THE 7th IISS ASIAN SECURITY SUMMIT
SHANGRI-LA DIALOGUE
Singapore
Sunday 1 June 2007
SECURING ENERGY IN THE ASIA-PACIFIC
Mikhail Margelov, Chairman of the Committee for International Affairs,
Federation Council, Russian Federation
As delivered - provisional transcript
Thank you very much for the opportunity to speak here. It is a great pleasure to again be in the great state of Singapore.
After the oil crisis of the 1970s, we were told many times that the progress of a new creative economy will drastically diminish our dependence on oil. Oil producers took these forecasts calmly, and they were right. The fact is that the ‘creative economy’ has limits of expansion. If everyone is involved in intellectual labour, such as working on patents, brands, and so on, how can we produce goods based on these patents without spending energy?
Against impressive technical progress, the world, as before, depends on oil even stronger than in the last 30 years of the 20th Century. The forecasts of the 1970s were compiled at the times when the annual oil consumption stood at six billion barrels per year. Today it has reached more than 30 billion barrels per year. People need means of transportation, irrespective of whether they are painting in oils or founding[?] energy consuming steel. Since the 1970s, the means of transportation have doubled. They devour half of the extracted oil. Furthermore, the creative economy itself, where it exists, consumes much oil. It is acknowledged that the production of one personal computer takes oil equal to its double weight.
The hopes on energy saving also did not work. According to some data, the production chain in the US consumes 20 times more energy than the products contain. This means that the energy efficiency of this chain is at only 5%. Still, energy saving policies have some space for manoeuvre. It is not yet clear whether an energy source to alter natural oil and gas will be found in the near future. There was a great deal of talk about ‘oil substitutes.’ When the oil crisis broke out in the 1970s, it was recalled that, during World War II, the tanks were run on the fuel extracted from coal. It was also said that cars can work on a blend of gasoline and methanol, and that, during World War I, cars ran on ethanol alcohol. Charts were compiled on comparative costs. Specialists tried to find out at which price levels alternative sources could substitute oil to extract engine fuel. Now the oil prices have exceeded such levels, yet gasoline and diesel fuel are still being produced from oil.
The share of alternative sources is negligible and does not stand for even 10% of fuel. Cars can run on ethanol-alcohol. Brazilian drivers have been using it for many years. However, it has been calculated that in order to cover only the US’s demand for motor oil, one should spare the world’s wheat crop. We want to believe that, in the future, the specialists will find an alternative to natural oil. Still the issues of energy securities are tied to natural oil and gas. It is true for the whole world and for the dynamic Asia Pacific region in particular.
Russia can make a solid contribution to this. Moreover, a successful energy policy is possible only if there is solidarity between the participants. No single country can pursue efficient energy policy. Another condition is the minimal politicisation of the energy market. Although today, energy is a considerable factor of policy itself. That is why the term ‘energy diplomacy’ has come into fashion. Both the producers and the consumers are arguing about the energy resources and means of their transportation.
The demand for energy is growing in the Asia Pacific region. For the last 20 years, the consumption here has grown 70%. Meanwhile, in the Asia Pacific region, approximately one billion people still have no access to electricity. The energy consumption per capita here is lower than in the rest of the world. If counted in oil, 750 kg of Asia Pacific stand against the world’s 1,070 kg. That is why, until the year 2030, the energy consumption in the Asia Pacific region can grow at an annual rate of almost 3%. Oil and natural gas prevail in this energy consumption, making 80% of it.
The diversification of the supply is considered to be the main measure of energy security. One should also add the coordination between the market participants, which means suppliers, transporters, and consumers. These issues of global energy security were discussed at the G8 Summit in St Petersburg in 2006. Diversification and coordination do not only bring the energy security issues out of national and regional borders, but give them the global dimension.
Russia can participate in the Asia Pacific by being both an alternative source of energy supply and an alternative transit route. It is known that Russia has ambitious to shift its hydrocarbons to the East. There are estimations that, in 10 years, the supplies to Asia can make 30% of Russia’s export. The pipeline from Eastern Siberia to the Pacific is under construction. There is also a project to stretch two natural gas pipelines to China, and here again towards the Pacific Ocean. Russia is ready to work not only on East-East, but also on the South-South and South-East directions. This means that Russia can participate in the construction of oil pipelines stretching from Iran to China through Pakistan and India. In other words, Russia can make an important contribution in establishing an Asia Pacific energy security network.
Russia has already adopted a programme of unified Eastern Siberia and the Far East gas supply system. This project is supposed to unite the western and eastern pipeline systems in Russia. It also means the access to the resources of the Yamal Peninsula and the Arctic Shelf. The establishing of chemical industries, based on natural gas, can boost the profitability of these projects. This is the field where the experience and investment from the Asia Pacific region can find implementation.
Russia’s urge towards the positions in the Asia Pacific region is only natural. There are processes of integration taking place all over the world: in Europe, in Eurasia, in North America, and in the Asia Pacific region. The EU, CIS, NAFTA and OPEC country members have half of the world’s territory and population, and stand for more than 85% of the world’s GDP. They are also consuming 77% of the world’s natural resources.
In the 1990s, Russia pursued a single side of the West-oriented policy. With time, it became clear that such policy contradicts the geopolitical and geo economic positions of Russia. After the disintegration of the Soviet Union, the centre of Russia has noticeably moved north-east. The East European states of the former Soviet bloc strive for the NATO and the EU memberships. In essence, geographically, Russia has gone down to the level of ‘European periphery.’ That is where Russia’s multi vector[?], as diplomats say, policy comes from. It is the idea of more or less equal attention to all neighbours and to all dimensions.
Recently, Russia’s interest towards cooperation – especially with the Asia Pacific countries – has been growing. Experts say that Russia can become an organic part of the region. She can become not only an oil and gas supplier, but a Western part of the Asia Pacific region’s trade zone. Through solid railroads which pass round unstable areas, the goods from the Asia Pacific can go directly through Russia to the East and West European markets. This, again, can contribute to the diversification of transportation. Diversification is a universal way of securing not only energy but all markets. Thank you.
