Most American geopolitical risk analysts live in a row of northeastern towns far from the tornado belt, so they don’t understand what sowing the wind, reaping the whirlwind means. The Anglo-American strategists who thought it clever strategy to launch a little war in Libya, kill Muammar Qaddafi, and help themselves to the new regime’s oil and gas concessions are slow to follow that the whirlwind there is now blowing south and westward.Last year in Mali, last week in Algeria, soon (again) in Nigeria. Attacks on the wellhead, refinery or pipeline – gas or oil – will soon enough reveal how counter-productive are Francois Hollande’s bombers and paras; and by contrast, how fulsome and stable Russian gas supplies, natural or liquefied, will prove to be, when the whirlwind really starts blowing across the Sahara towards central Africa’s energy exporters.
Business risk analysts do better at wind detection — time to go short on energy companies with west and north African exposure; go long on Gazprom, Novatek, Rosneft. Alexei Miller, Leonid Mikhelson, Gennady Timchenko and Igor Sechin are crying all the way to the bank.
It’s Davos time, and that means farmer’s market week for the US and UK companies which make their living selling fear of risk and consolation to big corporations at $20,000 a pop per month. The louder the US market leaders cry, the more obviously they are hucksters. Stratfor of Houston, Texas, for example, has taken the due diligence-equivalent of snake oil to a new pitch.
As a snake-pit of risks – nuclear armed, over-endowed with natural resources, authoritarian, corrupt, atheistic – Russia has been a staple of the commercial fearmongers. So when the Eurasia Group of New York touts its latest from the Swiss mountain top, and fails to mention a single Russian risk for the year ahead, that’s news. Or is it?
Eurasia is run by Ian Bremmer, who has a string of academic degrees and university jobs in the US, and also the practical experience which won him the award “Young Global Leader of the World Economic Forum, 2007.” David Gordon, who runs Eurasia’s risk research, comes from the US intelligence community, doing time at the CIA, the State Department, and the US Agency for International Development. The director of research, John Green, is from the US Marine Corps. The director for research on Russia, Cliff Kupchan, got his stripes at a Congressional Committee, the State Department, and the centre for the National Interest (aka Nixon centre).
The Eurasia Group’s board of advisors is heavy on hedge funds paying for what they hope will be inside dope on emerging markets, plus American and Japanese money men whose institutions have a record of difficulty getting their Russian business above the red line, and of fleeing at the first sign of trouble. Citigroup, with two slots on the advisory board, has distinguished itself purveying the good news from the Russian markets with an annual competition to send Russian business reporters to New York for a make-over.
Eurasia makes more of its living selling the bad news, and Russia has been a staple. In Eurasia’s “Top Risks for 2009”, Russia took an entire section for itself. A lot of innocent trees were felled to put this on paper: “We enter 2009 with Russia in play in a way we haven’t seen in decades. The relevant comparison isn’t 1998, when the Russians engaged in default and devaluation but remained within the bounds of their existing political and economic system (as Lenin said, two steps forward, one step back). The history to consider is 1989-as key aspects of the Russian system could change for the worse…
“We’re likely to see much more turbulence in 2009, as factories providing employment for entire cities are shuttered. That’s a sort of suffering that Russians are certainly used to, but only in the context of a very different kind of political system…Russia will be a troublemaker in international relations-if a more unpredictable and opportunistic one than in 2008. As the latest gas cutoff to Ukraine shows, the Kremlin puts realpolitik and national interests first. ‘Market discipline’ in the aftermath of Georgia did not prevent Moscow from again turning off the tap to Ukraine, and more instances of bare-knuckles foreign policy are likely in 2009.”
Not much of this turned out to be true, or redounded to the benefit of Eurasia’s balance-sheet. Three years later the group’s “Top Risks for 2012” issued 8 Russia alerts. One risk was “grassroots opposition to entrenched governments is spreading to countries such as Russia”. Also, Bremmer and his colleagues managed to predict that Vladimir Putin would win the presidential election, and that “President Dmitry Medvedev may well be left by the wayside, but that’s not going to affect Russian governance”. US hedge funds like Citadel, EMSO, Discovery Capital, and Pinebridge pay premium dollar for this. Here’s a fairer priced copy.
This year, this week, Eurasia “Top Risks for 2013” contains just four mentions of Russia, and they are passing references, not risk alerts. One of them claims that “from Russia to China, leaders’ wealth is increasingly exposed”. Somehow the New York analysts failed to look out the window when Americans went to their presidential poll. Then there is the forecast “of Russia and the US (and perhaps China) agreeing on a common post-Assad peacekeeping mission in Syria.” Finally, the prediction which gives the snake-oil game away: “should it decide to exploit its own reserves, or collaborate with regional partners such as Algeria, Europe could, for example, reduce its dependence on its tough Russian supplier.” Tough? Sonatrach or Gazprom?
That’s the only mention of Algeria in the report. While conceding the risk of Islamists attacking by surprise somewhere, the Eurasia put its finger on the map and said it couldn’t rule out uprisings in “the Gulf region, Jordan, or Morocco”, while elsewhere in the “the Sahel Zone [risk] is growing, with the potential to destabilize Mauritania or Niger.” The possibility, which was realised last week in the attack on the Amenas gas refinery in Algeria, has taken Eurasia Group by complete surprise.
The communique from the attackers claims the Amenas operation was “90 per cent successful, as we were able to hit a strategic site protected by 800 soldiers with only 40 men”. The communique linked the operation to French intervention in Mali. The plant is owned and operated by Statoil of Norway and Sonatrach of Algeria. Of the 37 foreign plant workers killed, there were Americans, British, Japanese, Norwegians, and French. Of the attackers killed or captured, 11 were Tunisians and 2 Canadians. The weapons the latter used came from US and NATO-supplied stocks delivered to Libya during the war of 2011.
Before the US and NATO powers dependent on African oil and gas dust off their histories of European warfare in the African desert, and start pricing in the extra security premium for their shipments to European energy consumers, Russia’s gas and oil companies have an offer that’s going to be difficult to say no to. It’s called no-risk delivery at a stable price. Good to the last drop! — as Theodore Roosevelt said in 1907, not long after he promised US troops would intervene in countries defaulting on their debts.
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