One of the challenges of going
last hour late and inviting such

authoritative voices is that much of
what you had planned to say has been set

but there are a couple of things that I'd
like to do in a few minutes that I have

that can help try to bridge

the gap rather than square the circle and
several of the issues of the day here.

One thing that we've heard all day is
that on the one hand there seems to be

a great impulse for
cooperation but when we look at

the landscape we see mixed results
across all the different sectors and

we've heard a host of reasons why
that may or may not be the case.

We've also heard which is really
typical of this field a plethora

of perspectives and
one perspective that really gets lost or

really has not been been engaged in many
of these debates are the people that

theoretically and least from a scholarly
perspective look at international security

and there's been a lot of
international relations discussion and

the role of globalization
in an inner dependence.

But the hard headed realists out
there beyond the people who focus on

resource nationalism really have not
been part of a lot of these debates and

especially in the academic
community which when you look at

the topic of the day which is east Asia
and its interface with Russia and Eurasia.

Is actually quite strange because when you
look at what's going on on the ground.

It is in fact heated up a policy
debate over whether or not.

Energy is a source of cooperation or

a bone of contention that goes
beyond the commercial realm.

You see and we've term.

Heard in much more detail
than I can go into now how

the competing energy profiles
of the major players in this

dimension of the of the game if you
will in East Asia and your Asia.

Maybe food for
that competition right you have Russia.

You know pronounced an energy
superpower with its great reserves

in the Russian Far East
proximate to the east Asia and

with a burning concern about taming
its traditional caught customers in

Europe anxious to play the East Asian
energy card and hard so

to speak then you have the various
profiles that were just summarized nicely

and most recently by my count but really
delved in deep deep lead by all of our.

Speakers that show a mixed bag and
one that could be right for

competition that we talked about and added
to the mix of course the United States

with our import dependency our concerns
about sea lines of communication and

protecting those transport lines and
our naval supremacy and

our concerns and our sort of
dichotomy in our concerns between

those of about China's freeriding and
maintaining our our naval Supremes.

On the other hand you sort of see you can
look at the same cast of characters and

see marriage just convenience
all over the place and

the outbreak of cooperation
most recently marked by

the the the the Pacific pipeline

from Russia this a policy
debate of course animates

a broader theoretical debate to
date mostly among the political

economists between resource nationalism
and interdependence or globalization is.

Nationally as we see integrated
markets first in the oil but

increasingly in the gas sector.

Well as an international security
scholar and one who looks at.

Strategic interaction.

There are a couple of bottom lines
I guess in my observation of this

East Asian Eurasian tangle one and most of
my work is really focused on Russia and

Eurasia and so I look at Asia
from more of that perspective.

But when we look at how states interact
on energy we see that globalization and

hard headed politics are not
dichotomous that one can practice

heavy handed Reale polity within
interdependent relationships.

So the globalization realist or
globalization rap resource nationalist

arguments in and of themselves are sort
of missing the point because states can

manipulate others in within and
are dependent relationships.

Also the discussion in the hoopla
surrounding resource nationalism

as well as the prospects for integrated
markets and letting the market rule really

miss the empirical richness of the region
and specifically the relationship between

Russia and Eurasia on one hand and
East Asia and that it's been a mixed bag.

There's been both more and
less to East Asian Eurasian energy state

craft that either side of this traditional
theoretical debate can explain.

There's been more competition
than the interdependency and

market or oil or perspectives can
acknowledge and there's been more

cooperation than the resource
nationalist arguments can acknowledge

especially since you see cooperation
among the national companies or

status intervention and we also see that.

Not all supplier customer
relationships are volatile

in this particular dimension
there's a ration station element.

So as an international relations person
in a security person in particular

its focus is on strategic interaction
what intrigues me what I see

to be our energy security
dilemmas in the sense that

outcomes either cooperation or
competition and competition and

strategic competition beyond your
commercial outlets are a function

of dynamic strategic interaction
between players between states.

It's not a function of whether or not.

Russia itself is predatory or
China itself is predatory or

Japan or
Korea predatory it's how they interact.

But it's also not just their endowments
and the market positions that they bring

but also the domestic institutions that
affect the stakeholders the property

rights and more specifically in
a strategic interaction context their

ability to signal to each other and
so when I look at the equation.

I see the strategic interaction between
a host of State players private actors and

quasi I state players them on
the landscape that make it difficult

to distinguish between commercial
competition and strategic competition and

this was something that was raised
during lunch and it's TALK OF IT.

Well why is that suddenly seem
more commercial competition

isn't that good is not
a positive sum game.

Well I would argue in these
energy security dilemma

contacts that it's very hard
sometimes to distinguish

what made seem to be commercial from
strategic competition and as a result.

What we see when we what we see
in terms of the manifestation

of competitive arrangements or
a competitive issues.

And in many cases and
in Vernon and avoidable.

And that somehow confound
otherwise mutual interests

in cooperation in the interdependencies
that were mentioned earlier.

And so
the challenges in many cases are not to

outcompete another player or another
actor or to change their incentives but

rather to improve reassurance
confidence building.

OK To mitigate some of
these security dilemmas but

to recognize in some contexts.

Given the market dynamics and the Domestic
Institutional composition of the players.

That we're going to have
energy security dilemmas and

their competition at the strategic
level is not a void.

So the challenge is to figure out under
which conditions are this these energy

security dilemmas heightened
versus mitigate So

what I'd like to do then in the few
minutes that I have is really

touch on some of the the debates
between interdependence globalize

on the one hand Royler perspective on
the one hand and the resource nationalise

on the other hand is sort of expose
what some of the limitations

to these respective arguments may be
then sort of outline very briefly.

Some preliminary thoughts on what
our energy security dilemmas and

then discuss even briefer since we've
we've touched on a lot of these cases in

more detail some episodes in the gas
sector with respect to Russian and

Eurasian relationships with
the the Big East Asian players and

then talk about some of the implications
both for and the you especially I see

students here on the behalf of students in
terms of scholarly research areas that you

may want to explore that
need more explore ation but

also tease out some of the lessons
from the public policy perspective.

So the Euler perspective.

The globalization interdependence
arguments right rest on

the fact basically that there
is an integrated market.

So as we heard Ed and others talk about
doesn't really matter where oil is

delivered right in integrated
market prices reverberate right so

this whole notion of being
concerned about equity stakes and

national ownership of resources
really doesn't matter

in a global integrated market and
the more integrated the markets are and

therefore as we move away from
regional gas markets to more global

L N G A possibly shale gas markets we may
see more of this harmony of interest and

due to this transparent
integrated markets and so

in that context you would expect to see
the relationship between Russia and

Eurasia and East Asia be a model for
cooperation.

Right because as we've all heard and
as just laid out in the talk before me.

You have this rising demand for

energy this heightened state of
import dependence and demand for

diversification from their traditional
suppliers in the Middle East who pay so

we know that we really scoped out
the eight East Asian dimension to it.

Similarly on the Russian side.

Right.

You in Russia is the number
one export of natural gas.

Number two explorer of oil.

It has large and
exploited reserves in the Russian far east

right there favorable
pipeline economics delivering

energy through pipelines
from Russia to East Asia.

You have a Russian energy strategy that
has just been revised at the end of last

year to put an accent on this fixation on
East Asia with targets of growth going.

From eight percent to twenty five percent
of its exports and oil to do to East Asia

with its gas going from a very paltry
percentage today to about twenty percent.

OK And this is driven by a host of factors
right the decline in the production of

its West Siberian reserves the greenfield
opportunities in the east side Derian

reserves the growing the growing markets
in East Asia relative to these new

fields the pipeline infrastructure etc So
and

you can see this Russian strategy really
manifest itself in where they see their

new production coming from you know as
we go out to twenty thirty five we see

increasingly a focus on the far
eastern and East Side Derian fields.

And so while the the west side
green fields still loom large

they begin to take a smaller
stake on natural gas.

It's a little bit different because the
stock man and your model reserves are so

significant.

But nonetheless we see once
again that the Far East and

the Siberian reserves are going to be key.

And we've seen.

Also the pipeline projects
that would be reflective of

this interest and focusing on the east and
we've talked about the.

The Pacific Ocean oil pipeline but

it's also not just Russia.

That's playing in in these
waters some speak on oil.

You have the Chinese pipeline and

you also have to see on the gas front.

We have the pipelines from Turkmenistan
to China that will grow and

valving was back to stand and
cause after supplies.

So when the oil is perspectives things.

Could look pretty good.

However despite these common interests.

We have seen at best a mixed landscape.

All those projects that I mention and
those are the success stories

were marred by ferment is protracted delay
not clear how commercially competitive.

They were you already heard about how
Russia was trying to play off Japan and

China right then the big movie and in
the Far East was waiting for E.S.P.N. up.

Because it took so long in this in
this process you have in Russia

tremendous alarmism about the far about

about China in particular
specially given the demographic

trends in the Russian Far East and
the fears in the political debates.

Just as simultaneously as they talk about
an energy strategy to twenty thirty

with the East Asian fixation worries
about becoming a resource appendage

to China and the station.

So you have those concerns and
by the way you also have strange things

that are difficult to explain why is it
when Russia would export forty percent

or forty percent of its exports to Japan
where energy they didn't complain but

when forty percent of its
exports to China cause a lot.

Why is that OK.

That suggests there's something
else going on than the pure numbers

in addition there's a real
question if we go back to this.

This E.S.P. all pipeline assume.

Where's the oil going to come from right
especially in the Stage two right.

If Russia is going to meet
the stage two targets even if they

know as they realize they're going to.

I have to quadruple their existing
proven unproven reserves there.

So it's not clear where
that's going to come from

especially as I mentioned in a few minutes
as Russian especially as Russia faces

some deep seeded infrastructure and

institutional challenges to increasing
those investments so on the face of it.

The picture is a lot more
complicated than the oil or

perspective of the market a globalized
perspective would subjects.

So how about on the resource nationalism
and this is something we've heard

a little bit about it's freshly coming
from the Far Eastern perspective and

it's very common and we've already seen
and I've talked about the difficulties

on these pipeline projects that are quote
the success stories of course we see

a a an excessive play by national oil

companies the ENO sees right and restate
ization of the energy sector in Russia.

Right.
The for

the most part the gas sector has been
tightly held between the state and

a state company in the oil sector
ironically in Russia that was

one of the first sectors to be privatized
when the Soviet Union collapsed.

But since then and
specially since two thousand and six.

There's been creeping restate ization
where the balance is shifting more towards

sixty percent of the sector
being owned by the state.

So you have state players now engaged.

We've talked about China.

What China brings to the table in
these resource nationalise con this

resource nationals context.

It's not just demand but

it their financial leverage levers
left for loans for oil deal.

They were decisive in and
determining the the East Asia or

the the Pacific Ocean
pipeline as well as in the.

Turkmen pipeline the discussion of
equity or oil equity stakes and

having percentages required for
import by the various countries and

Japan and Korea sort of right for the
resource nationalist types of argument.

And of course then the Russian history
a pipeline to pulp will plummet seat in

the cases that I mention but also
a predatory nature especially in the gas

sector towards its own reserves and
forcing others either the I.O.C. S.

or and the case of Jap and
in the case of Japan to reduce their

shares in different states of
the feet of the fields and

as I mentioned a concern about
becoming a resource pending so

that's the obvious resource nationalism
state and claims and evidence however

they're based on a number of myths
at least when the assessed uniformly

One is that we don't there's a tendency
to look at the relationship between

Russia and Eurasia on the one hand is
the sort of growing supplier base and

this East Asia this growing demand base as

a battle of titans right between
these superpowers energy superpowers.

But when we look at China's activity and
Russia and Eurasia

as we've just seen a number of slides this
is relatively small potatoes in China.

This is not where all
the states up the Middle East.

Angola other places
where the action is and

their interest in Russian
gas may be fleeting not only

do they have a relatively smaller
interest in gas and Japan and and

South Korea but also with the potential
for shale gas and others.

Elon Jeanne what Russia is not in.

And does not compete favorably you.

We've seen that with Japan
there is the declining.

Demand for oil in the.

In Korea.

The real game is in nuclear.

As we've heard before and
possibly in the green energy area.

Russia.

Well at best.

Russia is a gas regional gas
superpower it's not an oil

superpower Russia and
the oil sector is a price taker.

It does not set even though it may
be the second largest export and

it doesn't have swing producer capability.

It responds to the prices set by
the other large suppliers Middle East and

Saudi Arabia OPEC.

So Russia is not an oil superpower.

It's ability to affect
the market signals are limited

gas Well it's clearly a gas power but

its primary leverage is been in Europe.

However when we look at
Europe which is its primary

zone of both predation and of prowess.

Once again we see they are not
necessarily controlling all of

the power here because they
are mutually dependent on the European

markets because they depend
heavily on the revenues and

rents that are acquired from
those sales Europe although it

may be increasing its imports of oil and

gas from Russia Russia's position and
overall energy consumption and

Europe is actually staying at
a relatively paltry level.

Russia's exports to Europe.

Through pipelines are vulnerable to
the decisions made by transit States as

the Ukrainian and Belarus episodes
suggest Russia can't switch its

natural gas exports to Europe quickly to
an alternative supply and there's no.

No domestic market that pays real prices
that would be a smart decision for them.

Similarly the infrastructure is not built
to swing the production two to East Asia.

So Russia even in its best.

Case in its relationship with Europe
it is not able to dictate the terms and

to the extent there have been
rows they have been very bloody.

They have been bloody for
Russia as well as the consumers and

the transit States there it's been
a lose lose lose proposition.

And so and in addition to all of that
Russia faces a whole host of structural

challenges in accessing
these promising reserves in

the east their investment problems
are infrastructure problems

they're bottlenecks in
the transport pipeline system.

There's a principle agent issues that
were mentioned earlier within Russia.

So Russia is not in an N.B.A.
Elbel position.

The second myth.

If you will.

Surrounding this resource nationalism
argument has a basically a twist on

the old G.M. argument Rhett's but
it's good for G.M.

it's good for the country and
sort of the argument is what's good for

the end of season is good for the state
right and that this and that the N.S.C.

is are basically appendages
of the state but

it's sometimes the literature on this
confuses ownership with control and

we've heard their divergent interests on
the commercial side and on the state side

there's also a tendency to to
overstate the extent to which

you know C S R.

Harmful and
their activity is one hundred four.

Right.
The whole notion that any sort of equity

stake by an N N C is somehow
predatory misses the fact that

many of these cases especially in
the Russian Eurasia count on tax.

It's getting more resources to market.

OK And so these it's not a zero sum game.

It's actually a positive sum game.

They're getting more
resources to market and

they're getting resources to market
that the I.O.C. is of passed on for

the most part so they're not really gone
head to head against the I.O.C. S. and

in fact most of the cases where they've
gone head to head against the I.O.C.

is they've not done well except for

you know in Turkmenistan
is a notable example.

In addition as Kent Manchanda
as Ed mentioned equity stakes.

If you look here at China as an gauge
meant in Kazakhstan you see that

only a very small percentage of the equity
stakes in Kazakhstan actually go to China.

Most of it is going directly to
the international market in the same with

the other season involved in Russia and
Azerbaijan almost all

of the equity stakes go into
the international oil market.

So there's some misnomers there.

So how do we begin to think about this
given that the record is much more mixed

then these two competing
paradigms would suggest.

Well one.

It's sort of going back to basics if you
will on energy and energy security and and

as a human and others mention any
security is a term that is in the eyes of

the beholder and it really means a lot of
different things to different players but

when we look at the international
landscape we see that really since

World War two demand is outstrip
supply and that states one way and

the other are find themselves in
an interdependent relationship.

Where their energy interests bump up
against those of other states and

they since they operate in this
anarchic international environment and

they can't control all of these factors.

They're bumping up against each
other can affect each other and

as a result energy independence
really has been is really a misnomer.

In addition to complicating it and
something that was highlighted by

the panel second panel is that countries
have different conceptions of what

their energy security is so they don't
only bump up against each other but

they define how they bump up against
each other differently which then

leads to confusion between
commercial competition and

strategic competition and
because states are without interdependent.

With each other and their interests.

There are many ways that they can directly
or indirectly affect the others and

which then leads to what I would
call an energy security dilemma and

I use the term security dilemma in the I R
context which means that actions taken

by one state for purely benign reasons

because of the conditions of the
environment they operate in inadvertently

compromise the interests of another actor.

OK so the pursuit of energy
security by one state either by

the development of
a strategic energy reserve or

the development of gas storage facilities
of the pursuit of diversified pipelines

can inadvertently come at the expense
of the interests of another state.

You know that another transit
state that's losing out supplier

may be losing out store
GATT the development for

example by Ukraine of gas storage
facilities made Russia nervous.

Why would that be the case.

Well because the Russians may conceive
of that clearly benign effort and

the best scene in the best
light has been I.

As as you know protecting themselves for

one day you know cutting
Russian supply to Europe off.

OK so it doesn't say you know the issue
we don't even have to assume aggressive

attentions The Cond the context the
landscape within which states are pursuing

their energy interests are bumping up
against each other and the actions taken

by one state can affect the secure energy
security interests of another state.

So the challenge is for
us to figure out what are the conditions

that extension weight energy security
dilemmas and what conditions mitigate and

then this is actually where my research
rests and where I'm sort of broader and

I will only talk about that very briefly
today is looking at how market power and

domestic institutional arrangements
interact because market power can

affect both the opportunities that
a country may have and the vulnerabilities

that it may experience and
that domestic institutional capacity or

transparency affects
the property rights and

the actors and a whole nother words
the stakeholders their interests as well

as their ability to signal not
only to each other but to other

states especially as the pursuit of
their energy is bumping up against them.

So as a disciple of Bob Germans who are
seeing the world in two by two matrices.

Although I have a slightly
different agenda and

we don't need to get
into all the details but

when you put those two different
factors together of market power and

transparency you get different worlds that
may be more versus less prone to security.

Dilemmas and so let me walk you through
how I see some of these things playing

out and why we see for
example a more competitive.

Relationship and
between Russia and China on gas.

He she has done we do with respect
to Japan and Korea knowledge

meant these are not critical case studies
and this is not a good example for

the graduate students of for you guys
you can turn off your ears right now but

there are more or less treated
examples to give you an idea when

we look at the Russian Chinese
relationship we see obviously Russia

brings a lot of market muscle and
specially and

today regionally defined gas markets
it's a major gas exporter and

also has huge reserves to
blur bring to bear China.

Although it is demand for
Russian gas is not.

It's not a it.

It's not a be on end all.

To China.

It brings a tremendous amount
of leverage into this mix in

the sense that it since it relies
mostly on the Middle East.

It can be it's looking to diversify.

It's not going to be held
vulnerable to Russia and

in addition to the market power is
not just a function of resources it's

a function also financial resources
that can be brought to bear and

so and credit abilities to bring and
bring to bear.

So you've got two big powers
coming to compete here with

divergent trajectories as I mentioned
Russia face a whole host of structural

challenges of accessing the oil
that it currently can see and

it's proved its face tremendous
challenges accessing the future and

is dependent increasingly on
others to help in that regard.

Both on the R. and D. side and the
financing side and China is really rising

in terms of its credit and financial
capability so you have a competitive.

Setting on the market side.

This is a compound.

By institutional capacity on both sides
of the equation it's not just that

we have state owned facilities.

It's that the regulatory systems in
both in both structures are opaque and

it's very difficult for either one of
them to signal their commercial versus

strategic interests and their relatively
arbitrary rules of the game at this stage

you have the principal agent problems of
both mentioning on the Chinese side and

in Russia of course we have
a tremendous arbitrary process so

as we've seen escalation of tensions and

reserve in here I don't want to
get into all the details but

the project has really never
gotten off the ground.

It's competed primarily with Russia's
primary interest at the moment

getting the turning gas westward.

There have been price disputes the I

mean the project itself is really
challenged the Western orientation

the predominant westward
orientation of gas problem.

The the Turkmenistan deal
was also a situation that

was on it's also somewhat competitive here
while China has been able to seal the deal

with Turkmenistan and it's done
largely through loans for gas and

been able to secure the first P.S.A.
onshore P.S.A. it.

It's not clear what they actually want.

It's not clear.

One how much gas is in Turkmenistan and

how much gas is going to
be available to go east.

Given the commitments and Russia's
competitive advantages with Turkmenistan

and Kazakhstan and increasing the price
increase in the volumes of delivery and

the potential incremental
plays by Western pipelines.

So it's a very competitive dynamic that.

On the on the the Japanese and

Korean side of the ledger of course the
market positions are very different and

you have a different set of
plays on the on the Japanese and

Korean side where primarily the focus for
them is L. and

G. demand they are much more diversified
in their portfolios both upstream and

downstream and and developing R. and D.

They have diversified roles that
they play both in the oil and

gas sectors I might add that really Korea
is very involved in providing refinery

capabilities to some of the regional
oil companies in Russia and

you have more with the centralization
of privatization and you have more

transparent signals with and
that to the extent there's diplomacy

that undergirds the energy plays and
is more in terms of affecting credit lines

of the of the national kind of private
companies in Japan and South Korea.

A lot more credit with relatively
little diplomatic intervention

China Korea in particular has been
very slow to playing that game and

you see then the payoffs with
respect to the softening to deals

where and it's an interesting dichotomy
of plays because in the previous case

could give the attempt by the foreign
investors was to have a majority stake and

in this case the gas problem
has the fifty percent stake.

Japan's companies have smaller stakes.

There's a more diversified
focus on infrastructure and

service issues so what does all this mean.

Well what it means that we need to think
about energy security in a strategic

context and the challenge really at
the next generation is to figure

out what those conditions are that in
fact I'm just scratching the surface.

I'm just at the beginning
of my research and

thinking about the role of markets and
institutions in this.

And there's a lot of role to be played.

But domestic institutions are clearly part
of the strategic element it's not just

a function of shaping who the owners
are it's also affecting House signals how

the actions of states are interpreted
by the domestic institutions

that are established and
this also has tremendous part and

set of policy implications as
well because it suggests that

international institutions aren't
always going to work OK even if they're

mutual interests because some conditions
may be more prone to lead states

get caught up in inadvertent escalation
than others some some are very competitive

environments based on the market power and
the opacity of the institutions that

what is worked in some cases for example
when we look at Russia and Eurasia and why

some of the pipelines going westward have
worked because we had private champions

that took the role of Chevron B.P. well
that may work in the oil sector but in

the gas sector when you have a combination
of these market in institutional factors

champions can actually excite security
dilemmas make countries nervous.

Reassurance therefore is
the name of the game but

reassurance can be a function
not just on joint ventures.

But it can also be a function of domestic
reforms and more transparency built into

countries some countries can help reassure
other countries about reforming themselves

and this from time and it's also suggests
that security comes from more than equity

stakes in fact equity stakes especially in
the gas sector can really excite security

dilemmas not just lead to
inefficiencies in markets but actually

it can confuse commercial competitiveness
with strategic competitiveness.

So when you put all that together.

What does the future look like.

Well I can't tell you but I can say
that some things may shape things.

One is to what extent there's incremental
competition posed by suppliers in the West

and Europe and in and
other pipelines that become

the come on line it's not like
the East Asian pipelines that we've been

discussing are being pursued in a vacuum
in fact their comparative advantages to

all of the already existing infrastructure
in the in the former Soviet space is

directed westward and that Saudi Arabia
has a comparative advantage is to

affect their market position not just in
terms of turning on or off the spigot but

also investing in refinery capabilities
in East Asia that can also improve their

their standing in addition there's
the unconventional gas issue because and

I won't get into this was
we're running out of time but

the bottom line with unconventional gas
is simply that it could potentially turn

help with Elegy turn the gas sector
into the integrated oil sector

and obviously efficiency environmental
concerns are a big issue and

then we've certainly touched on earlier
the role of North Korea and Iran

as affecting the strategic calculations
of not only the United States but

all of its allies and even China.

So there are some wild cards there but

my point is we live in a world of
strategic interaction and thinking about

specially energy in national terms
is only part of the equation.