MOSCOW:The titans of Russia's energy industry gathered around an enormous mapshowing the route of a proposed new pipeline in Siberia. It would costbillions and had been years in the planning. After listening to theirpresentation, President Vladimir Putin frowned, got up from his chair,whipped out a felt pen and redrew the map right in front of theembarrassed executives, who quickly agreed that he was right.
The performance, which was carried on state television in 2006, wasobviously stage managed, but there was nothing artificial about itspoint. It was a typical performance for a leader who has shown anuncanny mastery of the economics, politics and even technical detailsof the energy business that goes well beyond a politician taking aninterest in an important national industry.
"I would describe it as very much his personal project," saidClifford Gaddy, a senior fellow at the Brookings Institution inWashington and an expert in Russia's energy policy. "It is the heart ofwhat he has done from the very beginning."
Indeed, from his earliest days in power in 2000, Putin, who left thepresidency in 2008 and became prime minister, decided natural resourceexports and energy in particular would not only finance the country'seconomic rebirth but also help restore Russia's lost greatness afterthe collapse of the Soviet Union.
Just this month, Putin's personal immersion in the topic was on fulldisplay as he ordered natural gas shut off to Ukraine, in the processcutting supplies to Europe. It was portrayed by the Kremlin as aprotracted commercial dispute with Ukraine. But the hundreds ofthousands of shivering gas customers in the Balkans and Eastern Europesent an unmistakable message about the Continent's reliance on Russiansupplies and Putin's willingness to wield energy as a politicalweapon.
When talking about energy, he often rattles off obscure statisticsnot often heard outside a Houston boardroom, like average dailyproduction of fields and throughput capacity of pipelines.
Putin "clearly knows as much about BP's business in Russia as I do,"Anthony Hayward, BP's chief executive, once said after a meeting withhim.
In fact, the standoff in Ukraine was just one part of a far largerRussian playbook on natural gas policy under Putin. In the past year,Russia has formed a cartel-like group with Middle Eastern nations withthe goal of dampening global competition in natural gas, sewn upsources of supply in Central Asia and North Africa with long-termcontracts to thwart competitors and used its military to occupy animportant pipeline route in Georgia.
And this broader struggle extends over a dozen countries fromAzerbaijan to Austria. In its sprawl and slow pace, it is oftencompared to the 19th-century struggle for colonial possession inCentral Asia known as the Great Game. In the modern variant, Putin, amaster strategist, has proved far more effective than his Europeancounterparts.
"He has been thinking for some time, 'What are the means and toolsat Russia's disposal, to make Russia great?' " said Lilia Shevtsova, aresearcher at the Carnegie Moscow Center. In the post-Soviet world, shesaid, Mr. Putin concluded that "military power would no longer besufficient."
A spokesman for Putin, Dmitri Peskov, said that the energy market"was, is and will remain a strategic sphere for Russia" and thatgovernment leaders in Moscow should be versed in the topic. Peskovdenied the Kremlin used exports for political purposes. Of Putin's deeppersonal knowledge of the business, he said the prime minister showed asimilar attention to detail in other matters, too.
In this contest, Russia's overarching goal is to prevent the Westfrom breaking a monopoly on natural gas pipelines from Asia to Europe.Boris Nemtsov, a former Russian first deputy prime minister who is nowin the opposition, said: "It is the typical behavior 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 totake steps to diversify the Continent's sources of gas to end itsreliance 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 MirekTopolanek of the Czech Republic called for a renewed effort to buildthe long-delayed Nabucco pipeline to bring Central Asian gas to Europewithout 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, Putin isequally adamant about extending it.
The Nabucco pipeline was proposed in 2002 by executives fromEuropean energy companies with the express intent of undercuttingRussia's gas monopoly. It would pass through Turkey and Georgia to theCaspian Sea.
Under the best of circumstances, building an international pipelineis an intricate and arduous process, technically, financially andpolitically. However, Nabucco's planners rapidly discovered that theirbiggest obstacle was not a mountain chain or a corrupt localpolitician, but Putin himself. When OMV, the Austrian energy company,formally created a consortium for Nabucco in 2005, he responded with acompeting idea: a pipeline called South Stream that would terminate atthe same gas storage site in Austria, but originate in Russia andbypass Ukraine by traveling 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 bothan assured source of supply and a market for the gas it transports. TheSouth Stream pipeline would flood the gas market in southeasternEurope, locking up the customers the bankers behind Nabucco werecounting on to finance the project.
At the same time it would undermine Ukraine's domination of gaslines headed west, one of the biggest obstacles to Russian dominationof the European gas market.
But Putin did not stop there. Leaving nothing to chance, he alsotook steps to choke off potential sources of upstream gas supplies deepin Central Asia.
The race to secure these rich sources of natural gas unexpectedlyaccelerated in 2006 with the death of the eccentric and isolationistdictator of Turkmenistan, Saparmurat Niyazov. While energy executivesaround the world rushed to Ashgabat, the Turkmen capital, to meet thenew leader, Gurbanguly Berdymukhammedov, a former dentist, Putin wasthe first to cut a big deal.
Smiling and holding shovels at a televised ceremony to mark thestart of construction, Putin and Berdymukhammedov agreed in 2007 tobuild a pipeline north, to Russia, depriving Nabucco of potentialsupply. It was not until 2008 that European Union officials got toAshgabat with a memorandum of understanding for a trans-Caspianpipeline that could link to Nabucco. It has yet to be acted upon.
Farther west, it was the same story.
In February 2008, Putin signed an agreement with Bulgaria over theobjections of the United States and in spite of Bulgaria's status as anew NATO member making it a partner in the South Stream pipeline.
And in April 2008, Putin was in Athens, cutting a deal for a spur ofSouth Stream. In this flurry of diplomacy he again beat his Westernopponents. The United States State Department's point man on Eurasianpipelines, Matthew Bryza, in Athens the next day, could only rue thesigned deal. Bryza was left explaining to the Greeks: "If you have onlyone supplier of feta, you're in a vulnerable position. The same forgas."
The West still had an important pipeline partner in Georgia, acritical geographical link. But that all but evaporated in the briefwar last summer.
By 2007, a pipeline section had been laid across Georgia, theBaku-Erzurum pipeline, which is now used for local distribution butwill become a part of the Nabucco pipeline, if it is ever built. Thisbrought the struggle for Nabucco to a pivotal stage, for it was nowplaying out along a storied trade route in the petroleum business, andone highly sensitive to the Russians.
In the 19th century the Rothschild banking family and the Nobelbrothers of Sweden had built a railroad and pipeline across Georgia tosell Baku oil, undercutting the near monopoly in the business, StandardOil of the United States, which was supplying Europe with keroseneproduced in America.
After the breakup of the Soviet Union, the revival of thispre-Bolshevik energy corridor became a major foreign policy goal of theUnited States, intended to strengthen the economic independence offormer Soviet states and diversify world oil supplies away from theMiddle East. At a narrow point, the pipeline route passes just south ofthe Russian-controlled enclave of South Ossetia and north of anotherRussian ally, Armenia.
The August war sent a chill through boardrooms in the West when, forexample, Russian tanks scurried back and forth over one of the buriedpipelines and one crew occupied a pumping station. Russia, said SvanteCornell, a specialist on Central Asia and the Caucasus at the Schoolfor Advanced International Studies at Johns Hopkins University, sent asimple message: "We can blow this up at any time."
While his track record is very strong, Putin is not infallible. Lastsummer he made a rare mistake by locking in long-term contracts forCentral Asian gas at close to the height of the market $340 for 1,000cubic meters in 2009. While Putin achieved his goal of deprivingNabucco of more potential sources, Russia is now selling that gas in adown market to Ukraine for an average of less than $240 per 1,000 cubicmeters one possible reason, energy experts have said, that Putintried to force Ukraine to pay more for gas this winter.
Despite its best intentions, Europe is likely to remain dependent onRussian energy supplies for the foreseeable future and, perhaps,indefinitely if Putin has his way. And that reflects his long-heldbeliefs.
As far back as 1997, while serving as deputy mayor of St.Petersburg, Putin earned a graduate degree in economics, writing histhesis on the economics of natural resources.
Later, when scholars at the Brookings Institution analyzed the text,they found 16 pages had been copied without attribution from a 1978American business school textbook called "Strategic Planning andPolicy," by David I. Cleland and William R. King of the University ofPittsburgh. Putin has declined to comment on the allegation.
Tellingly, the passages they say were plagiarized relate to theindispensable role of a chief executive in planning within acorporation the need for one man to have strategic vision and control.
