NEWSLINK: Siberia placed to be the new Middle East

Oil Well file photo

Siberia placed to be the new Middle East – Asia Times – By Yong Kwon – September 24, 2012 –

Yong Kwon is a Washington-based analyst of international affairs.

Asia Times examines the impact of Middle Eastern instability on oil and the global economy, and Siberia’s emergence as a significant source of petroleum.

Russia actually starting serving as a major oil source more than a century ago, albeit impacted by historical developments:

A century ago … Royal Dutch Petroleum Company, Rothschilds, and the Nobel brothers took advantage of Russia’s liberalization of its market in 1872 and exploited the oil fields in the Caucasus with Shell Transport and Trading Company shipping the extracted goods to the burgeoning markets in the far east.

Innovations such as the Caspian oil tankers and projects such as railroads linking Baku to Batum soon pushed US imports out of Russia. Before long, shipments of Russian oil passed through the Suez Canal and began supplying the global demand. [] By 1904, one-third of the world’s oil was produced in Russia.

While the oil fields around Baku proved lucrative, the oil companies exploiting this resource rich region had to contend with increasing social unrest and political instability. The Russian Empire’s poor performance in the Russo-Japanese War (1904-05) led to nationwide strikes that included workers in Russian oil fields. A period of political liberalization followed, but proved short lived and the state’s repressions prompted more popular unrest. The foundations of what would eventually turn into the February and October revolutions of 1917 were in the making.

Eventually, World War I and the subsequent Communist Revolution effectively pulled Russian oil out of the world market, but the conflagration that had engulfed the area for four years also left the victorious powers with new oil-producing territories such as Iraq. Further softening the blow, Royal Dutch company had successfully developed the Sumatran oil fields and British exploitation of Persian oil fields proved invaluable. By the 1920s and ’30s, oil production had been diversified among several different regions in the world, ensuring a steady supply as demand rose to accommodate the proliferation of automobiles and other gasoline powered vehicles.

Similarly, the author argues, the world needs to diversify oil sources today.  And while Canada and Brazil offer options, Russian changes to encourage investment are necessary:

Much like how the Russian Empire prompted development in 1872 by loosening its monopoly laws, the Russian Federation also needs to take the first step by allowing greater market involvement and private investment in the development of Eastern Siberia (see Putin returns to the Wild East, May 15, 2012). At the same time, international players, both enterprises and states, should be doing more to cooperate with Moscow and Russian companies.

There is a huer, country risk in the Russian Far East is undoubtedly lower than in the Middle East. Above all, its geographic location facilitates supply to Northeast Asia, the largest consumers of energy and a key driver of the world’s economic growth.

In the long-term, overcoming difficulties of working in Russia will yield dividends …

Meanwhile, demand for energy continues rising, and concerns over risks relating to nuclear energy dangers impede the development of nuclear energy.

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