diversion of gas by Ukraine. As gas shipments dwindled, there were no reports of face-to-face talks Tuesday between Moscow and Kiev. Countries in the Balkans and Turkey saw supplies through the Ukrainian pipeline system cease Tuesday morning, Bulgaria’s energy ministry said. The Croatian economics ministry reported that gas shipments from Russia via Austria and Slovenia had ceased and said it has introduced temporary measures to reduce gas supplies to industrial consumers to ‘a necessary minimum’; it has also called on citizens to rationally use gas in their homes’.

Romania’s gas transport company Transgaz said Ukraine ceased pumping gas at 3 a.m. (GMT 0100) Tuesday. Turkey’s Energy Minister Hilmi Guler confirmed the cut-off and said the country was trying to compensate with supplies from other sources including another Russian pipeline beneath the Black Sea.  Bulgarian pipeline operator Bulgargaz CEO Dimitar Gogov said his country’s reserves were sufficient to cover needs only ‘for a few days’.

Late Monday, Gazprom said it would cut the amount of gas it ships to Europe through Ukraine by 65.3 million cubic meters, or about 20%, the amount it accuses Ukraine of diverting from its transit pipeline network. Russia supplies Europe with about a quarter of its gas, 80 percent of which is shipped through Ukraine. Kiev denies allegations it is stealing gas, saying it is diverting only the Russian-supplied gas it needs to run its pipelines, including
the compressor stations that pump gas west. Each side says the other is responsible for supplying the gas to run the pipeline network, but there is no way to sort out the conflicting claims. Details of the transit contract are secret.

While Gazprom said it was sure that it will be able to provide Europe with enough gas despite disruption of supply to Ukraine, it may just be hot air as fears of a rapidly developing crisis – now in its sixth day – could result in disruption of supplies for consumers in Europe, where gas is used for heating and electricity generation.

Primary source MARIA DANILOVA – Kiev.

Fast forward and in the last few moths, we’ve heard of the Henry Paulson threatening Congress with martial law if they didn’t get their way with the most blatant theft recently and we’ve see billions more misappropriated – OK stolen – from the American tax-paying public to cover fraudulent investment schemes that Paulson helped set up.

Earlier this week I posed the possibility that other countries would demand payment in their own currency or an accepted third party currency, which would still leave the USA obligated – but unable – to pay these debts.

However, there are now rumours that China may devalue their currency – the Yuan – by as much as 30% and this may be the first in a domino line that will see the USA back where it started and from the fat to the fire – recession to depression.  If will be most unpleasant to live in the USA when people can’t afford to buy food and start to take the law into their own hands.

The Russians use the military to oppress their people, but the military eventually refused. We are headed for dark days.

But the reality is that the system – driven by greed – has tempted one too many and delivered on one too few investments; the king has no clothes and soon his subjects will join him.  The larger the energy dependent and consuming the country, the farther they will fall. Those least dependent on energy and well versed on making ends meet will suffer as well, but practice will have given them the edge.  Those closest to living off the land will be least under threat.

So did it have to end like this ? Well the answer is yes; we don’t recognize limitations like our ancestors did; population growth was policed by the immediate environment to support a community; cheap energy in this day and age meant we could ship food from anywhere around the world; however, two things have happened, disproportionate population growth in resource rich countries have translated into these highly exporting countries scaling back exports to support their own populace before the populace rebel and take over.

Now, the realization is that there is a bottom of the barrel, resources are finite and if ‘we’ sell \them off to the highest bidder, regardless of the jobs it may create, at the end of the day we are left with big holes in the ground and the profit has disappeared off-shore with some locals receiving blood money to sell out.

In the ‘great depression’, a small proportion of the population was mobile, looking for work just for a meal, these days there is far less arable land, a higher incidence of food is imported and farming communities have long suffered from poor prices, drought and interest rates that drove many farmers to their own private depression and even suicide.

As disposable income shrinks, people are looking for ways to reduce their exposure to debt, but the ripple effect reduces everyones ability to get in front; financial institutions have pushed the envelope too far and humanity will hit a wall that is immovable.

The G20 meeting in Washington was largely ineffective; no significant actions came out of the meeting and the our Leaders showed no comprehension, no understanding and no foresight for any actions that will mitigate or prevent the financial collapse. A little known Baltic Dry Index (a ocean shipping volume index) is at record lows, dropping to 841 this week from a record high of over 11,473 just last May. That means that the cost to charter an ocean-going vessel is at or below the cost per ton to crew and fuel the vessel.

A Ukrainian operator of about 55 vessels, filed for bankruptcy last month and Zodiac Maritime Agencies Ltd. (a shipping line managed by Israel’s billionaire Ofer family), said last month it may idle 20 capesize ships which typically haul coal and iron ore. That’s about 5 percent of the fleet operating in the spot market. Why the collapse ? Banks refuse to issue Letters of Credit because the S&P GSCI index of 24 raw materials has dropped 31 percent this month, its worst performance since at least recession.

If cargo trade stops, a whole lot of supply chain disruption starts; wheat doesn’t get exported, the mills have nothing to grind into flour; no flour means bakeries and food processors can’t produce bread and pasta and other foods means there is no foods in the shops no foods in the shops means people go hungry; if families go hungry, people will riot and governments fall, but before that anarchy will take hold and it will be survival of the fittest.

Nations like Russia and China seem to be heading toward the former (after signing a 20 year multi-billion $ loan-for-oil swap, which guarantees China a place at the head of the line, when crude oil supplies start to dwindle from Russia.  So, will falling crude oil supplies, shrinking water resources, shared cross-boarder aquifers and harder to extract minerals be hoarded by nations or shared between nations? What conflicts will result from this?

Are you getting just a little concerned ?

In an October 6 article titled The German Question, STRATFOR’s George Friedman poured a pitcher of cold logic on America’s plan for NATO’s future. It appears that Germany is determined to block NATO membership for Ukraine and Georgia. The long-term implications of this decision are stunning.  ‘Since NATO operates on the basis of consensus,” wrote Friedman, “any member nation can effectively block any candidate from NATO membership.” The Russian invasion of Georgia has forced Germany into this position.

The conflict in Georgia has forced the Germans to clarify their geopolitical thinking. What we see now, quite clearly, is Germany turning away from NATO. They can call it whatever they like. They are thinking as Germans. Russia’s thrust into Georgia was a masterstroke because it successfully  redirected Germany’s political sensibility from a NATO-centered view to a German-centered view. In Europe there is one question that stands above all others, and the Germans must give the answer.

Either Europe will confront Russia in a new Cold War, or Europe will become Russia’s partner. According to Friedman’s logic, Germany has already decided on partnership with Russia. Imagine a partnership between Russia and Germany. The Russians supply the military muscle, the natural resources, and cheap labor. The Germans supply the technology, the money, and European finesse.

Friedman says that Germany’s energy situation is “desperate,” and that German leaders are merely looking after their country’s national interest. It is important to remember, however, that Germany sees a carrot as well as a stick. The German leaders are not merely avoiding pain. They are tempted by a Russian partnership, especially as global financial structures are imploding. As Friedman points out, Germany’s “political problem” is its geographical position in the center of Europe. Does Germany face east or west? Does Germany align itself with Russia or the Anglo-Americans and the French?

But surely the German’s understand that their destiny lies with the West! Such a conclusion, however, may be sensible to someone viewing affairs from a distance. It is not immediately sensible to the German leadership, tempted as they are by the prospect of a vital “reforming” role in Europe. The European Union is not  functioning properly and the Euro may be headed for the ashcan of history.

The NATO system, dominated so long by America, is increasingly inconvenient from the German point of view. It may, in fact, be a harebrained scheme to partner with the Kremlin – which prefers Asiatic methods. But such a partnership appeals to German vanity as well as to Germany’s practical sense. The Russians value the Germans. The Russians whisper sweet nothings into Germany’s ear.

Russian Prime Minister Vladimir Putin is a fluent German speaker who even possesses German traits, sympathizes with German thinking and thereby flatters German feeling. It is a complex case of seduction.  How do the Germans feel, deep down, about Russia’s intentions toward Georgia and Ukraine? The Germans are ready to think in terms of their  own national interest. They are tempted to disregard NATO. Perhaps they are sick of being NATO’s prisoner. After all, Germany was defeated in World War II and became trapped in the Cold War between Russia and America. This is not a situation that bears repeating.

Conflict between Russia and NATO is not in Germany’s national interest. Friendship with Russia holds promise – even if the promise is a false one.  France and Britain are willing to challenge Russia’s new aggressive stance. Germany doesn’t want this at all. The United States seeks to bring Ukraine and Georgia into NATO. Germany doesn’t want this at all. There is a serious rift in NATO. Will the Germans find a way out of NATO? Conventional wisdom supposes that this is unthinkable.

Everyone knows Russia is dangerous. Partnering with Russia is like playing with fire. Sooner or later Germany is going to get burned. At the same time, however, recent events in Georgia have educated the Germans. Suddenly Germany is confronted with an unpleasant choice. “NATO, as an institution built to resist the Russians, is in an advanced state of decay. To resurrect it, the Germans would have to pay a steep economic price.” Quite clearly, the Germans have already decided to abandon NATO’s mission in pursuit of their own short-term economic interest. Where this will lead in the long-run is obvious. One day Russia and Germany will come to blows, and America isn’t going to be around to help Germany. Perhaps the financial crash on Wall Street has underscored the future irrelevance of America for Germany. America is collapsing, after all.

NATO is therefore in trouble. It may not exist much longer. The Russian’s are shrewd in playing their diplomatic, economic and military cards. Luring the German’s into partnership opens the way to NATO’s destruction by diplomatic means. NATO has no real military power to project to the east,” wrote Friedman, “and none can be created without a major German effort, which is not forthcoming.” The logic of Friedman’s analysis cannot be disputed. The Kremlin looks at the collapse on Wall Street and sees an opportunity. During an October 2 joint press conference with German Chancellor Angela Merkel, Russian President Dmitri Medvedev said, “One of the complicated issues we discussed was the financial crisis. We have realized once again that the current global financial security system, like the international security system, doesn’t satisfy present needs. The flaws in the economic … model pursued by the United States of America … are serious, and we are paying for this today.

In a speech before the Russian-German Public Forum, the Russian president translated today’s financial crisis into geopolitical language. “What have recent events shown?” he asked. “They have demonstrated that the time in which one economy and one currency dominated the globe is irretrievably gone. And we need collective solutions to resolve the financial crisis brought on by financial selfishness….”

In other words, let the Americans suffer their fate. Europe is face-to-face with Russia now. Does Europe want to oppose Russia on its own? The Russians are forcing Germany to make a decision. “It is possible that today some people would like to go back to the primitive division of the world into ours and theirs, right and wrong, but in Russia we are convinced that this time is irretrievably gone. It is impossible to revive the Berlin Wall, just as it is impossible to return to the Cold War – there is no reason to do so.”

President Medvedev is winking at the Germans. You know what to do, he says to them. You don’t want to fight us. You need us. The wickedness of the KGB cabal in Moscow is not the issue. One must look “beyond good and evil,” to the hard realities of the situation. Does Germany want to feel the chill of winter, without the benefits of Russian oil or Russian natural gas? This is not a sensible position, and Germany knows which way to turn. NATO is finished and America is going to collapse. Therefore Europe needs a new “security architecture.” In other words, Europe now belongs to Russia and the Germans should cut a deal while the Russians are in a generous mood.

If the French Prime Minister says that the world stands on the “edge of the abyss,” the monster at the bottom of the abyss is Russia

From NATO’s expansion plans in the former Soviet Union to Washington’s proposals for a bigger defence budget and a missile shield in central Europe, the US was deliberately quashing hopes for permanent peace with Russia, Mr Gorbachev said.

‘We had 10 years after the Cold War to build a new world order and yet we squandered them, the United States cannot tolerate anyone acting independently.’

Yet if Washington blames Mr Putin’s self-aggrandising rhetoric for the worst crisis in East-West relations since the Cold War, for Mr Gorbachev the blame lies entirely with the administration of President George W Bush.

Gorbachev said ‘I sometimes have a feeling that the United States is going to wage war against the entire world’, no doubt to comments by Robert Gates (the US defence secretary), who told a congressional committee that America needed to boost military spending to counter myriad threats including the ‘uncertain paths of China and Russia’.

Those comments caused uproar in Russia, with pro-Kremlin newspapers claiming they heralded the start of a new Cold War.

Tensions have already been heightened by a US proposal to build a missile defence shield in Poland and the Czech Republic to counter a nuclear strike by Iran.

Mr Gorbachev said ‘it is a very dangerous step; the Americans promised that NATO wouldn’t move beyond the boundaries of Germany after the Cold War but now half of central and eastern Europe are members, so what happened to their promises? It shows they cannot be trusted; erecting elements of missile defence is taking the arms race to the next level’.

Relations have further deteriorated after NATO promised eventual membership to Georgia and Ukraine, a move interpreted as an attempt to extend America’s sphere of influence into Russia’s backyard.

For a man hailed as one of the heroes of the 20th century, Mr Gorbachev, now 77, often sounded like the ageing hardliners he struggled against in the Kremlin during the 1980s.