Energy, Russia’s International Political Power

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Russia’s invasion of Ukraine became an arena to test international political relations of a number of countries based on the oil and natural gas commodity trade chain. The economic embargo sanctioned by a number of allied countries of the United States of America to Russia has led to the phenomenon of rising world oil prices in a number of countries.

Russia as one of the largest fossil energy producing countries in the world can use its energy soft power to fight back against the economic sanctions. NATO countries in the European region that agree to the sanctions are likely to feel the energy shortage in their country. Russia places energy as one of its geopolitical forces.

Energy resources can act as soft power for the sake of a nation’s global political interests.

Energy resources are an important force in the geopolitics of a country. With this natural wealth of energy, a country can cooperate with any country for various purposes. In addition to increasing the country’s foreign exchange, energy resources can act as soft power for the sake of the global political interests of a nation.

Energy trade relations can serve as a means of strengthening alliances between transacting countries and at the same time can be used as a subtle “threat” tool. Countries with minimal energy resources will be in an inferior position in international political negotiations.

WTI trend
WTI known as Texas Light Sweet is a class of crude oil that is used as a benchmark in determining oil prices, this oil class is described as a light product because of its relatively low density and low sulfur content.
IEA says market may lose 3 mln bpd of Russian oil next month | Reuters

For now, countries that own fossil energy resources have a high geopolitical bargaining position in the global scope. This is in line with the condition of global final energy consumption, which is still largely dominated by the use of fossil energy, particularly from oil and natural gas (oil and gas) energy sources.

Based on IEA data, in the period 1990-2019, the total energy consumption throughout the world still mostly came from oil and gas, which averaged around 57 percent a year. Of the two types of fossil energy, energy products from petroleum are the largest consumption because on average it reaches the range of 42 percent, while that from natural gas is around 15 percent.

Countries that own fossil energy resources have a high geopolitical bargaining position in the global scope.

The high dependence on fossil energy sources causes the energy-owning countries to be very much needed by other countries, especially by countries with minimal energy resources.

International diplomatic relations with energy-poor countries will continue to be improved with energy-producing countries or third-party countries that act as large-scale energy importers.

This international cooperation relationship is not only to maintain a conducive global strategic environment, but also to ensure the smooth supply of energy in countries that lack energy.

This condition causes countries rich in fossil energy production from oil and gas commodities to be in a superior position. These oil-rich countries are relatively easy to establish international relations with any country in the world.

On the basis of carbon commodity transactions, countries rich in energy resources can use energy soft power to influence the political policies of other countries.

Positively, it can be used as a means to establish investment relations in various sectors of activity, such as the economic, defense, educational, social and political fields. However, this carbon trading transaction bond can also be used as a tool to pressure other countries’ global policies.

Threats to reduce or stop the supply of fossil energy can be a means to direct other countries to comply with or agree with the global plans of countries that own energy sources.

Russia ‘muffles’ NATO

In Russia’s invasion of Ukraine, this “Red Bear” country most likely used its energy politics to stifle NATO’s power. The relatively large dependence of the European region’s fossil energy on Russia has caused a number of NATO policies related to Russia’s invasion of Ukraine to be relatively non-frontal in the face of Russian weapons power.

Russia’s military invasion, one of which was caused by Ukraine’s efforts to join NATO, did not necessarily prompt NATO to declare war on Russia. NATO only supports passively, namely supplying weapons and also financially for the Ukrainian military.

The NATO military is only on guard in European countries bordering Ukraine. NATO also said it was not in a position to go to war with Russia. This indicates that there are very long political considerations related to Russia’s geopolitics. Russia’s energy wealth is likely to be one of NATO’s considerations.

Based on data from the Bp Statistical Review of World Energy 2021, there is a close reciprocal relationship between Europe and Russia. Every year Russia sends petroleum products and crude oil to Europe about 195 million tons or about 53 percent of all Russian oil trade in the global arena which reaches 366 million tons. This large proportion also occurs in natural gas commodities.

Russia’s energy wealth is likely to be one of NATO’s considerations.

Every year Russia also sends natural gas supplies to Europe of around 185 billion cubic meters or controls about 77 percent of Russia’s international gas trade which reaches the range of 238 billion cubic meters. Most of the natural gas sent to Europe around 90 percent is distributed through gas pipelines, making it more efficient and safe.

Russia’s oil and gas trade to Europe is the largest among other energy exporters to Europe. Other large oil and gas producing countries in the world, such as the United States, Saudi Arabia, and also other countries in the Middle East, the supply of oil and gas energy shipments is not as large as Russia.

nato

While the United States only shipped about 82 million tons of oil, Saudi Arabia about 54 million tons, and other Middle Eastern countries the amount was smaller, which was around 11 million tons. The same is true for energy trading from natural gas. Russia dominates compared to supplies from other countries, such as from America, Qatar, the Netherlands, Norway, and other European countries.

Supply from Russia dominates the delivery of natural gas through the piping system in Europe. A number of regions that receive energy supply from the Russian pipeline are in Belgium, France, Germany, Italy, the Netherlands, Spain, and England. The accumulated supply of natural gas to all these countries reaches around 37 percent of all natural gas needs through pipelines in the European region.

So, it is conceivable that if the energy supply is constrained due to the economic sanctions of the allied countries, it will trigger high energy price fluctuations in the region.

If this turbulence is not immediately resolved, it will trigger an increase in energy prices in general throughout the world due to a new balance of energy supply and demand due to reduced global energy supply.

These allegations are starting to take effect now. Based on data from Bloomberg, the price of West Texas Intermediate (WTI) oil experienced a price spike. From the beginning of 2022 until the day before the Russian invasion began, the average price of crude oil was in the range of US$86 per barrel.

However, since the Russian invasion of Ukraine on February 24, 2022 until the end of March, the daily price of crude oil has skyrocketed to an average of 107 US dollars per barrel.

Such conditions will be very burdensome for a number of countries whose oil and gas production is relatively small, so they must import oil and gas from abroad every day. This will be very burdensome for state finances because the government must provide more money or foreign currency to import oil and gas every day.

In fact, on the other hand, the government is trying to stabilize the selling price on the domestic market for certain oil and gas commodities, thus requiring a larger subsidy budget.

If the government’s budget is limited, the debt option may soon be implemented to maintain the supply of oil and gas in the community. This is intended so that inflation is maintained so that the economy is relatively not shaken due to the phenomenon of rising oil and gas prices on the global market.

So, in the long term, the effort to impose economic sanctions on Russia will most likely have a major impact on the global macro economy. The reason is, Russia is one of the largest energy producing countries in the world so that many countries are intertwined in their carbon commodity transaction relations.

Therefore, it would be better if the conflict between Russia and Ukraine ended immediately. Global organizations should participate in accelerating the creation of negotiations and peace in the region.

Support for supplying weapons and also financially for the Ukrainian military should be reviewed. The longer the tempo of the war will be very detrimental to the people of Ukraine. Many people died and infrastructure was destroyed, so it takes time and big capital to revive economic progress.

Indonesia as a non-aligned country can play a role by inviting other countries to participate in easing the conflict between Russia and Ukraine. Indonesia, which seems to be neutral in the planned presence of the Russian President at the G20 Summit in November in Bali, is a relatively appropriate attitude.

Without taking sides with either side, Indonesia’s position will be relatively more objective in discussing all issues that are present at the conference table. Without exception, including the Russian invasion of Ukraine.

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