Russia, an energy superpower

The term “energy superpower” is traditionally defined as a state with the two following characteristics: first, its territory has large, proven reserves of at least one type of energy resource (that is, oil, natural gas, coal, uranium). The second characteristic is that said state is the largest exporter of at least one of the abovementioned resources. One could think this sounds completely logical, but only at first glance, since this definition omits the most important of all characteristics: an energy superpower cannot be a country that does not have a stable state sovereignty.

In the recent past, representatives of the first two characteristics were, for instance, Libya and Iraq. However, it is pretty clear that they do no longer find themselves in such a position. If the availability of energy resources is not supported by military potential, then the country inevitably loses its status of “energy superpower”; the only thing there is to wonder is when this is to occur. The highest stage in the development of military potential is the presence of a nuclear weapons complex and modern means of delivering nuclear weapons anywhere across the globe. There are five known nuclear weapon states: Russia, the USA, the UK, France and China, although three of these states are not exporters, but importers of energy resources. Further reasoning leads us to the only logical conclusion: there is exactly one and only one already established energy superpower on our planet, and a second one that makes all the efforts it possibly could in order to stand on the same ground. It is about Russia and the USA. Ever since the start of the shale revolution, the States have managed to become exporters of both oil and gas and are now traditionally found in the “top 10” coal exporters. However, hydrocarbon exports are not “clean”; the United States remain major importers of oil, and in the not-so-distant year of 2018, we all got to witness that because of weather anomalies and quirks of their own legislation, the States were forced to import liquefied natural gas produced in Russia. In addition, over the course of 2019 alone, US coal exports collapsed by 20% and there have been no promising signs of recovery in these volumes in the coming years.

Vladimir Putin and the concept of “Russia being an energy superpower”

The concept of Russia being an energy superpower was first talked about somewhere at the turn of 2005 and 2006, and actually many western analytics attribute the formulation of this concept to Vladimir Putin while referring to the fact that he is indeed the one who expressed this idea during his speech at the Security Council of Russia on December 22nd, 2005. However, later on, the Russian president repeatedly insisted that nothing such was ever part of his speech. It is not difficult to tell who’s being truthful and who’s falsifying: the Security Council has kept a careful record of all its public meetings, including the opening speech of the president himself.

Here’s a quote from this primary source:

“Nowadays, energy is a major driving force of economic progress. It has always been and will remain so for a long time: a stable energy supply is one of the conditions for international stability as a whole. At the same time, our country has some competitive advantages, both natural and technological to occupy more significant positions in the global energy market. The well-being of Russia in the present and in the future directly depends on what place we take in the global energy context.

An application for leadership in the global energy sector is an ambitious task. In order to deal with it, it is not sufficient to just increase volumes of production and export of energy resources. Russia ought to become the initiator, the trend-setter in energy innovations, new technologies, in the search for modern forms of resource saving. I am convinced that our country, its fuel and energy facility and domestic science are ready to accept this challenge. ”

As you can see, there is indeed no words such as “Russia ought to become an energy superpower” in this speech, as the talk was only about world energy leadership. One could wonder why were western analysts and Russian russophobes so alarmed? Already back in 2005 no one argued with the facts: Russia has the largest reserves of natural gas on the planet, is on the second place in terms of proved coal reserves, proved oil production, as well as the third place in proved uranium reserves. Russia is also doing pretty well when it comes to nuclear weapons, since after the USSR reached global parity with the United States, the country managed not to lose this potential and ensured that all nuclear weapons which happened to be on the territory of post-soviet stated after 1991 were returned to Russia. All of these things however were already a fait accompli and most of Russia’s faithful foes got alarmed over one single phrase of Putin’s:

“Russia ought to become the initiator, the trend-setter in energy innovations, new technologies.”

It was right about that time (towards the end of 2005) that Russia actually clearly demonstrated that it did not intend to follow the canons of the liberal doctrine of the economy. The unbridled crushing of the fuel and energy complex (FEC) had changed course towards a sharp increase of the state’s control over it. On May 16th, 2005, the Meshchansky District Court sentenced Mikhail Khodorkovsky and the control over Yukos passed to Rosneft. Also in 2005, Gazprom acquired a controlling stake in Sibneft (a company that is now known under the name “Gazprom Neft”). In early 2006, Gazprom became the main shareholder of the Sakhalin-2 project, though the events that lead to this event took place in 2005. The state got oil and gas back under its wing. In his speech at a meeting of the Security Council, Putin repeatedly emphasized the role and importance of nuclear energy. It is therefore not surprising that western observers found some hidden subtext about the “ghost of the USSR” the Russian president’s speech, which represents Russia’s desire to initiate innovative development of energy technologies on a national level. The USSR has already demonstrated when developing nuclear and missile projects what happens when the state gets deeply involved in the development of technology. It ended up catching up with the west, and even overtaking it, no matter what the difficulties were. Even though the hidden allusion to the possibility of Russia making this “move” once again did not cause any alarm in the FEC, it did quite a poor job at concealing the fear rising in the United States and Europe. Nuclear weapons, huge reserves of energy resources and, simultaneously, a breakthrough in the development of the latest technologies in the fuel and energy complex while restoring state control over it: this is the kind of Russia no one in the west was comfortable with.

Vladislav Surkov’s formula

By no means did the wariness of the west become the problem that prevented the implementation of the plan that was outlined by Putin on Energy Day in 2005. The Russian government (more particularly its economic wind) frankly wasn’t prepared for the course of events that took place: Putin’s idea was emasculated by Vladislav Surkov, then Deputy Head of the Office of the President and Assistant to the President.

Here is a quote taken from his speech given to the audience of the Center for Party Education and Training “United Russia” on March 9, 2006:

“The FEC should remain mainly Russian and we should strive to participate in the global energy market as part of new multinational corporations. The economic future does not lie in the confrontation of great nations, but in their cooperation. The task is not about becoming a large raw material appendage, but to develop our capabilities by maximizing and making use of them in order to bring them to a new, qualitative level. First, we must learn how to extract oil and gas in more modern ways. It is no secret that we have no clue how to do that, and that we don’t know how to extract oil offshore, nor is it a secret that there are, in my opinion, no oil refineries that meet modern requirements when it comes to oil products. If we, through good cooperation with western countries, get access to new technologies, even not the latest ones, then, by developing our education system (as we, in general, are not stupid people), we will be able to reach these very high technologies.”

It is precisely these “postulates of Surkov’s” that the audience made of senior officials and Russian oil and gas companies tried to implement over the course of the next eight years, “through good cooperation with western countries”. It is only in 2014, after the Ukrainian events and the beginning of discriminatory measures against Russia coming from Europe and the United States that the Russian government was able to understand what “good cooperation” was in the understanding of western countries, as well as what results were achieved by relying on it. Just as Russia didn’t have its own technologies for producing hydrocarbons on shelf and at sea, it still doesn’t have them to this day. The same goes for technologies for large-scale liquefication of gas: Russia didn’t have them back then and still doesn’t have them now. Russian power engineering enterprises could not and still can’t produce gas turbines with a large capacity, so the problems remains unsolved. The list goes on and on, since it is only in 2014 that the word “import substitution” made its appearance in the Russian language.

The Rosatom phenomenon

However, there were no representatives of the Russian nuclear industry at Surkov’s lecture. Not only did Rosatom remain in the government’s ownership, it also got Atommash and ZiO-Podolsk under its control. It bought out Petrozavodskmash, built vertically integrated divisions for uranium mining, processing and nuclear fuel fabrication, returned design bureaus and research institutes, restored the training system as much as possible not only through its core universities, but also through the creation of a whole network of training and production centers in all its closed cities. If Russia, as a country, ranks third in the world in terms of uranium reserves, then Rosatom is the first company in the world in this same category, since it managed to acquire ownership over shares of mining projects in Kazakhstan, bought deposits in Tanzania and in the United States. Rosatom occupies a two-thirds niche in the world market of reactor engineering, and under construction nuclear-powered ice breakers are thus armed with the latest generation of reactor units. In 2019, “Akademik Lomonosov” (the first floating nuclear power station in the world) started operating in the energy system of the northernmost city in the world, Pevek. Designers are currently completing the development of projects for ground-based deployment of reactors that have been installed on new icebreakers, which will give Rosatom a significant head start in the low-power NPP sector as well, whilst on their competitors’ side, such projects are still undergoing an early development phase.

In summary, these are the results: the state-owned company Rosatom, having implemented what has been suggested by Putin rather than Surkov, has become the leader of the world nuclear project. State-owned companies Gazprom and Rosneft, having implemented what was suggested by Surkov, are still fighting for a place in the sun, with its plans constantly swept away by surges in world hydrocarbon prices. In the coal field, Russia does not have a single company with state participation in it. Also, due to the unsuccessful price conditions in 2019, there has been a decrease in production volumes, bankruptcy of several mines and opencasts, delays in salaries and a decrease in previously planned investment volumes. Russia, who was once a pioneer in the development of wind energy and whose potential in the Arctic zone is described as “endless” by experts from all over the world, is taking its first steps to rebuild the national science and technology school. The Ministry of Education is only thinking about the possibility of creating a system that would train relevant specialists. This situation can hardly be described as an optimistic one, but one can think about and perhaps recall the beautiful soviet film “Aibolit-66” and the famous line of Barmaley: “It’s actually good that we feel so bad!”. The sanctions imposed on Russia actually helped government officials, deputies of the State Duma and the Federation Council to understand with painful clarity what does “good cooperation with western countries” actually mean for the western countries themselves, and how unpromising are the prospects for further liberal postulates in the fuel and energy complex.

Coordination of efforts and cooperation of FEC companies: the basis for the implementation of national projects

Russia’s armed forces guarantee its state sovereignty, whereas energy reserves in the country’s bowels and the experience gained by Rosatom are what make it possible to implement this concept at a modern level. Gazprom, Gazprom Neft and Rosneft do not have the right to compete against one other in the struggle for hydrocarbon deposits, and the development of new technologies should be done in close cooperation between the state-owned companies. There already are living proofs that this is possible: Rosneft is building the largest Zvezda shipbuilding complex near Vladivostok, on which tankers will be built both for Gazprom and NOVATEK, and on which it is planned to lay the latest nuclear-powered icebreaker of the Leader category for Atomflot, an icebreaker that is to be built in order to ensure the implementation of projects of Russian oil and gas companies in the Arctic.

The new meanings behind the concept of an energy superpower

Russia has two national superpojects: the development of the Far East and the Arctic zone. However, their implementation without innovative energy projects and without a qualitative new level of fuel and energy management. No investors, even those who are the most favorably disposed towards Russia, will ever set foot in a region where before building industrial plants, they will have to solve the problems of the designing and building of thermal power plants. In the 21st century, it is embarrassing to keep on ensuring the viability of ports and settlements in the Arctic by northern delivery; this was only permissible in the first decades of the Soviet Union. As an example, let’s recall what the delivery of diesel fuel and coal to remote villages and uluses of Yakutia looks like: Nuclear-powered icebreakers first bring caravans of cargo ships to Yakutsk, then river boats, and deliver the cargo to villages located on the bank of the Lena river. And that’s all, as there are no routes in the summer. Power engineers are waiting for frost, snow and polar nights since these conditions make it possible to lay winter roads.

In the energy sector of the Arctic, just as there weren’t, still are no “effective private owners”. There are no opportunities to recoup investments in a few years time. Artic energy belongs to a state-owned company named RusHydro, which has already built 19 combined solar plants under these conditions. Solar panels are combined with diesel generators: when there is sunlight, we use it; when there is none, the diesel engine turns on automatically to ensure the comfort of consumers. Every kilowatt-hour that gets “caught” by the solar panels is the opportunity to bring one less barrel of diesel fuel. In the winter season of 2018/2019, a combined wind farm operated well in Tiksi at -40°C and under fierce arctic winds. The project of this engineering feat was developed in Russia, but the equipment was produced in Japan, since there are no Russian companies that could pull out an order of such complexity.

In the summer of 2020, the Akademik Lemonosov floating nuclear power station will be connected to Pevek’s heating networks, which will allow the retirement of the local Chaunskaya thermal power station that was commissioned in 1944. Also in summer 2020, a new thermal power station in Sovetskaya Gavan should begin working in order to replace the Mayskaya condensation electric power plant which by some mysterious means still manages to provide heat and light even though it was built back in 1938.

Russia is obliged to be an energy superpower so that the country can master itself and complete projects that are already hundreds of years old. Russian ancestors tamed the Arctic under the reigns of kings and emperors, during the Time of Troubles, through all conceivable wars and revolutions, under feudalism, capitalism and socialism. It was in 1910 that Captain Alexander Kolchak, former member of the Northern Sea Route Commission, commanded the icebreaker “Vaigach” and participated in an expedition led by Boris Vilkitsky. In 1914/1915, this expedition was able to navigate on the NSR highway for the first time ever. The part Peter Wrangel played in the history of Russia is still being disputed to this day, but there are no reasons to argue about the contribution Ferdinand Wrangel made to the study of the Arctic Ocean, an island located between the East Siberian and Chukchi Seas has even been named after him. Coming back to old development projects of the Far East and the Arctic at a new level of technological development is impossible without the implementation of the latest energy projects.

Energy supplies as part of a set of proposals

In order to strengthen its position on world markets, Russia has to expand the scope of its technological influence, which cannot be achieved if it remains only a gas and oil supplier because in this case there will be an endless competition with the United States since the latter will never abandon their attempts of becoming a second energy superpower using methods that are far from being the usual market ones. Russia would have a hard time competing with the USA in energy markets of Europe and Southeast Asia, since it has one main disadvantage: the dollar remains the main trading currency in the whole world since no one is planning on dissolving the NATO bloc. The States are crushing Russia in the LNG market and price wars have already begun (which is not unusual for producers of one same product). However, only 42 countries import LNG, and there are at least thrice as much countries on the planet.

Rosatom wins over the reactor building market because it makes complete offers to its potential customers, such as the design of nuclear power units of the “3+” generation that meet all post-Fukushima safety requirements, their construction and the provision of all equipment, nuclear fuel supplies and reprocessing of radiated fuel, training of professionals in Russian universities, as well as industrial complexes that are included in the “package” for the construction of nuclear power plants, the development and implementation of schemes for the withdrawal of electricity from nuclear power plants into the power supply system of the customer country.

This means that Russian gas companies also have to learn how to develop and implement such comprehensive proposals, from coastal regasification terminals to the construction of power plants, both grounded and floating, since the world is full of island states that simply don’t have free land. There also is to be found a compromise on how developing countries could possibly pay the compagnies, which is not impossible since Tatneft is considering signing a contract for the supply of petroleum products to African countries. Also, a third party, Russian diamond mining company Alrosa is involved in the contract. If there’s no cash, then the payment can be made with diamonds. This is the only example so far, but it is a way of proceeding, since bowels of developing countries contain extremely demanded minerals. We shall note that Tatneft and Alrosa are state-owned, and it is thus one more proof that the theories of liberal economy enthusiasts rarely work out in real life.

If the customer countries are more in need of raw materials for their chemical industry rather than gas as an energy resource, then Russian companies will have to offer such options, however while avoiding working on other countries’ technologies. Same thing applies to the oil industry: black gold should not be the only product offered by oil companies, there shall also be projects of oil refineries and petrochemical plants. If coal prices are falling and export plans of Russian coal companies are on the verge of failure, it’s for the exact same reason: coal miners are not able of making a comprehensive proposal and cannot offer their customers coals as anything other than an energy resource. However, such work can only be taken on by the state, its leadership and coordination; it is useless to wait for private owners to make this move.

Electricity: the final product of energy processing

As an energy superpower, Russia is a country that exports not only energy resources but also final products of its processing, that is, electricity. Export of electricity from Russia is also a monopoly of the state-owned company Inter RAO. So far, the volume of these exports has not been particularly large: some bits here and there in China, Finland and some Baltic countries through the BRELL (Belarus, Russia, Estonia, Latvia, Lithuania) energy ring. However, this is far from being enough. So far, it hasn’t been possible to agree with China on the increase of the volume of supplies because of price disputes, and also because Russia does not have any additional energy capacities along the Amur River. Projects for hydroelectric plants on the banks of the Amur River are gathering dust, and the Yerkovetsky coal deposit keeps on passing from hand to hand, that same coal deposit where, back under the Medvedev administration, the government had tried to implement a large thermal power plant project.

The feasibility study of two energy bridges is approaching its final stage. These bridges are to be settled as follows: Russia – Azerbaijan – Iran and Russia – Georgia – Armenia. Are they to be built using Russian technologies? The answer to this question depends on the prospect of expanding cooperation with Iran, the country that ranks second in terms of natural gas reserves, as well as the one that the United States have designated as their strategic adversary in the updated version of the National Security Strategy, alongside with Russia and China. It is not about going back to times of “international friendship”, even though such a verdict from the USA is a good basis for a rapprochement of positions in the energy sector. Iran has been intermittently under western sanctions for three decades now, and these sanctions are even more severe than the ones applied to Russia. However, Iran already has its own, operating offshore drilling platforms. Its chemical industry is developing steadily, also being based on its own technologies. Iran has adopted quite a surprising method for resisting western pressure for the past decades: in 2021, the 6th five-year period of economic development in this country will come to an end. Iran is a capitalist state in which the public sector in the economy barely reaches 50%, and yet it has five-year plans. This experience is to be studied and analyzed carefully, since it will sure come in handy.

A comprehensive development plan or a market economy?

Every single one of the components that make Russia an energy superpower requires strengthening of energy engineering, an increase in steel production, an expansion of existing capacities as well as the construction of new ones. But the technical equipment of these factories cannot keep on being based on imported technologies, otherwise there will remain a risk of falling under the next batch of elaborate sanctions. Russia as an energy superpower is a long game, but it has no other choice. Should it keep fighting on the markets of developing countries? Although an absorbing occupation, though quite tough considering the aggressive tendencies of all competitors: personal and sectoral sanctions, blocking of monetary settlements, bribing politicians and executives of large companies, etc. Pure market competition only exists in economics books; here, on planet Earth, things tend to be much more brutal. This means that there is a need to create new markets which will give “third-world” countries the chance to become “developing” countries again.

Russia, being the birthplace of the GOELRO plan, should be able to assist in the design and creation of integrated energy systems, which is the only possible basis for the development of energy-intensive industries. Russia must also have the potential to give customer countries a chance to develop, not only through the supply of energy resources and technologies for their storage, transportation and processing, but also (and without any kind of restriction) by training staff in Russian scientific, design and engineering schools. The Moscow Engineering Physics Institute, the St. Petersburg and Tomsk Polytechnic Universities, which train students coming from countries where Rosatom is building nuclear power plants and make a contribution to expanding Russia’s sphere of influence no lesser than the Moscow State Institute of International Relations which trains Russian diplomats.

The implementation of the concept of “Russia being an energy superpower” is not something that’s particularly “narrowly specialized”. In fact, it’s a comprehensive project that requires the development of science and technology in various fields. Any potential customer from Africa, Asia or South America will naturally doubt whether it’s worth signing a contract on LNG supplies and the construction of a power plant. In this case, it is necessary to be able to pull out of the sleeve, let’s say, a contract that incorporates a desalination plant for sea water. Although it has nothing to do with energy, it can turn out to be extremely popular with countries located on the coastline without any significant source of fresh water. Power station projects, even though they are quite liked and do not represent any burden for the environment, do not seem to have any particularly loyal customers. Therefore, Russian geologists must help find mineral deposits and energy companies should be able to immediately “roll out” mining and processing projects.

The double challenge Russia is facing

The implementation of this concept requires a whole different level of governing, as it implies the re-development of “the art of designing and implementing integrated development plans”. The education system, the restoration and development of the Soviet geological school, power engineering, non-ferrous metallurgy and shipbuilding, the cooperation of all state-owned energy companies, the restoration and development of instrumentation and machine tools, programming, inclusive digitalization, such are the many components that need to be developed in coordination, by strengthening and expanding each other’s capabilities. There are no trifles, every small detail counts, including the restoration of the journalism field and the restructuring of the work of federal media. This is a huge challenge for Russia, but not the only one: the creation of a fourth economy and the development of industries that simply did not exist in the country before. Additive technologies, biotechnologies, hydrogen energy, composite materials, high-temperature superconducting technologies; all these are a living proof that science does not stand still, and the country must thus learn how to find itself at the right place, at the right time, but also become a pioneer and a leader in the newest industries.

In order to make the concept of an energy superpower fully come true, Russia needs steelworkers and miners, chemical technologists, sailors who are not afraid of the challenges of the Northern Sea Route, railway workers and stevedores, designers and engineers. All these specializations must become prestigious and inspiring again to the Russian youth. Therefore here lies the double challenge Russia is facing: to reindustrialize with its own new technologies and to simultaneously implement a new industrial revolution. This challenge is a very, very difficult one. But there is no other way out: from the very moment the States updated their National Security Strategy, the world has already begun quite openly its second Cold War. For Russia, this double challenge is to be accepted, otherwise “good cooperation with Western countries” will end with the transformation of Russia not into an energy superpower, but into a raw materials appendage for these very Western countries.

Translated by Ellina Hensen
Original text: geoenergetics.ru

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