Download Ten theses on the transformation of the Global Energy System

Finnish Centre of Excellence on
Russian Studies
Ten theses on the transformation of the
Global Energy System, Climate Issues
and Expectations for Russia
Valdai Discussion Group, IX Annual Meeting
Scenarios for Russia’s Economic Development
October 21-26, 2012, St. Petersburg –Moscow
PAMI AALTO
Jean Monnet Professor/Director, Jean Monnet Centre
of Excellence on European Politics and EuropeanRussian Relations, School of Management
University of Tampere <[email protected]>
1. Russian fossil fuel resources are not the
problem for maintaining energy rents,
instead the rules by which resources are
converted to income are
2. Russian gas and oil producers face very different, and diversifying policy
environments in the European, CIS and Asian markets. These are defined by
different 1) market rules; 2) institutional rules; and 3) ecological rules. The
problem is increasingly to identify and follow the ’
right’rules in each context.
Global outlook: what to
make of the rules?
Russian federal, regional and corporate
actors vs. European, CIS, Asian
markets
3. Russian actors have to navigate in a policy
environment with several co-existing structures
4. In deciding which
rules to follow in each
policy environment,
Russian actors (as any
actors) are bound to act
sub-optimally
Financial rules
Institutional rules
Ecological rules
-Markets
-Competition
-Investment
-Mechanisms
of currency
fluctuations
-Informal/formal ‘
rules
of the game’
-Bureaucratic politics
-Energy Diplomacy
-Agreements
-Popular attitudes
and international
cultures of interaction
-Environmental side-effects of
energy production, transport and
use
-Climate change
-Pressures for lessening energy
consumption or use of
renewable sources
-Criticism of established financial
and institutional rules of energy
policy
EU –Russia
Russian actors: federal; European
regions; energy and transport companies,
environmental NGOs vs. other actors
6. Russian actors must
develop more diversified
strategies in a
5. Russian actors encounter a converging, more ‘
agile’ differentiating, yet
EU market with flexible price formation mechanisms
converging, competitive
market!
Financial Rules
Institutional rules
Ecological rules
-Converging markets
-Competition with
LNG spot prices
-Unconventional gas
from 2020-2030s
onwards, slow move
away from oil
-Capital still
reasonably well
available
-High-trust supply
relations vs. diversification
policies away from Russia
-Vertically integrated
dominant companies
under pressure from EU
law & courts
-Politically conditioned
market entry, optimum
degree of Russian state
involvement
-Pressure for
developing
renewables
-energy efficiency to
re-emerge after
economic recovery
-Increasing nuclear
energy scepticism
-If no emissions trade,
then carbon tax?
Japan –Russia
Russian actors: federal; east Siberian;
energy companies, environmental
NGOs vs. japanese actors
7. Russian actors face a potentially
expanding (gas) market after Fukushima
8. Prioritise gas for
Japan, nuclear
energy for Siberia?
Financial rules
Institutional rules
Ecological rules
-Expanding market
after Fukushima
-Competition to
substitute Persian
Gulf, East Asian
supplies
-Gasification of
eastern Siberia vs.
exports?
-Investment is key & is
available
-Remaining Cold War era
tensions, territorial disputes
latent threat
-Very few & weak international
institutions like in post-WWII
Europe! High ‘
transaction costs’
-Bilateral diplomacy vs.
economic rationale for
multilateralism
-Nuclear energy passe
-Not much competition
for fossil fuels
-Ecology of sea area
China –Russia
Russian actors: federal; east Siberian;
energy companies, environmental
NGOs vs. Chinese actors
9. Apart from oil, Russian actors’long wait for
proper market entry?
10. Real need for
developing East
Siberian oil to supply
more proximate
resources to China
more economically?
Financial rules
Institutional rules
Ecological rules
-Russian oil diversifies
Chinese Gulf supplies
-Gas not competitive
with Chinese coal
-China’
s growing, hardto-access energy
market vs. mature
Korea, re-expanding
Japan?
-Investment available
-Territorial disputes
settled, stable setting as
long as China is stable!
-Familiar ‘
great power vs.
great power’setting: is it
really easier to manage
than the EU front?
-Strategic partnership
with China ‘
emptier’than
the one with the EU
-Competition with emerging
renewable production &
industry
-Vast scope for energy
efficiency: when ‘
fixed’
,
implications for energy
trade?
-Relatively little pressures,
as of yet, on climate issues
Observations
For more, see P.
Aalto (ed.) Russia’
s
Energy Policies:
National,
Interregional and
Global Levels
(Edward Elgar 2012)
1. Resources not the problem, but identifying and following the set of right
rules in each case are, in order to maximise prospects of success in an area
where outcomes/energy deals are typically sub-optimal
2. Some energy challenges are global, many are not: Russian companies will
have to develop their geographically differentiated strategies even further;
they will also need to start studying those contexts more in-depth?
3. Especially important to find a more flexible pricing formula in gas for Europe
4. Consider more of a role for smaller independent companies in European
trade to ’
fit’better into the competitive ‘
anti-trust’EU market and ward off
political suspicions? ’
Information war’is key!
5. Investment potential is not a major problem in the energy sector in any
major geographical direction, if promising projects are created, but
strengthening a predictable and transparent investment climate is key
6. No way round the ’
institutions/political economy’problem: in Europe, ‘
too
many’intergovermental & supranational institutions, according to some,
while in Asia, too few for effective business?
• where you could expand on the way the
global energy landscape is changing in the face of
political, social,
technological and climate disruptions and how it will
affect the
industry and the Russian energy industry in particular.
Needless to
say that the energy rent has been incremental for the
Russian economy
over the past decade thus the forecast for the industry
becomes an
important factor for the economic development and
policies.