From the December 2006 Idaho Observer:

PART II: Sino-Russo Strategic Cooperation—Washington’s Nightmare

The highest-stakes "game" among industrialized nations is securing adequate and consistent supplies of power-producing resources. The most coveted of power-producing resources are crude oil, natural gas and coal. Since the beginning of the last century, the world—its poverty and prosperity; its wars and peace—have been determined by the nations as they maneuver politically for energy-resource advantage. In this "game," the U.S. played its hand well enough to attain sole superpower status by 1990. But, since Sept., 2001, under the leadership of the neo-connected Bush administration, the U.S. hand has been badly overplayed. Rather than leading the world into an era of peace and justice, as it well could have (and should have), the Bush administration is leading the world into an unjust era of perpetual war. The community of nations is not sitting idly by. Though the mainstream presses are not covering it, the world is mobilizing—to deal with U.S. belligerence and to accommodate the power and resource consumption vacuums that will be created when the U.S. "threat" has been "neutralized."

by F. William Engdahl

Ironically, the aggressive Washington foreign policy of the Cheney-Rumsfeld era since 2001 has done more to nurture the one strategic combination in Eurasia most dreaded by Washington political realists such as Kissinger and Brzezinski, namely a strategic military and economic cooperation on a deep, long-term basis between former Cold War foes, China and Putin’s Russia.

Putin has taken a number of steps in recent months to shore up relations with Russia’s most important potential strategic Eurasian partner, China. In March he went to Beijing to discuss increased bilateral energy cooperation, a theme dear to the heart of energy-hungry China. Top on that agenda was China’s wish that a pipeline from Taishet in Siberia be built to bring oil to Daqing in China. In addition, the China National Petroleum Company (CNPC) and the Russian Rosneft oil company signed several agreements for joint energy projects and; Gazprom and CNPC did a Memorandum of Understanding for Russian natural gas supply to China. With Sudan and the Middle East under increasing pressure from the United States, the Sino-Russian energy cooperation has moved to the top of China’s foreign policy agenda. Russia and China will be meeting again to discuss further energy cooperation in Moscow talks.

As well, Russia is a major supplier to China of arms; military cooperation between the two states is increasing. In 2001 the two signed the Russia-China Friendship and Cooperation Treaty, the first such bilateral treaty since 1950. A major point covered "joint actions to offset a perceived U.S. hegemonism." That was two months before September 11 and the ensuing Iraq invasion by the U.S.

In August, 2005, the two countries held their first joint military exercises to increase bilateral coordination in "fighting the war on terrorism." They realize more than one can play the game. This past May, Russian Defense Minister Sergei Ivanov hosted the Chief of General Staff of Beijing’s People’s Liberation Army, and discussed increased cooperation in the context of the Russia-China leading role in the Shanghai Cooperation Organization (SCO). Russia will increase deliveries of select military technology to China as well as training Chinese military at the institutes of the Russian Ministry of Defense. With this bilateral cooperation in mind, a broader look at Russia’s use of energy to build a counterweight to U.S. dominance in Eurasia is instructive.

Russian energy geopolitics

In terms of the overall standard of living, mortality and economic prosperity, Russia today is not a world class power. In terms of energy, it is a colossus. In terms of landmass it is still the single largest nation in land area in the world, spanning from the Pacific to the door of Europe. It has vast territory, vast natural resources and it has the world’s largest reserves of natural gas, the energy source currently the focus of major global power plays. In addition, it is the only power on the face of the earth with the military capabilities able to match that of the U.S. despite the collapse of the USSR in 1989 and deterioration in the military since.

Russia has more than 130,000 oil wells and some 2,000 oil and gas deposits explored of which at least 900 are not in use. Oil reserves have been estimated at 150 billion barrels, similar perhaps to Iraq. They could be far larger but have not yet been exploited owing to difficulty of drilling in some remote arctic regions. Oil prices above $60 a barrel, however, begin to make it economical to explore in those remote regions.

Currently Russian oil products can be exported to foreign markets via three routes: Western Europe via the Baltic Sea and Black Sea; Northern route; Far East to China or Japan and East Asian markets. Russia has oil terminals on the Baltic at St. Petersburg for oil and a newly expanded oil terminal at Primorsk. There are added oil terminals under construction at Vysotsk, Batareynaya Bay and Ust-Luga.

Russia’s state-owned natural gas pipeline network, its so-called "unified gas transportation system" includes a vast network of pipelines and compressor stations extending more than 150,000 kilometers across Russia. By law only the state-owned Gazprom is allowed to use the pipeline. The network is perhaps the most valued Russian state asset outside the oil and gas itself. Here is the heart of Putin’s new natural gas geopolitics and the focus of conflict with western oil and gas companies as well as the European Union, whose Energy Commissioner, Andras Piebalgs, is from new NATO member Latvia, formerly part of the USSR.

In 2001, as it became clear in Moscow that Washington would find a way to bring the Baltic republics into NATO, Putin backed the development of a major new oil port on the Russian coast of the Baltic Sea in Primorsk at a cost of $2.2 billion. This project, known as the Baltic Pipeline System (BPS), greatly lessens export dependency on Latvia, Lithuania and Poland. The Baltic is Russia’s main oil export route, carrying crude oil from Russia’s West Siberian and Timan-Pechora oil provinces westward to the port of Primorsk in the Russian Gulf of Finland. The BPS was completed in March 2006 with capacity to carry more than 1.3 million barrels/day of Russian oil to western markets in Europe and beyond.

The same month, March 2006, former German Chancellor Gerhard Schroeder was named chairman of a Russian-German consortium building a natural gas pipeline some 1,200 km long under the Baltic Sea. Majority shareholder in this North European Gas Pipeline (NEGP) project, with 51 percent, is the Russian state-controlled Gazprom, the world’s largest natural gas company. The German companies BASF and E. On each hold 24.5 percent. The project, estimated to cost €4.7 billion, was started late 2005 and will connect the gas terminal at the Russian port city of Vyborg on the Baltic Sea near St. Petersburg with the Baltic city of Greifswald in eastern Germany. The Yuzhno-Russkoye gas field in West Siberia will be developed in a joint venture between Gazprom and BASF to feed the pipeline. It was Gerhard Schroeder’s last major act as Chancellor, and provoked howls of protest from the pro-Washington Polish government, as well as Ukraine, both of which stood to lose control over pipeline flows from Russia. Despite her close ties to the Bush Administration, Chancellor Angela Merkel has been forced to swallow hard and accept the project. Germany’s industry is simply dependent on the Russian energy import. Russia is by far the largest supplier of natural gas to Germany.

The giant Shtokman gas deposit in the Russian sector of the Barents Sea, north of the Murmansk harbor, will ultimately also be a part of the gas supply of the NEGP. When completed in two parallel pipelines, NEGP will supply Germany up to 55 billion cubic meters more a year of Russian gas.

In April 2006 the Putin government announced the first stage of construction of the East Siberia-Pacific Ocean Pipeline (ESPO), a vast oil pipeline from Taishet in the Irkutsk Region near Lake Baikal in East Siberia, to Perevoznaya Bay on Russia’s Pacific Ocean coast, to be built at a cost of more than $11.5 billion. Transneft, the Russian state-owned pipeline company will build it. When finished, it will pump up to 1.6 million barrels/day of oil from Siberia to the Russian Far East and from there, on to the energy-hungry Asia-Pacific, mainly to China. The first stage is due to be completed by end of 2008. In addition, Putin has announced plans to construct an oil refinery on the Amur River near the China border in Russia’s Far East to allow sale of refined product to China and Asian markets. Presently the Siberian oil can only be delivered to the Pacific via rail.

For Russia, the Taishet to Perevoznaya route will maximize its national strategic benefits while taking oil exports to China and Japan into account at the same time. In the future, the country will be able to export oil to Japan directly from the Nakhodka Port. Oil-import-dependent Japan is frantic to find new secure oil sources outside the unstable Middle East. The ESPO can also supply oil to the Republic of Korea and the Democratic People’s Republic of Korea, by building from Vladivostok branch lines leading to the two countries and to China via a branch pipe between Blagoveshchensk and Daqing. The Taishet route provides a clear roadmap for energy cooperation between Russia and China, Japan and other Asia-Pacific countries.

Sakhalin: Russia reins in Big Oil

In late September, 2006, a seemingly minor dispute exploded and resulted in the revocation of the environmental permit for Royal Dutch Shell’s Sakhalin II Liquified Natural Gas (LNG) project, which had been due to deliver LNG to Japan, South Korea and other customers by 2008. Shell is lead energy partner in an Anglo-Japanese oil and gas development project on Russia’s Far East island of Sakhalin, a vast island north of Hokkaido, Japan.

At the same time, the Putin government announced environmental requirements had also not been met by ExxonMobil for its De Kastri oil terminal built on Sakhalin as part of its Sakhalin I oil and gas development project. Sakhalin I contains an estimated 8 billion barrels of oil and vast volumes of gas, making the field a rare "Super-Giant" oil find, in geologists’ terminology.

In the early 1990s, the Yeltsin government made a desperation bid to attract needed investment capital and technology into exploiting Russian oil and gas regions at a time the government was broke and oil prices very low. In a bold departure, Yeltsin granted U.S. and other western oil majors generous exploration rights to two large oil projects, Sakhalin I and Sakhalin II. Under a so-called "production sharing agreement (PSA)," ExxonMobil, lead partner of the Sakhalin I oil project, got tax-free Russian concessions.

Under the PSA’s terms, which are typical among those struck between major Anglo-American oil majors and weak Third World countries, Russia’s government would instead get paid for the oil and gas rights in a share of eventual oil or gas produced. But the first drops of oil to Russia would flow only after all project production costs had first been covered.

PSAs were originally developed by Washington and Big Oil to facilitate favorable control by the oil companies of large oil projects in third countries. The major U.S. oil giants, working with James Baker III’s "James Baker Institute," which drafted Dick Cheney’s 2001 "Energy Task Force Review," used the PSA form to regain control over Iraq’s oil production, hidden behind the facade of an Iraqi, state-owned oil company.

Shortly before the Russian government told ExxonMobil it had problems with its terminal on Sakhalin, ExxonMobil had announced yet another cost increase in the project. ExxonMobil, whose attorney is James Baker III, and which is a close partner to the Cheney-Bush White House, announced a 30 percent cost increase, something that would put even further off any Russian oil flow share from the PSA. The news came on the eve of ExxonMobil plans to open an oil terminal at De Kastri on Sakhalin. The Russian Environment Ministry and the Agency for Subsoil Use suddenly announced the terminal did "not meet environmental requirements" and is reportedly considering halting production by ExxonMobil as well.

Britain’s Royal Dutch Shell under another PSA holds rights to develop the oil and gas resources in Sakhalin II region, and build Russia’s first Liquified Natural Gas project. The $20 billion project, employing over 17,000 people, is 80 percent complete. It’s the world’s largest integrated oil and gas project and includes Russia’s first offshore oil production, as well as Russia’s first offshore integrated gas platform.

The clear Russian government moves against ExxonMobil and Shell have been interpreted in the industry as an attempt by the Putin government to regain control of Russian oil and gas resources it gave away during the Yeltsin era. It would cohere with Putin’s emerging energy strategy.

Russia-Turkey Blue Stream gas project

In November, 2005, Russia’s Gazprom completed the final stage of its 1,213 kilometer $3.2 billion Blue Stream gas pipeline. The project brings gas from its gas fields in Krasnodar, then by underwater pipelines across the Black Sea to the Durusu Terminal near Samsun inon the Turkish Black Sea coast. From there the pipeline supplies Russian gas to Ankara. When it reaches full capacity in 2010, it will transport an estimated 16 billion cubic meters of gas per year.

Gazprom is now discussing transit of Russian gas to the countries of South Europe and East Mediterranean, including based on new contracts and new volumes of gas. Greece, south Italy and Israel all are in some form of negotiation with Gazprom to tap gas from the Blue Stream pipeline across the territory of Turkey. A new route for the gas supply is being developed now—the one via the countries of East and Central Europe. The interim title of the project is the South-European Gas Pipeline. The main issue here is to establish a new gas transmission system, both from Russian origin and from the third countries

In sum, not including the emerging potentials of Gazprom’s entry into the fast-developing Liquified Natural Gas markets globally, energy, oil and gas and nuclear, is firmly at the heart of Russian attempts to build new economic alliance partners across Eurasia in the coming showdown with the U.S.

U.S. plans for

"Nuclear Primacy"

The key to the ability of Putin’s Russia to succeed is its ability to defend its Eurasian energy strategy with a credible military deterrent, to counter now-obvious Washington military plans for what the Pentagon terms "Full Spectrum Dominance."

In a revealing article titled "The Rise of U.S. Nuclear Primacy," in the March/April 2006 edition of Foreign Affairs, the magazine of the New York Council on Foreign Relations, authors Kier Lieber and Daryl Press made the following claim:

"Today, for the first time in almost 50 years, the United States stands on the verge of attaining nuclear primacy. It will probably soon be possible for the United States to destroy the long-range nuclear arsenals of Russia or China with a first strike. This dramatic shift in the nuclear balance of power stems from a series of improvements in the United States’ nuclear systems, the precipitous decline of Russia’s arsenal, and the glacial pace of modernization of China’s nuclear forces. Unless Washington’s policies change or Moscow and Beijing take steps to increase the size and readiness of their forces, Russia and China—and the rest of the world—will live in the shadow of U.S. nuclear primacy for many years to come."

The U.S. authors claim, accurately, that since the collapse of the Soviet Union in 1991, Russia’s strategic nuclear arsenal has "sharply deteriorated." They also conclude that the United States is and has been for some time, intentionally pursuing global nuclear primacy. The Bush administration’s National Security Strategy (September, 2002) explicitly stated that it was official U.S. policy to establish global military primacy, an unsettling thought for many nations today given the recent actions of Washington since the events of September, 2001.

One of (former) Defense Secretary Rumsfeld’s priority projects has been the multi-billion dollar construction of a U.S. missile defense. It has been sold to American voters as a defense against possible terror attacks. In reality, as has been openly recognized in Moscow and Beijing, it is aimed at the only two real nuclear powers, Russia and China.

As the Foreign Affairs article points out, "...the sort of missile defenses that the United States might plausibly deploy would be valuable primarily in an offensive context, not a defensive one—as an adjunct to a U.S. first-strike capability, not as a stand-alone shield. If the United States launched a nuclear attack against Russia (or China), the targeted country would be left with a tiny surviving arsenal—if any at all. At that point, even a relatively modest or inefficient missile-defense system might well be enough to protect against any retaliatory strikes, because the devastated enemy would have so few warheads and decoys left."

In the context of a United States which has actively moved the troops of its NATO partners into Afghanistan, now Lebanon, and which is clearly backing the former USSR member Georgia, today a critical factor in the Caspian Baku-Tbilisi-Ceyhan Turkey oil pipeline, in Georgia’s move to join NATO and push Russian troops away, it is little surprise that Moscow might be just a bit uncomfortable with the American president’s promises of spreading democracy through a U.S.-defined Greater Middle East. The invented term, "Greater Middle East"—which stretches from Pakistan to Morocco and the Arabian Peninsula to Central Asia—is the creation of various Washington think-tanks close to Cheney including his Project for the New American Century.

At the G-8 Summit in Summer 2004 President Bush first officially used the term to refer to the region included in Washington’s project to spread "democracy" in the region, which includes former Soviet states Azerbaijan, Georgia and Armenia.

On October 3, the Russian Foreign Ministry warned that Russia would "take appropriate measures" should Poland deploy elements of the new U.S. missile defense system. Poland is now a NATO member. Its Defense Minister, Radek Sikorski, was a former "resident" in Washington at Richard Perle’s hawkish AEI think-tank. He was also executive director of the "New Atlantic Initiative," a project designed to bring the former Warsaw Pact countries of eastern Europe into NATO under the guise of spreading democracy.

The United States is also building, via NATO, a European Missile Defense System. The only conceivable target of such a system would be Russia in the sense of enabling a U.S. first-strike success. Completion of the European missile defense system, the militarization of the entire Middle East, the encirclement of Russia and of China from a connected web of new U.S. military bases, many put up in the name of the "War on Terror," all now appear to the Kremlin as part of a deliberate U.S. strategy of Full Spectrum Dominance. The Pentagon refers to it also as "Escalation Dominance," the ability to win a war at any level of violence, including a nuclear war.

Integral to their strategy of Escalation Dominance is a new U.S. policy of militarization of space, part of the Pentagon’s Full Spectrum Dominance policy. The president authorized the release of a new "U.S. National Space Policy" on August 31, 2006, that establishes that the conduct of U.S. space programs and activities shall be a top priority. It is part and parcel of the Bush administration defense strategy. The new policy document declares that the U.S. will "take those actions necessary to protect its space capabilities; respond to interference; and deny, if necessary, adversaries the use of space capabilities hostile to U.S. national interests…"

The U.S. has decided it will not let any international body or treaty hinder its militarization of space: "The United States will oppose the development of new legal regimes or other restrictions that seek to prohibit or limit U.S. access to or use of space. Proposed arms control agreements or restrictions must not impair the rights of the United States to conduct research, development, testing, and operations or other activities in space for U.S."

That all would be a little more comforting were it not for the bizarre way in which people in Washington these days define "national interest," in contrast to the interest of the world community in peace and freedom.

Moscow’s military status

Moscow has not been entirely passive in the face of this growing reality. In his May, 2003 State of the Nation Address, Vladimir Putin spoke of strengthening and modernizing Russia’s nuclear deterrent by creating new types of weapons, including for Russia’s strategic forces, which will "ensure the defense capability of Russia and its allies in the long term."

Russia stopped withdrawing and destroying its SS-18 MIRVed missiles once the Bush administration unilaterally declared an end to the Anti-Ballistic Missile Treaty, and its de facto annulling of the Start II Treaty.

Russia never stopped being a powerful entity that produced state-of-the-art military technologies—a trend that continued from its inception as a modern state. While its army, navy and air force are in derelict conditions, the elements for Russia’s resurgence as a military powerhouse are still in place. Russia has been consistently fielding top-notch military technology at various international trade shows, and has been effective in the demonstration of its capabilities.

In spite of financial and economic difficulties, Russia still produces state-of-the-art military technologies, according to a 2004 analysis by the Washington-based think tank, Power and Interest News Report (PINR). One of its best achievements after the dissolution of the Soviet Union has been its armored fighting vehicle BMP-3, which has been chosen over Western vehicles in contracts for the United Arab Emirates and Oman.

Russia’s surface-to-air missile systems, the S-300, and its more powerful successor, the S-400, are reported to be more potent than American-made Patriot systems. The once-anticipated military exercise between the Patriot and the S-300 never materialized, leaving the Russian complex with an undisputed, yet unproven, claim of superiority over the American system. Continuing this list is the Kamov-50 family of military helicopters that incorporate the latest cutting-edge technologies and tactics, making them an equal force to the best Washington has. European helicopter industry sources confirm this.

In recent joint Indo-American air force exercises, where the Indian Air Force was equipped with modern Russian-made Su-30 fighters, the Indian Air Force out-maneuvered American-made F-15 planes in a majority of their engagements, prompting U.S. Air Force General Hal Homburg to admit that Russian technology in Indian hands has given the U.S. Air Force a "wake-up call."

The Russian military establishment is continuing to design other helicopters, tanks and armored vehicles that are on par with the best that the West has to offer.

Weapons export, in addition to oil and gas, has been one of the best ways for Russia to earn much-needed hard currency. Already, Russia is the second-largest worldwide exporter of military technology after the United States. As reported in various magazines, journals and periodicals, at present, Russia’s modern military technology is more likely to be exported than supplied to its own armies due to the existing financial constraints and limitations of Russia’s armed forces. This has implications for America’s future combat operations since practically all insurgent, guerrilla, breakaway or terrorist armed formations across the globe—the very formations that the United States will most likely face in its future wars—are fielded with Russian weapons or their derivatives.

The Russian nuclear arsenal has played an important political role since the end of the Soviet Union, providing fundamental security for the Russian state. After a bitter intra-services fight within the Russian General Staff which lasted from 1998 to 2003, the General Staff realized, along with the Defense Ministry, that a further policy of neglect of nuclear forces in favor of funding rebuilding conventional forces in the face of tight budget constraints, was not tolerable. In 2003, Russia had to buy from Ukraine the strategic bombers and ICBMs being warehoused in the former Soviet state. Since then, strategic nuclear forces have been a priority. Today, the finances of the Russian state, thanks largely to high prices of oil and gas exports, are on strong footing. The Russian Central Bank has become one of the five largest dollar reserve holders with reserves of more than $270 billion.

The material foundation of the Russian military is its defense industry. After 1991, the Russian Federation inherited the bulk of the Soviet defense industrial complex.

Ending notes

Sino/Russo: The Shanghai Co-operation Organization (SCO), founded several years ago by Russia and China to bring together select Eurasian countries for common dialogue. Founded in June 2001 by China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, its stated goal initially was to facilitate ‘cooperation in political affairs, economy and trade, scientific-technical, cultural, and educational spheres as well as in energy…’ Iran’s Ahmadinejad was invited as an honored observer last June and Iran is being encouraged by Russia and China to join SCO. Today SCO remains on the surface rather a rather amorphous discussion forum. Given a bit more provocation from Washington and NATO, that could change rapidly into the core of a broader Eurasian military and energy alliance to counter-weigh US nuclear primacy. The nightmare of Halford Mackinder would be fulfilled, ironically, largely due to the unilateral and aggressive foreign policy of an over-confident United States.

U.S.: Today, the U.S. is building up its influence and military presence in the Middle East. It is also putting huge resources into the periphery countries of the Russian Heartland of Eurasia. Why? Oil is a large part of the answer. But oil seen in geopolitical terms. The ultimate high-stakes game being played out by the U.S. at this time is to render permanently impotent the Eurasian land power, Russia, to control its access to the seas and to China—just as Mackinder argued. The push for a U.S. "nuclear primacy" over Russia is the factor in world politics today, which has the most potential for bringing the world into a World War III, a nuclear conflagration by miscalculation.

The basic argument of the Mackinder’s geopolitics is still relevant: "The great geographical realities remain: land power versus sea power, heartland versus rimland, centre versus periphery..." This Russia understands every bit as much as Washington.

F. William Engdahl is author of the book, "A Century of War: Anglo-American Oil Politics and the New World Order," (See ad page 21). He has completed a soon-to-be published book, "Seeds of Destruction: The Hidden Political Agenda Behind GMO." He may be contacted through his website, www.engdahl.oilgeopolitics.net.