Monday, June 30, 2014

Lessons from a failed energy revolution: the real reasons of the nuclear failure

(Image from global warming art). In this post, I argue that nuclear energy ceased to be a viable option in the world's energy mix as the result of the disappearance of the subsidies it received in the form of plutonium purchases by the military. This event was accompanied by a demonization campaign that forever destroyed the reputation of nuclear energy as an environmentally benign technology. In this story, there are several points of contact with the present situation with renewables, targeted by a demonization campaign destined to prolong the agony of fossil fuels. (note, this post was slightly modified on Aug 2014 in response to requests to clarify that the civilian nuclear industry never "sold" plutonium to the military. This was clear to the author from the beginning, but the way the older version was written could generate some misunderstandings)

So far, no energy transition has been planned or managed in advance. Moving, for instance, from wood to coal or from coal to oil was the result of price mechanisms which made the transition convenient for everybody. There never was any need for governments to subsidize diesel locomotives to replace steam ones.

Today, we are going through a new energy transition, one that will take us from fossil fuels to renewable energy. The problem is that price mechanisms, alone, may not be sufficient to drive the transition fast enough. Hence, many governments have enacted rules and created incentives designed to favor renewable energy. These measures have been successful in promoting the growth or renewables, but, right now, the incentives are under attack everywhere in a situation of increasing competition for ever diminishing resources. So, the transition is at risk.

As it is often the case, the past can be a guide for the future and we can learn something by looking at a past case of a failed energy revolution: nuclear energy. This story is worth retelling today because of the many points which are starting to appear surprisingly similar to the present situation with renewables.


The nuclear industry started, literally, with a bang; with the first nuclear bomb of Alamogordo in 1945. But nuclear reactors are older than that. The Alamogordo warhead used plutonium produced by the first nuclear reactor in history, the "Chicago Pile" which had started operating in 1942. It had been built exclusively to produce plutonium for military purposes, just as the other reactors built during the same period. These early reactors generated a lot of waste heat and it was soon clear that this heat could be used to produce electric power. That was the origin of the concept of "atoms for peace", popular in the 1950s.

In the mid 1950s, the first commercial reactors for the production of electric power appeared and, subsequently, nuclear energy production grew rapidly, to the point that it seemed possible to create an energy system based entirely on nuclear sources, at least for the production of electricity. It was a moment of great optimism and the age of electricity "too cheap to meter" really seemed to be around the corner.

But, in the 1970s, something happened that brought the expansion of the nuclear industry to a screeching halt. From the mid 1980s onward, the number of new reactors has been barely sufficient to replace the old ones, with the total production of nuclear energy slowing down its growth and showing a decline during the past few years (image on the right from Wikipedia). The nuclear industry failed its objective of becoming the world's main source of electric power; a market that was instead kept by fossil fuels; in particular by coal.

Various interpretations have been proposed to explain the decline of nuclear energy. Often, several different causes are said to have acted together as you can read, for instance, in "Ten Blows that stopped nuclear power." By far, however, the most popular interpretation seems to be that the nuclear industry was killed by the growing environmental movement. It is an interpretation that pleases both nuclearists (it gives them someone to blame) and environmentalists (who see themselves as a powerful force in the issue).

These explanations make some sense. But do you really believe that as many as ten causes all acted in the same direction to explain such a clear trend as the nearly complete stop to the construction of new reactors? And do you really think that the environmental movement could have such a success in bringing on its knees a supposedly healthy industry, considering the success that the same movement is now having, for instance, in stopping the emissions of greenhouse gases from coal plants?

Rather, I propose here that there is a clear single cause that brought nuclear power on its knees in the 1970s. It was, simply, that nuclear energy stopped being subsidized by the US government. At that point, building new plants became unprofitable and the expansion of nuclear power stopped.

The question of the subsidies needs some explanation, because the nuclear industry often claims it needs none. A list of subsidies is given in the 2011 report by Doug Koplow, who, however, seems to have missed what was probably the historically most important subsidy to the Western nuclear industry: the production of plutonium for the US military to be used for military weapons. This market was probably of the same order of magnitude as that resulting from the sales of electricity (for an estimate of the budget involved, see note at the end of this post)

With the expansion of nuclear power, the production of plutonium increased in proportion. But, in 1977, the US senate approved a law forbidding the reprocessing of spent fuel from nuclear plants nuclear plants to produce plutonium. In a sense, it was a badly needed decision, since the growing production of plutonium was creating an economic and strategic disaster. The risk of nuclear proliferation increased with the amount of plutonium produced and the number of warheads in the US and in the URSS military systems was growing out of control with more than 30,000 nuclear stockpiled in the US alone. That gave to the concept of "overkill" a whole new meaning (image source). Apart from the strategic problems it created, plutonium purchasing was also a considerable financial burden for the US government, at that time in a serious financial difficulties generated by the ongoing oil crisis.

The disappearance of the market for plutonium reprocessing was a major blow to the nuclear industry. Not so much in purely economic terms, because the civilian nuclear energy never could produce plutonium - they were not equipped for this purpose. But it cast a general doubt on the financing of new plants since the original market for which they had been developed - military plutonium - had disappeared. As a result, in the tight financial moment of the late 1970s, it became nearly impossible to find the resources to pay for new nuclear plants. Coal plants could produce higher revenues at smaller initial costs and it is there that investments in energy production were directed. In a sense, we can say that the nuclear industry was a victim of the crisis of the industry that it was supposed to replace: the fossil fuel industry.

The (apparent) end of the oil crisis in the second half of the 1980s eased the world's financial situation, but it didn't help the nuclear industry, which had failed in developing lower cost technologies and still couldn't compete with fossils at the low prices of that period. The new crisis of the first decade of the 21st century reversed again the trend. Today, we see new claims about the need of going nuclear and some evidence of new nuclear plants being programmed. But this nuclear renaissance is slow to start and it may do little more than replace the obsolete plants which badly need to be scrapped.

An interesting point in this story is how stop to the nuclear subsidies was accompanied by the demonization the nuclear industry.  Up to the early 1970s, environmentalists had been generally neutral and often favorable to nuclear energy. Afterward, instead, the tide turned decisively against nuclear energy, with the fortunate slogan "Nuclear? No thanks" created in 1975. We have no evidence that the anti-nuclear campaign was masterminded by some secret agency (but it cannot be ruled out, either). What we can say is that the campaign was extremely effective and in turning nuclear power into the absolute bugaboo of all environmentalists.


Now, let's move forward to our times and let's look at the situation of renewable energy. The similarities with the story of the nuclear industry stand out clearly. The renewable industry enjoys significant subsidies from governments and grew rapidly to production levels comparable to those of the nuclear industry.  Whereas nuclear subsidies were generated mainly by military needs, subsidies to renewables have been generated by the perception of the horrendous external costs of both fossil and nuclear energy. In the first case (fossils) mainly in terms of climate change, in the second (nuclear) in terms of proliferation, contamination, etc.

The problem with external costs, however, is that they are paid by the whole community while the profits of the activities generating them go only to the owners of the plants. Hence, when subsidies or "internalization" start to bite on profits, fossil lobbies will start fighting back. One of the ways they have to undermine public support for renewables is to use demonization campaigns in the media. These campaigns are especially evident in wind power, but also for photovoltaic power and other clean energy technologies. It seems that this approach is starting to pay off for the fossil lobby. Today, a significant fraction of the environmental movement seems to be considering renewable energy almost as evil as nuclear energy. 
We are not yet to the point to see the diffusion of slogans such as "Photovoltaics? No thanks" but never underestimate the power of media and the gullibility of people. PR campaigns tend to generate entrenched legends which, in the long run, are extremely difficult to dislodge from the collective perception. We have examples of this behavior with the demonization of the study "The Limits to Growth" of 1972 and, today, with the demonization of climate science. There is a real risk that a well financed negative PR campaign coupled with punitive financial measures could reduce the renewable industry to something similar to what the nuclear industry is today: obsolete plants and old men reminiscing of past glories.

But the transition to renewable energy is the only hope we have to overcome the resource crisis and the climate crisis we are facing. Renewable energy is showing rapid progress: costs are going down, efficiency is increasing, and new solutions for energy storage are being developed. Renewable energy is now a credible competitor for fossil fuels even without subsidies and it needs not suffer the same failure of nuclear energy. But we need to watch out for a last ditch attempt of the fossil lobby to get rid of a competitor by lies and slandering. We need to keep the momentum for the transition to a better world. And to keep it, we must fight for it.


Note: plutonium and the nuclear industry. 

I haven't been able to find data on how much money the military paid for the plutonium they used for nuclear warheads during the 1960s and 1970s. Maybe it is still a military secret, but we can at least make a rough estimation.

First of all, the total amount of plutonium produced for the US military alone is of some 111 metric tons (source). Since plutonium does not exist in the Earth's crust, all of it must have been created in nuclear reactors. How much is this plutonium worth? At present prices, plutonium is said to be worth something between 1000 and 5000 $/g (source). So, all the plutonium stored by the US military is worth something of the order of 100 - 500 billion dollars. No peanuts, indeed  Now, consider that this sum was paid in an arc of time of about 20 years and that today the nuclear industry in the US sells about 40-50 billion dollars of electric power (source). We see, therefore, that the subsidy to nuclear energy coming from the sales of plutonium was very significant.

Let's try another approach. A 1 GW nuclear plant was reported in 1976 to generate something like 250 kg of plutonium per year (source). At today's prices, that could be worth between 250 million dollars and one billion dollars. According to the data available (source) a total nuclear capacity of 100 GW in the US generated 790 million MWh, that is, about 8 million/MWh per GW of nominal power. Let's take a value of 50 $/MWh (source), it follows that a 1 GW nuclear reactor generates revenues for 400 million dollars per year. Again, we see that the plutonium produced by the reactor  worth a significant fraction of the revenue from electricity sales, perhaps even more than that!

Of course, these data are obtained using the present plutonium prices; at the time, prices were surely different. And note also that the civilian nuclear industry never could  "sell" plutonium to the military - they couldn't do that because they lacked the facilities to extract and refine plutonium (of the right isotopic composition) from their spent fuel. They just provided their spent fuel rods to specialized plants which would extract and refine plutonium 239 which then was transformed into weapons or stockpiled. The calculation is just an estimate of the value of the plutonium production during the heydays of the nuclear industry, and that must have provided a significant benefit to the industry.

Monday, June 23, 2014

Photovoltaic Water

Water produced by condensing humidity from the air using solar energy. Starring Francesco El Asmar. Photo by Ugo Bardi

When we started working on producing water from atmospheric humidity, myself and my friend and colleague Toufic El Asmar thought it was a mad idea. Energy is expensive and water condensation requires a lot of it. Yet, as we kept working on the concept, we found that it made sense. Sure, it takes energy, but, with the progress of technology, renewable energy is becoming cheaper and cheaper. And at some moments, renewable energy really costs zero. At those moments, you should store it, but storage is the expensive part of renewable power. So, why not transform solar energy into something that you can store at little or no cost, for instance clean, drinkable water? After all, water is fast becoming a scarce commodity in many regions of the world.

So, the idea was born of a "solar water machine" which uses electric energy from photovoltaic panels to drive a water condenser which collects humidity from the air. The water is then filtered and made drinkable by adding a small amount of natural salts. The machine is more complex than this; it also collects rainfall and it can clean and purify water from almost any source, producing up to two hundred liters of pure water per day. Its solar panels make it completely self-sufficient: you may place it anywhere; it doesn't need to be connected to the grid (although it may be). So, it is good for remote places, for emergency situations, and for a variety of needs. Here is the "Acqua dal Sole" system, the day of its official presentation in Capannori, Italy. The people involved in the project are lined up in front of the machine (including yours truly).

Now that I told you the essential, let me tell you some more details about this idea. It all started some years ago, when myself and Toufic El Asmar prepared a project about using solar collectors to produce air conditioning for North African and Mid-Eastern Countries. The idea was that these countries enjoy a high solar insulation, which could be collected using parabolic mirrors to heat up an absorption air conditioning system. The project was approved by the European Commission with the name of "REACT" and it led to the manufacturing of two prototypes, one in Morocco, the other in Jordan.

As time went by, however, the rapid fall of the price of photovoltaic panels made parabolic solar collectors obsolete. But while working on the React project, we noticed how solar refrigeration could produce a lot of water by condensation from the air. That led us to study the subject more in detail and the European Commission sponsored a project called "Aqua Solis". Our idea was to study an approach completely different than the large scale desalination plants which are commonly used nowadays to produce water for dry countries. The idea was to develop "village scale" systems; improved versions of the old "solar still" idea. Cheap, simple, and with no need of the expensive pipeline systems needed for the conventional desalination plants. The basic idea was to create versatile systems which could use photovoltaic energy for water production, but also for any use needed at a particular moment

In time, this study evolved into a patent filed by me (Ugo Bardi) and Toufic El Asmar and to a working device: the "Acqua dal Sole" system, built by the Italian companies Sinapsi and Sinerlab, on a project by Archistudio. The "Acqua dal Sole" system is at present located in an area close to the airport of Capannori (near Lucca, in Italy) where a high tech aeronautics company, "Zefiro" has kindly offered space for a test. The water produced is free for anyone stopping by, although for bureaucratic reasons you will read on the tap the sign "not drinkable" (in Italian). But it is perfectly drinkable and very good, I can tell you that!

We are looking at practical applications and markets for this device. Of course, that depends on the cost but, as the prices of PV keep falling, it is likely that water from the air could be a revolution in the way water is produced in the world, especially in areas where it is badly needed. And also on the way renewable energy is stored.

Once you have seen the "photovoltaic camel" you can understand how fast the range of applications of PV panels is growing. Photovoltaics is an emergent technology which has the possibility of reshaping the world in ways which, at present, we can't even imagine.

Acknowledgement: the people who worked on the "Acqua dal Sole" project

Ugo Bardi (University of Florence)
Eugenio Baronti (Zefiro s.r.l.)
Lorenzo Cardarella (Sinapsi s.r.l.)
Toufic El Asmar (Food and Agriculture Organization, FAO)
Filippo Niccolai (Sinerlab s.r.l.)
Francesco Niccolai (Sinerlab s.r.l.)
Michele Tosti (Sinapsi s.r.l.)

Sunday, June 22, 2014

A conversation with Gail Tverberg and Ugo Bardi

This video was posted on the "Doomstead Diner." Sorry that the audio is not very good when I speak. Anyway, since it has been done, here it is.

Monday, June 16, 2014

"Extracted": the movie

Credits: Babylonia-Brussels, Dianna Rienstra, Daphne Davies, the staff of the Club of Rome, and several more people. The book "Extracted" is available from Chelsea Green

Saturday, June 14, 2014

Russia's Smart Move to Asia

In this post, professor Tatiana Yugay, of the Moscow State University of economics, reports  from Saint Petersburg about the recent Russia-China deal. See also a previous post on the subject.

By Tatiana Yugay

In my previous post at Ugo Bardi's blog, I suggested that “Russia but not the U.S. has been pivoting to Asia just now”. Since then several landmark events happened in the Asian arena, such as, Vladimir Putin's successful visit to China and the conclusion of a $400 billion gas mega-deal between Russia's Gazprom and China's CNPC along with other important 50 agreements, the Russian-Chinese navy drills in the East-China Sea and Obama's visit to East Asia in order to alert his Asian allies. Last but not least, signing the Treaty on the Foundation of the Eurasian Economic Union took place in Astana at the end of May.

On May 23-24, I had a chance to participate in the Forum of Russia's and China's Leading Economists which was hosted by the St. Petersburg State University of Economics. By a happy coincidence, the Forum took place right after the conclusion of the millennium gas deal between the two countries and, moreover, contemporaneously with the St. Petersburg International Economic Forum. Though our event was a much more modest one, all the participants felt their involvement with mainstream geopolitical developments. The atmosphere was very vibrant, friendly and a sort of triumphant. In fact, we felt ourselves as if we were participating in the St. Petersburg International Economic Forum since the agenda of both forums were somehow overlapping, including a key topic of the Russian-Chinese strategic economic partnership. 
It is needless to say that the gas deal was on everyone's lips. I was pleasantly surprised that the attitude of the Chinese speakers was very similar to my own vision. It is clear that the scientific communities of both countries are more free to express their views than the political leadership. Recently, Russian policymakers do not hesitate to express their opinions in strong and sarcastic terms and the general public enjoy this fact. On the other hand, the Chinese leadership is rather careful in its wording and expresses its position rather indirectly. On the contrary, the Chinese speakers at our Forum were even more tough while expressing their attitudes towards the U.S. policy than their Russian counterparts. They accused the U.S. of the “new regionalism” aimed at excluding China and Russia from shaping new international trade rules in the framework of Trans-Pacific Partnership Agreement (TPP) and Transatlantic Trade and Investment Partnership (TTIP). Both Russian and Chinese participants agreed that the US domination destabilizes the world and exerts direct threats to national security of our countries. 
In my presentation, I presumed that Russia and China should give asymmetric geoeconomic responses to the latest geopolitical threats, avoiding direct confrontation. Since the U.S. is still stronger economically, politically and militarily than China and Russia and, mainly, because all three countries are the members of the nuke club and the world is already dangerously balancing on the brink of the world war. 
In my opinion, soft asymmetric responses should not be directed straightforward at a potential adversary but represent elaborate strategies aimed at creating international configurations or alternative ways out of a crisis situation. In these latter days, Russia has been masterminding such kind of long-term solutions. Instead of involving itself in a fruitless tit for tat sanctions game, Russia has been forging its Asian-Pacific pivot. 
Ahead of striking the mega-gas deal and in the aftermath, there was no shortage of speculations about its geopolitical significance. A repeating key-note was that China had an upper hand because of Western sanctions against Russia. The commentators presumed that Putin was going to China as a suppliant and would be forced to submit to Chinese tough conditions. Frankly speaking, I was seriously concerned when at the end of the first day of his visit the contract wasn't yet signed and I saw Putin's sober face. The tension continued on the next day and only in the afternoon it was announced that the deal was struck. However, there was still remaining a sort of ambiguity about the price of the gas that could serve as the main indicator of whose hand was the upper one. Gazprom regards the price as a commercial secret and didnn't reveal it. So the analytical community both in the West and in Russia made a lot of guesswork. A simple math supposes that if the total price ($400 billion) and the quantity (38 billion cubic meters) are known then the average price can be $350 per 1,000 cubic meters. 

The Western commentators hurried up to admit that Given the costs announced so far, this project will yield a subpar return for Gazprom under today’s assumptions—maybe high single digits or low double digits. This will not be Gazprom’s most profitable endeavor”. However, the head of the Gazprom export arm Alexander Medvedev said the gas price would be well above $350 per 1,000 cubic meters. At that, Gazprom and China have preliminary agreed on a $25 billion advance payment for gas supplies. Konstantin Simonov, director general of the National Energy Security Foundation, thinks that the widely reported sticker price of $350 per 1,000 cubic meters is a simple oversimplification. He explained that under the contract, supplies of Russian gas via the Eastern route will reach the full capacity of 38 bcm a year only after the fifth year of supplies. During the first five years deliveries will be only 16 bcm annually. This means that the total gas supply will exceed a trillion cubic meters and the price will come closer to $390.  

Important for Russia, the agreement includes a base price formula with reference to oil prices. Russia was determined to protect this price formula notwithstanding China's tough resistance. The pricing of Russia's gas sales to Europe is based on an oil price reference formula. Given the high oil prices, the oil-based price formula for natural gas allows Russia to sell its gas at a higher price than if it were based on spot-market natural gas prices. On the other hand, RBC Capital Markets analysts said implied terms will give China a steady supply of piped-in Russian gas at a price about 25-40 percent lower than the current cost of importing liquefied natural gas from overseas. So the deal is beneficial for both parties.

Gazprom expects that the contract with China will affect gas prices in the European market, Aleksey Miller, head of Gazprom said at the St. Petersburg International Economic Forum. "Firstly we assume that the signing of this contract will impact European gas prices. Secondly, the competition for Russian gas resources has begun yesterday,” Miller said. “The Asia-Pacific is not only the largest and dominant market, but it is the Asia-Pacific market that is influencing the European and North American markets”.

A greater geopolitical vision of the gas deal is expressed by Ulson Gunnar, “Finally, Russia and China’s constructive energy partnership, concluded without territorial, economic, or legal integration, will lend further credibility toward a future multipolar global order, while simultaneously exposing the shortcomings, even follies, of the West’s unipolar system of pursuing hegemony through costly and ultimately unsustainable global integration».

Immediately after striking the deal which was long in advance nicknamed by the Western media as Putin's Holy Graal, it was labeled as Russia's Asian pivot. As Patrick L Young puts it, “Placed in perspective, while a massive deal it is only expected to be around 10 percent of Chinese demand by 2020 (according to Nomura). That means there is much more scope for Russia to increase its supply in due course. Russia’s pivot to the growing markets of the east is in full swing”.

Properly speaking, inking a gas deal wasn't the beginning but a spectacular display of a very careful and thoroughly adjusted process of Russia's return to the Pacific. The deal was just an ultimate piece of smalt which made the whole mosaic visible to the general public. In fact, the Western analytical community has been alerting their governments about potential Russia's shift to the East long ahead of the Ukrainian crisis and even before Putin's re-election.

Gazprom and CNPC had been negotiating the gas deal during a whole decade, and when it was finally finalized Russia has succeeded in concluding a bulk of trade agreements with other north-eastern states. As well. Another landmark project is to double connect North and South Koreas by means of pipelines and railways. On June 5, Russia’s Minister for Far East Development Aleksander Galushka announced the plan to extend the Trans-Siberian Railroad in order to provide a link between the Korean peninsula and Europe. The link will extend the world’s longest railroad and make Russia a major transit route between Europe and Asia. Shipping by rail is nearly 3 times faster than via the Suez Canal, Russian Railways CEO Vladimir Bakunin said.

Cooperation between the two Koreas on the railway could lead to compromise on a long-delayed plan to build gas pipelines and connect both Koreas with Russian gas. Russia's Gazprom and the DPRK's Ministry of Energy have reached an understanding to build a natural gas pipeline that would enter the DPRK at the Khasan crossing of the Tumen River on the Russia-DPRK border. The pipeline would then extend through the DPRK to the Republic of Korea (Korean Gas Co). South Korea is the 10th largest consumer of energy worldwide and the second largest importer of LNG. Russia first agreed to export LNG to South Korea in 2005, and agreements this year include South Korean support for modernizing the LNG fleet and investing in Russian Far East development. Seoul is especially interested in partnering with Russia as an alternative to nearby China and Japan. Russia is ideally positioned to export to South Korea because of the proximity of the two.

In order to boost the deals, Vladimir Putin recently signed into law an agreement that will write off much of DPRK Soviet-era loans. Russia will forgive 90 percent of North Korea’s debt from the Soviet era, leaving $1 billion to be repaid interest free in the next 20-40 years. At that, North Korea will grant Russian firms access to its natural resources in exchange for imports and investments. In January, a UK-based private equity firm SRE Minerals Limited said North Korea had the largest rare earth oxides deposits in the world, an amount of approximately 216 million tons. Rare earth elements (REE) can be used in many sophisticated technologies, from cell phones to guided missiles.

During his four-day visit to Vietnam and South Korea in November 2013, Putin signed a series of documents to enhance Russia's cooperation with Hanoi and Seoul in the economic, energy, military and humanitarian sectors. Thus, Russia will help Vietnam with hydrocarbon extraction, and possibly sell LNG to Vietnam, along with its ongoing support for the Vietnamese navy and nuclear power. Vietnam’s coast is accessible from ports in Russia’s Far East. For that reason, Russia sees Vietnam as an attractive energy partner not only in its own right but also as a gateway for Russian exports to other Southeast Asian nations. Using Vietnam as a corridor to Southeast Asia would allow Russia to diversify its energy trade and avoid excessive dependance on Chinese exports.

India is an ancient trade partner and loyal political ally which has openly supported Russia amidst the Ukraine crisis. The countries are involved in high-tech military cooperation and Russia is a top arms provider to India. Surprisingly enough, their energy cooperation has got a random character. One of the major barriers to greater energy partnership between India and Russia — particularly for crude oil — is the lack of infrastructure to transport the crude. Currently, Russia and India are negotiating the construction of a $30 billion oil pipeline—the most expensive ever—to connect Russia’s Altai mountain region to the Xinjiang province in northwest China and then to northern India. India also can be interested in buying LNG from Gazprom's Sakhalin-2 terminal. At the time being, the main beneficiary of Sakhalin-2 is Japan. A new LNG plant in Vladivostok aims to ship 10 million tons from 2018 and will be connected to the continental gas production centres such as Yakutia and Irkutsk oblast. Novatek, Russia’s largest non-state gas producer, initiated another LNG Project on Yamal peninsula. It will start producing LNG in 2016 and supply 16.5 million tons per year of the tanker-shipped fuel by 2018.
Naturally, Russia's beginning pivot to Asia was not at all welcome in the West. Gal Luft in a characteristic article “Can America Stop Russia's Energy "Pivot" To Asia?” gives the US leadership advises how to stop Russia. They are so outdated that I can't deprive myself of pleasure to cite them. 1) “as guarantor of South Korean security, Washington should publicly take a strong position against the Russia-Korea pipeline”. 2) “Washington should convince its Asian allies that it is committed to becoming a leading energy-exporting country and a major player in the global energy-trade system”. 3) the U.S. “should enhance cooperation with Asia on unconventional gas. China owns the world’s largest shale reserve. Japan is a global leader in the development of methane hydrates”. 4) the U.S. “should support measures aimed at reducing LNG prices in the Asia-Pacific to make LNG more competitive with Russian pipeline gas”. In fact, items 2-4 can be reduced to a single one or shale, shale and shale! 

The U.S. made all this mess in the Ukraine in order to promote its shale gas to the EU and, supposedly, to extract it in the eastern Ukraine. That is why the US military advisers are so relentless towards the rebellious eastern provinces. It's hard to believe that they offer to sell the futures of this same gas not only to Europe but to Asia as well. In Russia, we say “to sell the bear's skin before one has caught the bear”. In my previous post I cited Gail Tverberg's article “The Absurdity of US Natural Gas Exports” , were she explains why America's gas crusade to Europe is ill-intentioned not only against Russia but for Europe, as well. On June 5 after the G7 meeting in Brussels, European Commission President José Manuel Barroso made it clear that the EU cannot create “the illusion that gas from the US is going to solve our problems.” In fact, instead of containing Russia's pivot, the U.S. and the EU have been doing their best to push it forward. A ridiculous sanction's campaign is still in play. The latest EU suicide attempt was to cancel the construction of the South Stream pipeline bypassing Ukraine. 

During the last few years, Russia has been striving to strengthen the European energy security and to diminish dependency of Southern European markets from the vicissitudes of gas transit through the unstable Ukraine. According to its fuzzy logic, the European Commission told Bulgaria to suspend preparatory work on South Stream, as it could damage EU energy security. Ironically, all this fuss takes place right at the moment when the EU, Russia and Ukraine are trying hard to resolve a $3.5 bn debt crisis since Ukraine haven't paid for Russian gas for months. Putin has sent two letters to EU leaders warning them that in case of continuing non-payments, Gazprom would be forced to suspend deliveries to Ukraine. A recent history teaches us that in such a case the latter simply begin stealing gas from a transit pipe. After tough talks, Ukraine has paid a third of the debt. What makes me laugh - that same EU Energy Commissioner Guenther Oettinger who has been the main arbiter in the debt case, has announced about blocking the South Stream. After trilateral gas talks in Brussels, Gazprom Chairman Miller has stated, “The EC cannot stop the construction. No one can stop us building it. Our answer is very simple. In December 2015 the first gas along the marine section under the Black Sea will arrive in Bulgaria and the European Union”.

Credit: Pool photo by Alexey Druginyn

While the West understands that it cannot reverse Russia's shift to the East, it is deeply concerned by another Putin's “dream” which has been turning into reality these days. After the collapse of the USSR, Russia has been seeking to restore gradually the economic and political relations in the post-Soviet territory in the framework of the Eurasian Economic Union and the Customs Union. At the end of 2011, Vladimir Putin, then being the Russia's Prime Minister, published an article "A new integration project for Eurasia: The future in the making" ("Izvestia", 3 October 2011). He revealed his vision of further developing of the Eurasion cooperation. An angry reaction from the other side of the Atlantic was not long in coming. Former US Secretary of State Hillary Clinton referred to the project as a “move to re-Sovietise the region.” While acknowledging that the Eurasian Union will not be called “the Soviet Union,” she also stressed “let’s make no mistake about it. We know what the goal is and we are trying to figure out effective ways to slow down or prevent it”. Did her ominous threat ever come true? 
On May 29, Presidents of Russia, Belarus and Kazakhstan has signed the Treaty on the Creation of the Eurasian Economic Union in Astana, which comes into effect in January 2015. The goal is to create a common market between three countries with a total population of over 170 million, with free movement of capital, goods, services and labour. Kyrgyzstan and Armenia are ready to join the Treaty in the nearest future. Meanwhile, Vietnam and Turkey are negotiating about joining the Customs Union. After the signing ceremony, President of Kazakhstan Nursultan Nazarbayev who hosted the event, said “a new 21st century geopolitical reality is being born”. 

It isn't at all surprising that comments on establishing the Eurasian Economic Union, were rather aggressive. They labeled the EEC as a “New Russian Empire” or a “New Soviet Union.” They predicted its failure, mainly, because of Ukraine's absence. Neil MacFarquharmay wrote a post titled sarcastically Russia and 2 Neighbors Form Economic Union That Has a Ukraine-Size Hole». He writes, “Some analysts suggest that the loss of Ukraine as a potential member was the death knell for the Eurasian Economic Union. On a purely economic scale, losing Ukraine meant losing a market of more than 40 million people. Ukraine also provided economic diversity when paired with the two energy exporters».

Is Ukraine so crucial for the Eurasian project? In order to understand the rationale behind Western reaction on Ukrainian developments, let's turn to “The Grand Chessboard: American Primacy And Its Geostrategic Imperatives, a textbook for American presidents written by Zbigniew Brzezinski. Four key statements are, as follows, 1) “For America, the chief geopolitical prize is Eurasia”, 2) “A power that dominates Eurasia would control two of the world's three most advanced and economically productive regions”. 3) “the new world order under the hegemony of the United States is created against Russia and on the fragments of Russia. 4) “without Ukraine Russia ceases to be empire, while with Ukraine – bought off first and subdued afterwards, it automatically turns into empire”. Following these clear instructions, the U.S. leadership has started a campaign of tearing Ukraine away from Russia and incidentally selling the idea of shale gas.

In my opinion, Brzezinski and his adepts have been over-estimating Ukraine's significance for a success of the Eurasian integration. Though Ukraine is very emotionally important for Russians, from the political and economic points of view, it was clear long ago that it was drifting to the West. If we look at the chart, we can see that Ukraine didn't take part in the Customs Union and exited from the Common Economic Space on the early stage. Initially, Russia was not so strong economically in order to give the country considerable support or to compete with the US NGOs in bribing the local elite. When Russia began doing well and started investing in Ukraine, the latter corrupted and got accustomed to milk two cows. Meanwhile, a fatal West-East divide has been gradually corroding the country from within. While maintaining old cooperation relations with the east-Ukrainian industrial regions, Russia was developing little by little its own industries to substitute Ukrainian import. Finally, the construction of North and South Stream pipelines were aimed to decrease gas transit through Ukraine. However, Ukraine will always stay a source of political, security and humanitarian preoccupation for Russian leadership.


I can't respond better to those who talks about Putin's imperial ambitions, than Mark Adomanis, who says, «Without lapsing into cartoonish Kremlinology, I do think it’s noteworthy and important that Putin is so publicly and forcefully going on the record advancing a broad program of technocratic neoliberalism: harmonizing regulations, lowering barriers to trade, reducing tariffs, eliminating unnecessary border controls, driving efficiency, and generally fostering the free movement of people and goods. Even if not fully sincere, an embrace of these policies is healthy». 

Last but not least, an important by-product of the Asian pivot is further undermining dollar domination, since according to the gas megadeal and other Russian-Chinese deals roubles or yuans will be used in mutual payments. Trade turnover inside the EEC will be also carried out in roubles, as well as, North-Korean deals.


Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)