THE HIGH-STAKES GAME

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Britain is leading the West’s crusade against Russia

Why has Britain decided to escalate tension in relations with Russia? What kind of game is it playing? Prosaic as this may sound, it seems likely that the cause lies in economics; more specifically, the battle for access to natural resources.


On May 28, the Russian authorities received an official request for the extradition of Andrei Lugovoi to Britain. The British Crown Prosecution Service has accused him of murdering Alexander Litvinenko.

Given the obvious legal impossibility of demanding Lugovoi’s extradition, Britain could have expressed outrage over Russia’s failure to arrest him; it could have handed over the body of evidence and insisted on an open trial in Russia. This might also have led to a confrontation, but if Britain really wanted to solve the Litvinenko murder case, this would have been the natural and obvious course of action. Yet Britain made an entirely different choice, going beyond the framework of legal and diplomatic logic.

In effect, the British government stated openly that it had no intention of taking the Russian Constitution into account; it demanded openly that Russia should either breach or amend its Constitution, and threatened sanctions if Russia failed to do so.

Essentially, Britain’s demands amount to provoking a direct political conflict between our countries. Posing the question in this way simply denies Russia any opportunity to find a compromise. Britain insists on extradition; Russia cannot extradite him. Britain insists on amending the Constitution; Russia cannot do that (no self-respecting state can permit itself to amend its Constitution as a result of overt pressure from other countries – that much is obvious). And any appropriate response on Russia’s part will only escalate the situation further. So what is the point of this provocation? Why has Britain decided to escalate tension? What kind of game is it playing?

In Britain itself, such radical development of the current conflict is being interpreted in a variety of ways. All these explanations can be reduced to four basic theories.

First theory: this isn’t about politics – it’s a matter of principle: a British citizen was killed on British soil, there was a radiation threat to public safety, and the criminal must be punished.

Second theory: it’s all about self-promotion for the new prime minister and his cabinet, who are using this issue to assert themselves.

Third theory: this situation has come about because the new British cabinet is full of political amateurs – including Foreign Secretary David Miliband.

Fourth theory: the United States and Britain are playing a joint game against Russia. Proponents of this theory note that only a day before speaking out on the Litvinenko case, Miliband had declared that America is Britain’s leading strategic partner. This theory bears the greatest resemblance to conspiracy theory; it comes in numerous variations and interpretations, and all official commentators deny it; but it still doesn’t seem entirely improbable.

“The current conflict is a symptom of deteriorating relations, rather than the cause,” says Russia expert Margot Light, a professor at the London School of Economics. And the conflict’s intensity supports this idea. But if we’re dealing with a symptom – what is the real cause?

Prosaic as this may sound, it seems likely that the cause lies in economics; more specifically, the battle for access to natural resources.

North Sea fields have made Britain just about the only Western country capable of supplying almost all of its own hydrocarbon needs. By the mid-1990s, however, it became clear that oil and gas production from those fields had reached a plateau; output was no longer growing, or slightly declining. And the plateau could not be maintained for long; within 10-15 years of the mid-1990s, the decline in output was predicted to become rapid. In other words, by 2007-12 Britain would face the problem of ensuring that its energy needs were met.

Covering this gap between production and consumption is a priority task for British corporations and the British government. However, there aren’t too many regions of the world where British corporations can become owners of hydrocarbon fields (or license-holders): there’s Russia (and the rest of the former Soviet Union), Nigeria, Iraq, and Venezuela. Britain’s active participation in the Iraq war is largely explained by its desire for access to major hydrocarbon deposits (it’s no coincidence that the Americans have given the British control of Iraq’s leading oil-production zone); but the war in Iraq is still under way, as a partisan war – the most unpleasant form of warfare. That leaves Russia and the rest of the former Soviet Union.

British investors were the first to move into Russia in the early 1990s, well aware that the weakness of state institutions could be an indisputable advantage as well as a flaw. The British government’s support for its corporations (Shell, and especially BP) was impresssive. Lord Brown, who resigned as BP chairman this May, was known to have close contacts with Prime Minister Tony Blair. It’s worth noting that the details of how British companies moved into the post-Soviet market have been revealed in the British press recently. Les Abrahams, formerly of BP, told The Mail on Sunday how the British major, with support from Embassy staff, bribed Azeri leaders to secure concessions for Azerbaijan’s oil and gas fields. This involved briefcases full of cash in an impoverished country, bank cards with unlimited deposits, charter flights packed with prostitutes, and freedom to maneuver for MI6 agents who were behind the overthrow of pro-Moscow leader Ayaz Mutalibov, followed by Abulfaz Elchibei. Although Elchibei was willing to promise the Britons everything they wanted, he was unable to ensure security and stability for investments by stopping arbitrary decision-making; so they decided to back Heidar Aliyev. He gave British corporations most favored status in Azerbaijan. In the same period (1993-94), a decree issued by Boris Yeltsin gave Shell the rights to gas deposits on the Sakhalin Island shelf, under a Production Sharing Agreement (PSA) with unprecedented easy terms.

But Britain’s greatest breakthrough came in the Putin era, not the Yeltsin era. The TNK-BP project (as Lord Brown said, “a partnership born of conflict can be among the most enduring”) has been one of the most successful projects in BP’s history. TNK-BP, a Russian-British company, now accounts for a third of BP’s worldwide oil production and is the fifth-largest oil producer in Russia.

What’s more, the merger between the Tyumen Oil Company (TNK) and BP only became possible with Putin’s personal permission; it was signed during his official visit to London in early 2003 (the first such visit by a Russian head of state in 125 years), with the direct involvement of Tony Blair.

Soon after becoming president, Putin let it be understood that firs, the state is interested in concentrating its capital in the oil and gas sector; second, that development strategy decisions in this sector are the state’s exclusive prerogative; and third, that foreign investors in Russia – in oil and gas production, at least – must operate on standard Russian taxation terms (no more PSAs, concessions, or tax breaks). But Putin still gave permission for a British takeover of a Russian oil and gas company. At the time, many observers in Russia and the West perceived this as Putin weakening his stance and backing down on state domination in the oil and gas sector. Within a few months, they were proved wrong. The assault on YUKOS started in July 2003 (one of the causes was an attempt to sell a YUKOS stake to ExxonMobil and ChevronTexaco); it ended in the company’s destruction and maximal concentration of hydrocarbon assets in the hands of the state.

The operation that destroyed YUKOS sent a message to foreign investors who had moved into Russia in the turbulent 1990s: the rules of the game will be changed – revision of the Sakhalin-2 PSA and oil-field licenses could start as soon as the Russian authorities recover from the counter-punches of YUKOS owners and crush their resistance. In this context, the permitted merger of TNK and BP took on a different meaning entirely: Russia is allowing British corporations to produce oil in Russia, but in return it expects the green light for Russian corporations to take over companies in Britain. This policy stance – oil and gas in exchange for integration into the European business community (including access to companies working with end consumers) – was conclusively established in 2005, laying the foundations for the “energy superpower” concept.

But no reciprocal gesture in the form of a green light was forthcoming. On the contrary, the British elite – with the British government’s full support – proceeded to make it as difficult as possible for Russian companies to move into Britain, firmly blocking all attempts to acquire strategic assets.

In April 2006, it was reported that Gazprom was negotiating with Centrica, one of Britain’s largest gas distribution companies. Even the rumor of such a deal met with strong, consolidated resistance from the British elite, which launched a full-scale anti-Gazprom campaign.

It wasn’t clear how the negotiations ended, but in June 2007 the media reported rumors that Gazprom would either abandon the deal or was no longer interested in buying Centrica.

Once it became clear that Britain is not prepared to give Russia access to its strategic assets, Russia started making counter-moves – squeezing British companies out of Russia. In June 2007, after an intense battle, Shell was forced to cede control of the Sakhalin-2 project to Gazprom. A month later, BP (threatened with license cancellation) had to surrender control of the large Kovykta gas field. Thus, some major projects which could have expanded the oil and gas production resources of a partly British-owned company were lost. (TNK-BP is still operating in Russia; so is Salym Petroleum Development, a Shell subsidiary developing a relatively small field in Siberia.)

Neither British corporations nor the British government are satisfied with these developments.

Although it has lost Kovykta, BP still has very substantial production volumes in Russia and doesn’t want to put them at risk. But Britain doesn’t have much room for maneuver now, so it is forced to play for high stakes, at least, if not to go for broke. Continental Europe, lacking energy resources of its own, has essentially agreed to Russia’a proposed rules of the game (cooperation on Gazprom’s terms in Russia and gradually allowing Gazprom access to end consumers in Europe). Germany was the first to agree, followed by Italy (Gazprom-ENI accords based on agreements between Berlusconi and Putin). And now France has agreed to accept Gazprom’s rules as well (Gazprom and Total will develop the Shtockman field together, and Gazprom will have access to French distribution networks via Suez). These countries are the EU’s leading players. Only Britain remains. Unless it now manages to change the situation somehow, or regain some lost ground (by strengthening its positions in Russia or weakening Gazprom’s positions in Europe), it will be too late.

Consequently, Britain’s EU partners are just about the main audience for Britain’s current stage-show, and one of the main aims of the attack on Russia is to disrupt Russia’s breakthrough into Europe.

Essentially, Britain is provoking not only Russia, but also other EU countries, who are being invited to participate in a combined attack on Russia in order to force it to give in and accept Europe’s rules rather than Russia’s (Gazprom’s) rules: in other words, allowing European corporations access to Russia’s oil and gas fields without Russian corporations having any access to strategic assets in Europe. And Europe might well agree to support Britain’s game. At any rate, France and Germany have already expressed support for Britain’s extradition demand.

The British elite is not prepared to base its strategy on objective dependence on Russia and its gas supplies. Moreover, in contrast to Europe, Britain still has some energy resources of its own; consequently, it has some time (not much) to attempt to change the situation. And that’s why Britain has taken on the mission of organizing the West’s crusade against Russia. Moreover, anti-Russian attitudes are traditional among the British political elite.

Mary Dejevsky, a columnist for The Independent, described the British attitude to Russia as follows: “After the announcement about Russian diplomats being expelled, the BBC opened a feedback line, and most ordinary viewers were inclined to say that the British government is making a mountain out of a mole-hill. Hardly any ordinary viewers made negative comments about Russia. But the situation in the elite may be different. British business leaders are not Russophobic – rather the reverse; the private sector is very positive about doing business with Russia, although it’s wary of the risks arising there. But the political elites generally take a negative view of Russia, although they’ll deny that officially. And every time a problem arises in relations with Russia, it only confirms the anti-Russian attitudes based on prejudice and insufficient understanding of Russia. In contrast to business leaders, most members of the political elite have never visited Russia. They have a cartoonish impression of it, based on information that was obsolete a decade ago.”

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