At this year's G-8 summit, Russia formulated a new energy security concept, under which energy consuming countries and producing countries should coordinate their energy policies and cooperate, and asked European countries to further open their markets. The country's assertive stance and move to demonstrate its status as an important energy country provoked strong dissatisfaction among Western countries. It seems that Russia is unfolding a new diplomatic stance in the world energy arena.

Since President Vladimir Putin assumed power, the Russian Government has gradually nationalized energy enterprises by taking a series of actions to strengthen its control over the country's energy industry. Based on this, Russia has begun to play an energy diplomatic card by right of its rich energy resources, not only getting financial and technological support from other countries, which has promoted the revival and development of the country's economy, but also elevating its status in the world political structure.

In recent years, with the rise in international oil and gas prices, Russia's economy has become stronger, and its energy diplomatic strategy has changed from expanding exports in the past to becoming actively involved in consuming countries. It has participated in the transport and development of oil and gas resources in neighboring countries and has strengthened the containment of Central Asian countries and European Union (EU) members by using its resources card.

The natural gas crisis between Russia and Ukraine early this year is an obvious signal that Russia is carrying out a new energy strategy. For a long time, Russia had sold oil and gas to Commonwealth of Independent States (CIS) members at preferential prices that were lower than the international price, so as to maintain its influence in this area. However, in the past two years, "color revolutions" occurred one after another in CIS states and some of these governments are inclined toward the West, which has gravely affected Russia's political interests in Central Asia. From this year, Russia began to exert pressure on the CIS countries that are drawing closer to the West by raising the export price of natural gas. The price of natural gas exported to Ukraine, for example, has been increased from $50 per thousand cubic meters to $230.

Russia's move is not only intended to deter Central Asia but also to indicate a tough stance toward Europe. Since last year, Russia has been trying to enter Western Europe's retail market, but that has been rejected by the relevant European countries. Russia is no longer accepting this in a mild manner. Russian President Vladimir Putin said on a public occasion that the entry of Russia's energy supplies into the Western market would be a basis of cooperation between Russia and Europe. Russia's tough stand against Ukraine on the gas issue is also a mirror of Russia's power to cleverly use and control its energy resources.

Besides, Russia's energy diplomacy is reaching Asian countries to further strengthen energy cooperation. Since last year, the Russian Government has stressed on many occasions that elevating Asia's commercial and political status is of great strategic significance to Russia. This is because the Putin administration has been increasingly interested in Asia's vast energy market. Through developing the Asian market, Russia will implement its strategy to further expand its energy export channels. What's more, the expansion of Russia's energy exports to Asia will add more bargaining chips in its discussions with European nations.

All of these maneuvers clearly show that Russia is not only seeking to enter the European energy market, compete for control of the Caspian area and expand the Asian market, but also to challenge the Organization of Petroleum Exporting Countries (OPEC) and become a world-class energy empire. Now it has accelerated its steps on the path to realizing this dream.

Competing with Europe

After the Iraq war, European countries began to strengthen their cooperation in the energy field with Russia to avoid over-dependence on oil from the Middle East. In recent years, Russia has been increasing its energy exports to Europe. A quarter of the natural gas and one third of the oil of Europe comes from Russia. At the same time, some big European oil companies have directly participated in the development and construction of Russia's energy industry. For example, BP or British Petroleum, one of the world's largest oil companies, headquartered in London, and TNK, Russia's fourth largest oil company, have set up a joint-venture oil company, while Royal Dutch/Shell, a global group of energy and petrochemical companies, is building liquefied natural gas plants in Russia.

Despite this, energy cooperation between Russia and Europe is not proceeding very smoothly. Especially in the past years, with the rise of Russia's economic strength, Russian energy companies have no longer been satisfied with the status quo of being an energy provider to the EU, and they hope to become transnational energy dealers directly dealing with consumers.

Russia's Gazprom, the nation's largest natural gas company, has been negotiating with RWE and Eon, two energy giants in Germany, attempting to purchase shares of these two companies and thereby enter the consumption market of these two firms in Europe. Russia also wants to acquire Centrica, the largest supplier of natural gas to domestic customers in Britain, to enter the British market. All of these moves have been strongly opposed by these EU countries.

The British Government has been considering revising its takeover law to prevent Russia's purchase of the British natural gas company, warning it will directly intervene if necessary. In the meantime, Russia has taken measures to restrict the entry of Western capital into the Russian oil and natural gas industries, which include requiring that the stake held by foreign companies must not exceed 49 percent and barring foreign capital from strategic oil and gas resources.

The divergence of Europe-Russia energy cooperation became more prominent after Russia halted the supply of natural gas to Ukraine. The Putin administration has stressed on many occasions that energy cooperation should benefit both sides, saying that when Russia provides energy to the West, it should have the right to enter the areas of energy resource exploitation, transportation and sales in Western countries.

But the Europeans are concerned that Russia's advantage in energy resources will develop into an economic and political threat to Europe. After the energy friction between Russia and Ukraine, the EU began to be suspicious of Russia's reliability as an energy supplier. Britain, Germany and other European countries have tried to look for new energy supply channels and began to pay attention to the utilization of nuclear energy and the research and development of renewal energy sources.

Nevertheless, the reality does not appear optimistic for the Europeans. Considered from the aspects of geography and economic cost, it is hard for Europe to break away from relying on Russian energy for a long time. It is predicted that 60 percent of Europe's imported energy will come from Russia at least until 2020. As for Russia, out of strategic consideration, it will look to Europe as its biggest energy export market. Thus, the cooperation, divergence and collision between the two sides will continue to exist for long time. But in their competition, Russia seems to have the upper hand.

Competing with the United States

The conflict between Russia and the United States has long been focused on the development and transportation of the oil and gas of the Caspian Sea area. Since President George W. Bush took office, the United States has speeded up the scramble for global oil resources, in which the Caspian Sea area is the second target after the Middle East. Attracted by the bright prospect of oil and gas reserves in the Caspian area, many major U.S. oil companies are actively participating in the exploitation of oil and natural gas in the region. ExxonMobil, Chevron and some other big companies have invested more than $30 billion there.

To end Russia's monopoly over the mouth of the Caspian Sea, in 1998 the United States pushed Turkey to build the Baku-Tbilisi-Ceyhan oil pipeline, which runs through Azerbaijan, the mountains of Georgia and northern Turkey before hitting the Mediterranean coast and was opened in May 2005, bypassing Russia. Besides, the United States has provided military and economic aid to the countries in the Caspian Sea region, and has moved closer to Central Asian countries politically. All of these have greatly affected Russia's interests in the area. To deal with the challenge from the United States, Russia has reacted by quickening cooperation with Europe and cutting its natural gas supply to relevant countries.

The 9/11 terrorist attacks in the United States seemed to be a turning point in Russian-U.S. ties. Russia began to actively develop cooperation with the United States in the energy field, taking advantage of the better political relations between the two sides. In May 2005, the two countries signed the Energy Dialogue Joint Statement, and in July, Russia's first batch of 2 million barrels of oil arrived in the United States. Russia has also actively planned the construction of its northern port of Murmansk and the oil pipeline from Western Siberia to Murmansk in order to expand oil exports to the United States. At the same time, U.S. oil companies have participated in tapping oil and natural gas on Russia's Sakhalin Island.

Besides commercial interests, the energy cooperation between Russia and the United States is due to strategic considerations. Putin has said that a tough foreign policy toward the United States is not suitable for the strength of Russia, and from the prospect of long-term development Russia needs to enter Western society to get the technology, capital and modern management experience it needs to develop its economy. Meanwhile, Russia will have a chance to explore the oil consumption market in the United States and the countries' energy cooperation will help to boost their political ties.

On the U.S. side, a cooperative attitude toward Russia will help it become less dependent on oil from the Middle East. At the same time, the United States has long hoped to have a finger in the development of Russia's oil and gas development and enhance its influence there. In addition, the United States also hopes that U.S.-Russia energy cooperation will help to stabilize world oil prices and weaken the power of OPEC.

But things have not turned out as the United States expected. In recent years, the United States has been dissatisfied with Russia's behavior. The White House has repeatedly pressured Moscow, hoping it will change its policy of barring foreign capital from Russia's large-scale oil and gas fields. In May, U.S. Vice President Dick Cheney denounced Russia for using "tools of intimidation and blackmail" against neighboring countries when he traveled to the former Soviet republic of Lithuania. These show that current U.S.-Russian ties are in a state of both cooperation and struggle. Although Russia is not in a favorable position currently, it will one day force the United States to give up a direct contest and choose cooperation, as Russia's status in the world energy market increases day by day.

Rise of new markets

In recent years, new markets, such as China, India and Brazil, have emerged. Compared with their increased need for energy, their own energy reserves fall short and some countries must rely on imports. To ensure energy supply security, these countries have been seeking overseas oil and natural gas resources, which has triggered a new round of energy competition in the world.

In the world oil and gas development field, the entry of these growing countries makes traditional Western energy-consuming countries face more rivals and the contradictions between big countries become more complicated. The plan of China's CNOOC oil company to purchase overseas oil companies displeased the West. Western countries voiced the "China threat" theory constantly and took various measures to prevent the Chinese company's purchase of overseas energy companies.

China's development of small and medium-sized oil fields overseas has also faced fierce competition from India and other developing countries. In 2004, to obtain the exploration rights to an oil field in Angola, China paid a price 10 times higher than India's bid. China has also been involved in a contest with Japan over the construction of Russia's oil pipeline in the Far East. The United States has also been very vigilant of China's oil and gas development in Sudan and Latin America. In any case, the huge demand of newly rising countries has broken the former order of Western countries in the energy field. Old and new contradictions are entangled, further escalating the scramble for world's oil resources.

Based on the current world energy situation, in which supply tends to be restricted and the competition among big countries has become fiercer, Chinese President Hu Jintao called on all countries to establish a new energy security concept to ensure global energy security. He said few countries could achieve energy security without joining in international cooperation, and mutually beneficial cooperation should be strengthened in energy exploitation and utilization. It is important to strengthen dialogue and cooperation between energy exporters and consumers and among major energy consumers, the president stressed.

He urged the international community to strengthen policy coordination and improve mechanisms for monitoring the international energy market and responding to energy emergencies. He said all countries should promote research and development and the extension of energy-saving technology, support enhancing energy efficiency, conserve energy resources and discuss the safe and reliable supply of clean and economical energy across the globe in the future.

The concept was supported by most Western countries and Russia, but, because different countries have different energy strategic targets, it has been difficult for the international community to reach concensus on this issue. As an EU commissioner said, while everyone is talking about energy security, what the EU needs is supply security and what Russia needs is demand security.

The author is an associate researcher with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce