U.S. analyst chides Russia over Latvian oil policy

  • 2003-05-08

Russia's de facto oil embargo of Latvia in January was done to punish the Baltic state for its NATO bid and its staunch support of U.S. policies in Iraq and is part of an attempt to control Latvia's energy infrastructure, according to an opinion piece published in The Washington Times on May 5.

The author of the article, Ariel Cohen, research fellow in Russian and Eurasian studies at the Heritage Foundation, stated that "the policy of the Russian state-owned oil pipeline monopoly Transneft, in shutting down shipments through the Latvian oil terminal at Ventspils, directly contradicted what Presidents George W. Bush and his Russian counterpart Vladimir Putin agreed upon last fall: a U.S.-Russian energy partnership."

He added, "Under this policy, Russia was to open the spigot and increase sales on the world market. In today's environment of high oil prices this would be a win-win situation: Russia would thrive on the windfall energy revenues, while the world would get additional oil."

Cohen wrote that the Russian pipeline system has thus become a bottleneck. "Russia can deliver only one-half of the 8.6 million barrels a day it currently pumps to the global market. Private oil companies, which produce most of its oil, are forced to sell to the domestic market at $6 a barrel, losing revenue."

"Russian oil companies need Ventspils to keep the supply up. The port is open all year round, unlike other Baltic ports, which freeze during the winter. Ventspils boasts modern oil transit facilities and can handle 10 percent to 13 percent of Russia's oil exports," wrote the paper.

Despite this fact, Transneft halved supplies in 2002 and cut them altogether for 2003, while no demands put to Vice President Mikhail Kasyanov by top oil companies have managed to improve the situation.

"Many in the Russian elite are economic nationalists. They feel uncomfortable with Russia's growing integration into the global marketplace - a policy President Putin has repeatedly proclaimed. Some Moscow observers believe Mr. Kasyanov, who is closely connected with former President Boris Yeltsin's inner circle, is playing his own political game, trying to undermine Mr. Putin's policies," added The Washington Times, explaining why Latvia is being punished for its western policies.

"As Russia is still recovering after 10 years of postcommunist turmoil, its oil companies, flush with cash, are gobbling up refineries, gas station chains, natural gas distribution systems and other utilities from the Black Sea to the Baltic. Ukraine, Greece, Turkey, Bulgaria, Hungary and Poland - all have experienced Russian corporate takeovers. And as whole strategic economic sectors come under Russian ownership, geoeconomics morph into geopolitics," stated the commentary, adding that Latvia is no exception and the actions of Russia are reminiscent of the old expansionist days and bully tactics of czarist or Soviet Russia.