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Dutch Disease turnDutch Disease 2AC1. Russian oil hegemony causes Dutch Disease destroying democracy and making econ collapse inevitable Vladimir Shlapentokh PhD in economics at Soviet Academy of Sciences, professor of sociology at MSU November 6, 2006 “Intoxicated by high oil prices: Political Dutch disease afflicting the Kremlin”, Oil & Gas Journal, Dutch disease As suggested by many economists, Dutch disease--a country's excessive dependence on the export of raw materials--can have serious economic consequences as a country becomes increasingly dependent on that raw materials sector. Other branches of the economy, such as manufacturing, often decline because of the concentration of such resources as oil or gold, as happened in 16th century Spain. A sudden fall in the price of the raw materials could bring an economic collapse. Seemingly, the Russian leaders, like their colleagues in Venezuela and Iran, see the world through the prism of oil revenues. It goes without saying that one of the first victims of the political Dutch disease is democracy. However, an even more dangerous consequence of the political Dutch disease is the leader's loss of a sober assessment of reality. Under the impact of their technological achievements, both Stalin and Khrushchev, with their skewed visions of reality, moved the country closer to a major war. Putin's euphoria over oil prices may not be as great as his predecessors' enthusiasm, but his aggressiveness in foreign policy in general, and toward the US and Russia's neighbors in particular, has clearly increased since 2005. The shift occurred in late 2005 when Moscow brandished its gas weapon against Ukraine and indirectly against Europe. Russia's foreign policy has hardened (despite some cooperative gestures toward the West) and influenced several international conflicts, including issues surrounding North Korea, Iran, and the Middle East. The conspicuous demonstrations in July of friendship with Venezuela's Chavez, another political leader inebriated by oil revenues, and the readiness to sell him weapons despite American protests were clear signals of unfriendliness toward the US. Russian media treated Moscow's attitudes toward Chavez as an obvious demonstration of disregard toward American concerns. Dmitry Medvedev's proposal to make the ruble fully convertible in an attempt to renew the currency's international status was another result of the country's oil fever. Medvedev talked contemptuously about "the financial irresponsibility of the United States," citing the country's growing national deficit. He also denounced the International Monetary Fund's attempt to promote market reforms, forgetting that only a few years ago Russia had scrounged for credits from this bank. Oil fever has not infected all Russians. The level of enthusiasm among the general public and particularly among experts does not match the levels observed after Sputnik and cosmonaut Gagarin were launched into space, to say nothing of the excitement after the 1945 war victory. Among the most persistent critics of the oil frenzy is Egor Gaidar who suggested that the leadership's oil delirium and its disregard for the instability of oil prices were dangerous to the country. Several independent politicians and journalists have seconded Gaidar's critique of the Kremlin's "hydrocarbon doctrine," demonstrating concern for the "time bomb in our political system." Concerned about the Kremlin's "muddled vision of the world," some independent minds in Russia, such as Dmitry Muratov, the editor of Novaya Gazeta, insisted: "The intellect of the government changes inversely with the price of oil." n6 Leonid Radzikhovsky, a famous liberal journalist, wrote about the inverse correlation between the level of democracy and the price of oil. What is more, even Vladislav Surkov, until now the Kremlin's leading ideologue challenging Medvedev, in a struggle for influence over Putin, suggested that, with gas as its only basis, the Russian economy would inevitably reveal its fake prosperity in the "post-hydrocarbon era." Russia is not the only country in the world that is obsessed with oil. Every country, in one way or another, is preoccupied with oil. While the US, Europe, China, and India are concerned about fuel supply and the adverse influence of high oil prices on the economy and standard of living, several countries, including Russia, have turned their oil resources into weapons for achieving their domestic and foreign goals. As the experiences of Stalin and Khrushchev showed, Russian leaders sometimes overstretch the potential of their advantages and lose a sober perspective of reality. Mesmerized by his clout, Putin may accept "the invitation" of the Russians to stay in power after 2008. Today, 51% of the Russians would vote for him if he decided to try for a third term, which he promised not to do. In the foreign arena, Putin has already shown less willingness to cooperate with the West and the US in particular. His foreign policy may harden even more. However, it is unlikely that Moscow will demonstrate direct hostility toward the West in the near future. The post-Soviet space is another story, however. The idea that oil will allow Russia to take control over Ukraine, Georgia, and Belorussia is deeply engrained in the minds of Kremlin politicians. We can expect an exacerbation of the political developments in the post-Soviet space, which will undoubtedly complicate relations with the West. Aside from the damage to Russia's international relations, the oil delirium is more problematic to the country's long-term national interests. The over-confidence in oil revenues may lead to a decline in the spirit of entrepreneurship, to a refusal to modernize industry, or even to an acceptance of deindustrialization. The obsession with high oil prices explains why the Kremlin sees few obstacles to the country's continued move toward an authoritative regime. It also explains the Kremlin's conspicuous disregard for the growing problem of corruption in society. With the vision of the Russian leadership blurred, it may become increasingly insensitive to various destructive tendencies in the country. The impact of the price of oil on political decision-making in Russia is crucially important to the world and should be closely monitored. Foreign investment turnForeign investment 2AC1. Undermining russia’s dominant position in the oil market spurs foreign investment Gary J Schmitt writer for issues in Science and Technology, June 22, 2006 Natural gas: the next energy crisis? The United States has long been"addicted" to foreign oil. But we now risk becoming dependent on foreign natural gas as well. The most immediate obstacle to taking a tougher line with Russia, however, is the growing power of Gazprom, the Russian energy company in which the Russian government has a controlling interest. The operator of the world's largest network of gas pipelines and the world's largest producer of natural gas, Gazprom is assiduously working to expand its preeminence into a position as close to a monopoly as possible. Gazprom's strategy for accomplishing this goal is straightforward. To obtain the resources to develop its energy reserve holdings in Russia and increase production, it has allowed foreign entities to buy its shares and is inviting non-Russian companies to help develop untapped or underdeveloped fields. However, it is doing so in ways that ensure that Moscow still has the controlling interest. Combined with the revenues produced by its pipeline operations and the quasi-liberalization of its rules on stock holdings, Gazprom's market capitalization stands at approximately $200 billion. Flush with cash, Gazprom is now in the business of trying to buy pipeline networks outside of Russia. In fact, as the European Union pushes its members and prospective members to divest themselves of state-controlled energy companies and to liberalize more generally, Gazprom is moving to buy up pipeline assets or gain a substantial foothold in European energy companies. In short, Brussels's desire to create a more open market in the energy sector is being used by Moscow as an opportunity to extend its control over the distribution system for natural gas. Does that matter? Moscow clearly thinks it does. Well before Vladimir Putin appeared on the stage as a possible Russian president, he was writing that the key to Russia "regaining its former might" was its role as a provider of natural resources to the rest of the developed and developing world. As president, Putin halted plans by Kremlin liberals to break up Gazprom's monopoly inside Russia and instead appointed cronies as the company's chief operating officers. If nothing else, Gazprom's profits provide the Kremlin with an enormous slush fund that is outside the official Russian state budget. This is made even easier by Gazprom's habit of partnering with shadow companies whose underlying ownership remains opaque but that are suspected of having ties to the Russian mafia and Russian intelligence. Such arrangements also make it possible to feed funds to Russian and non-Russian politicians and government officials alike. As the past winter's events have made clear, Putin's use of Gazprom is not always so subtle. On New Year's Day, Gazprom cut off Ukraine's gas supplies. Not long after that, the major gas pipeline feeding Georgia mysteriously blew up. In both cases, two young democracies, both looking to the West, had frustrated Gazprom's efforts to get control of their pipeline assets. (Ukraine's pipeline is the main route for transporting gas to Europe, so the cutoff to Ukraine affected Europe's supplies as well.) Russian officials argued that Ukraine was paying far less than the global market price for the natural gas it tookfrom the pipeline. Moscow, of course, had little to say about the fact that Gazprom was providing Belarus and its pro-Russian leader, Alexander Lukashenko, gas at even lower prices. In the end, facing cutoffs and/or massive price hikes only weeks before elections, Ukraine's leaders cut a deal that keeps prices for the moment relatively low inexchange for a tangled web of corporate arrangements that gives Moscow a stake in Ukraine's pipeline system and allows billions of dollars to be siphoned off to a mysterious Swiss company (RosUkrEnergo). Tokeep the gun to Kiev's head, the deal also gives Moscow and Gazprom the right to trigger another gas crisis by renegotiating the price Ukraine pays for natural gas after only a few months. Moscow might not have much of a conventional military to threaten its neighbors anymore, but Putin clearly believes he has found another tool to wield influence beyond Russia's borders. Reducing Gazprom's market power Many in Europe, reacting to rising global demand and the uncertainty of supply exemplified by Gazprom's hardball approach to Ukraine, appear willing to grant Gazprom concessionary rights on European energy infrastructure and to sign long-term contracts with the company. Although from one perspective this might appear to satisfy Europe's energy security needs, in the process it further solidifies Russia's dominant hand in the field. Moreover, it ignores the fact that when Moscow has had a dominant hand to play with its neighbors in the past with oil or gas, it has not been hesitant about playing it. Would it trythis with Europe? No one knows. However, since the flare-up over Ukraine, Moscow has done little to reassure European capitals, threatening to take its gas supplies elsewhere--to China--if the Europeans continue to balk about Gazprom acquisitions in Europe and continue to insist that Russia liberalize its own internal energy market. At a minimum, we do know that with Gazprom having this advantage, Moscow will not be any easier to deal with. Nor will it make our European allies eager to challenge Russian misbehavior on other fronts. There are steps that Europe can take to lessen Gazprom's market power and, in turn, Moscow's leverage. First, Russia's goal of accedingto the World Trade Organization should be explicitly tied to Moscow's ratifying the 1994 Global Energy Charter for Sustainable Development. The treaty, among other things, would mandate a Russian commitmentto promote "an open and competitive" energy market and, in particular, would require Gazprom to open its network of pipelines to independent gas producers. Second, Gazprom's own oil and gas fields are in decline; most of the gas Gazprom provides to Russian citizens and its European customers comes from non-Russian sources in central Asia. To develop its untapped reserves in Russia, Gazprom will need to draw on the technological and financial resources of the West. The quid pro quo for providing those resources should not simply be an equity share in the revenues generated down the line but a G-8 negotiated and enforced commitment on the part of Moscow to create a truly transparentand market-based energy sector. Finally, European countries should rethink their tendency to sign long-term deals with Gazprom. Instead, they should focus on two initiatives: first, creating new pipeline infrastructure to move central Asian gas to Europe without Russian involvement; and second, adding new LNG facilities to support imports from West Africa and the Middle East. As we have seen in other cases such as the Baku-Tiblisi-Ceyhan oil pipeline, once Moscow is confronted with the fact that it is no longer in a dominant market position, Western companies will find it less difficult to negotiate competitive contracts with Gazprom and the other Russian energy giants. Directory: file -> view view -> Western Europe after wwii view -> Author study: paul fleischman view -> Qpa1 7ela study Guide view -> Arctic Oil/Gas Neg view -> November 1970 Approximately 150,000-500,000 deaths Bhola Cyclone Bangladesh view -> Grade Level: 6 Unit of Study: Caribbean glce view -> Citation: Duffield, Katy view -> Table of Contents Lesson # view -> Chinese Wind Energy Disad Download 9.54 Mb. Share with your friends:
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