- The Washington Times - Wednesday, January 10, 2007

The United States must face the fact that most of the world’s energy resources are in the hands of powerful states such as Russia, Iran and Venezuela that are increasingly hostile to U.S. interests and consumers, analysts and senators said yesterday.

Partly because of fumbled foreign relations by the United States, an “axis of oil” is developing outside of U.S. influence that encompasses Russia, China, Iran, Venezuela, among other giant energy producers and consumers.

To curtail the influence of this group, the United States should establish more constructive and cooperative energy relations with these states, analysts told the Senate Energy and Natural Resources Committee.

“This axis of oil is emerging as the principal counterweight to American hegemony in global affairs,” said Flynt Leverett, director of energy geopolitics at the New America Foundation.

“If present trends continue unchecked, this is going to become an increasingly important source of geopolitical tension around the world and an increasingly important source of challenges for U.S. interests.”

Russia and China have succeeded in “locking us out of Central Asia,” which has major oil and gas reserves, by establishing the Shanghai Cooperation Organization, the only large regional security alliance that does not include the United States, he said.

Meanwhile, Russia has been pushing out Western oil companies as it solidifies control over its oil and gas sectors, and China’s national oil companies have secured agreements to develop Iran’s huge oil and gas reserves — which together rival Saudi Arabia’s reserves in size — despite a U.S. push to impose sanctions on Iran over its nuclear program.

Venezuela, which provides 15 percent of the gas Americans use to power their vehicles, announced this week that it would take control of refineries in the Orinoco region, one of the world’s largest untapped oil reserves, from Western oil companies. Venezuelan President Hugo Chavez has worked tirelessly to keep oil prices high and supplies tight to maximize revenue that he uses to pursue his social and political goals.

Although many Americans continue to blame Big Oil for high pump prices, “the reality is that national oil companies control some three-quarters of the world’s oil reserves” and are working against U.S. interests, said Sen. Pete V. Domenici, the committee’s ranking Republican from New Mexico.

Mr. Domenici noted that Russia and other oil states no longer depend on the U.S. for the money and expertise needed to develop their reserves.

“With the price of oil where it is now and where it has been, they don’t need Western capital in the way that they have before,” said Linda Stuntz, an oil law specialist.

To minimize U.S. vulnerability, committee members advocated stepped-up conservation — including higher fuel-economy standards for cars and trucks — as well as more U.S. drilling and funding of promising alternative fuels. Major changes in foreign policy also were recommended.

Mr. Leverett contended that continued confrontation with Iran is counterproductive. He said Iran showed a willingness to help the U.S. in the aftermath of the September 11 attacks, and Washington should take up offers to negotiate a “grand bargain” settling disputes with Tehran to gain more influence over Iran’s energy development.

“The geopolitical and geoeconomic stakes in Iran go well beyond the nuclear issue, as important as that is,” Mr. Leverett said. “There is a broader strategic competition under way.”

Because of U.S. sanctions, Iran is looking to China and Russia to help develop its resources, and in exchange has promised to coordinate with Russia in marketing its gas to ensure that it does not loosen Russia’s stranglehold over European markets.

“This is the strategy that the Iranians think will get them out of the box that they’re in now,” Mr. Leverett said. ” And the United States, and even Europe to a large extent, are basically irrelevant to that strategy,” which “has the potential to remake the geopolitics of all Eurasia.”

The U.S. stance toward China on energy issues also has been backward, he said. Instead of blocking attempts by China’s state oil company to acquire U.S. oil firm Unocal Corp. last year, Congress should have encouraged it, because the takeover bid conformed with American notions of the rule of law and free markets, he said.

By nixing the takeover, the U.S. encouraged the natural tendency of such state oil companies to adhere to their own mercantile and national interests, he said.

Fatih Birol, chief economist at the International Energy Agency, noted that even friendly states, such as Saudi Arabia, may not always decide to increase production to satisfy consumer demand in the United States and elsewhere if it is not in their national interest.

“This may have serious implications for consumers,” he said, urging dramatic efforts at conservation.

Uncertainty about whether state oil companies will be willing to spend the estimated $4 trillion needed to increase production to keep up with growing demand in China, India and the U.S. is a principal reason oil prices are high and projected to stay high, he said.

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