Over the next few days, Russia will change the world. It has completed a new oil pipeline and port complex that sets Russia up to become a more powerful oil exporter than Saudi Arabia. The ramifications for Europe and Asia are profound: The shape of the global economy—and the global balance of power—will be altered forever.
December 28 was a big day of ceremony in Russia. Prime Minister Vladimir Putin pushed a button that transformed global oil dynamics—especially for Asia and Europe. The button released thousands of barrels of Siberian crude into a waiting Russian supertanker and heralded the opening of Russia’s first modern Pacific-based oil export facilities.
The multibillion-dollar, state-of-the-art oil terminal was a “great New Year present for Russia,” Putin said during the inauguration. The strategic terminal, located in the city of Kozmino on the coast of the Sea of Japan, is one of the “biggest projects in contemporary Russia” he said, not only in “modern Russia,” but “the former Soviet Union too.”
Putin has every right to be enthusiastic about his new port. Kozmino will unlock a two-way gate through which Russia’s vast Siberian oilfields will gush into Asia’s energy-hungry economies—and Chinese, Korean and Japanese currency will flow into Russia.
If just the seven ships currently waiting to berth are all filled during January, the port of Kozmino will instantly become Russia’s third-most important oil outlet.
According to Reuters, the first oil transport loads on January 15. In a symbolic move highlighting Russia’s warming relationship with China, Hong Kong will receive the first shipment.
After that, Kozmino’s importance will exponentially grow over the next year. Currently, all Siberian oil shipments into Kozmino are delivered by train—but that will soon change. Phase one of the East Siberian-Pacific Ocean Pipeline (espo) was also completed during December. Phase two will soon connect the Siberian fields directly to the new port. When phase two is finished in 2014, total exports could jump from the current rate of 250,000 barrels per day to over 1 million. Kozmino will transform into one of the largest oil centers in the world—capable of handling 14 percent of total Russian oil exports. It will be one of the most strategic geopolitical assets in Russia’s arsenal.
Russia pumped more than 10 million barrels of oil per day during November. With Saudi Arabian production falling, Russia is now the world’s largest oil exporter. Toss in Russia’s natural gas exports, and Russia is the biggest energy superpower in the world, by far. That does not even count Russia’s massive uranium resources and nuclear expertise.
But here is why the new port in Kozmino could radically affect the future of both Asia and Europe. For over a century, Russia’s entire energy infrastructure has focused mainly on supplying Europe. That has now changed forever!
The first and now-complete phase of the espo pipeline, which connects Russia’s Siberian oil fields to within just a few kilometers of China, is already destabilizing global oil dynamics and shifting them in Russia’s direction. “espo is what political strategists might call a ‘game-changer,’” writes the Telegraph. “It means that Russia will be able to send its oil either east or west—so it can drive a harder bargain when selling crude to Europe” (emphasis mine throughout).
Previously, when Russia has had pricing disputes with Europe, Moscow had to play the embargo card with an obvious bluff. It had no other alternative outlet for its oil. Without the Europeans, its oil would sit in Samotlor and Tyanskoye, costing money instead of making it. But now Moscow can turn off the tap to Europe and still pump in the profits by opening the pipe wide to its energy-hungry Asian partners.
But Russia’s stranglehold on Europe is about to get even tighter—much tighter. By 2012, the espo pipeline will be twinned with a pipeline for natural gas exports so Russian gas supplies can also flow east instead of west if necessary.
This development is truly scary to Europeans.
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