Expert article 158 Baltic Rim Economies, 21.12.2007, Bimonthly Review 6 – 2007
(See also Helsingin Sanomat Vieraskynä 31.5.2007. )
By Yrjö Myllylä
After the independence of the southern oil producing
countries once belonging to the Soviet Union, Russia has
become a more northern country seen from the energy
producing point of view.
As a result of this change the importance of Ukraine,
Byelorussia and Estonia is emphasized in the export of
energy from Russia. This is due to the fact that in Russia the
increasingly important oil and gas producing areas in West
Siberia are connected with pipelines which go through these
countries to Western Europe.
In southern Russia on the Black Sea only a hundred
kilometres of coastline is left which the country can use for its
energy transport and control itself. In oil transport through the
Black Sea there is the risk of heavy traffic in the Bosporus
Straits in Turkey.
The countries of the EU form by far the most important
buyers of Russian oil and gas products. The growth of the
world economy, among other things as a result of the growth
of the economy in China, as well as the unstable situation in
the Middle East, raise the prices of oil and gas. These factors
also increase the possibility of conflicts and accelerate the
development of new transport routes for the needs of
European buying countries.
Russia is trying to avoid economical and political risks in
the export of energy by developing competitive, lucrative
alternative transportation routes. Conflicts caused by the
increased price of oil and gas pose risks to Russia. These
conflicts are seen for example in disputes in transit payments
when trying to adapt to market prices.
Russia has the right and obligation, for example along
with the possible WTO membership, to avoid subventions
and move to market based pricing in different products. Oil
and the gas products get subventions in Russia. The country
has sold gas and oil to the countries of the former Soviet
Union clearly below the world market price.
However, Russia cannot avoid transit through Ukraine,
Belarus or the Baltic States, as the oil and gas lines built
during the Soviet regime form the central transit routes to
The Russian government decided in May 2005 on an
approved traffic strategy to emphasize such transport routes,
which the country could control itself and thus avoid
economical and political risks influencing its economy.
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