Today, Iran’s oil minister announced that he had discussions with the head of Russia’s Gazprom, the world’s largest natural gas producer, and his counterpart from Qatar about the formation of a cartel of gas exporters. The dream of a “Gas OPEC” goes back to at least 2001 when these three countries tried to organize the Gas Exporting Countries Forum. The effort failed then, but Moscow and Tehran tried to revive the idea last year. Russia is the world’s largest supplier of natural gas, and Iran has the second largest reserves. Together, the three nations-the “big gas troika”-sit on 60 percent of the world’s reserves of this precious commodity.
A strong gas cartel would be just what the Kremlin needs at this moment to offset its steep decline in oil revenues. In just 15 weeks the price of oil has fallen by more than half-from a high of $147.27 a barrel on July 11 to today’s price, fluctuating under $72.00. The dramatic decline looks set to continue as the global economy tumbles. Unfortunately for Russia, gas prices are also coming down fast.
The global market for natural gas is fragmented, so it will be hard for producers to form a cartel at this moment and make it stick. The odds say that the Kremlin will not be able to accomplish now what it was not able to do in more favorable market conditions earlier this decade. Yet this is not just a question of economics, at least for the Russians. For Prime Minister Putin, Russia’s exports of hydrocarbons has always been about achieving geopolitical goals-subjugating the “near abroad,” wooing Western Europe away from America, and modernizing the rusting military, to name just the most prominent ones-and he is not about to let sliding energy prices get in the way of his czar-like ambitions.
Ronald Reagan implemented a plan to depress commodity prices to kill off the Soviet Union. Such a concept would not occur to President Bush, who, with the possible exception of Germany’s Gerhard Schroeder, was the best friend Russian authoritarianism had this decade. Perhaps the next American leader will take our interests at heart and do all he can to lower the global prices of hydrocarbons. This is not about trade deficits. This is about protecting our nation from those who wish it ill.