Forgotten, decades-old document reveals...
...and that one reason will trigger a cascade of events leading to a New Energy Crisis: Iran's army surrounding U.S. troops in Iraq...Russia's army invading a southern neighbor...immigrants flooding America's southern border in unprecedented numbers...oil soaring to $150 a barrel - and beyond.
Those are just some of the events in store as a Rogues' Gallery of world leaders scrambles for ever-dwindling oil resources. But here are six strategies that will protect you now...offering gains of 135%...181%...250%...and more!
Dear Informed American:
As bad as the situation might seem right now for U.S. troops in Iraq, there's a high likelihood it's about to get much worse.
Within months - maybe even weeks - they could find their supply line cut. No more food, no more fuel, no more ammunition. The things they need not just to fight, but to survive...gone.
One man could make it all happen - Iran's president Mahmoud Ahmadinejad. And his motives stretch far, far back in time...to an era when Iran was America's ally.
In the next few minutes, you'll learn about the document from decades ago that holds the key to the entire Iranian nuclear crisis...how it could ultimately spell disaster for American forces in Iraq...and how it could be just one episode in a series of debacles that I call the New Energy Crisis.
One by one, I'll introduce you to a Rogues' Gallery of world leaders setting the New Energy Crisis into motion...some of them American allies...some of them sworn enemies...all of them bent on achieving energy security...and all of them about to light a match to volatile tinderbox regions around the world - even America's own backyard!
Then, finally, I'll walk you through six critical steps you can take right now to protect your wealth...even grow your wealth...during these turbulent times just around the corner.
Ahmadinejad is front and center in our Rogues' Gallery. You're probably familiar with him already...but there's a whole other dimension to his story you haven't heard.
Day after day, Ahmadinejad is demonized in the American press. Nothing is deterring him from his intention to proceed with the enrichment of uranium.
Crazy Like a Fox? Iran's Mahmoud Ahmadinejad
Not the threat of United Nations sanctions.
Not even the threat of airstrikes by the United States or Israel.
Is he crazy? Or crazy like a fox?
Most of us in the West tend to think that because Iran is awash in oil, Ahmadinejad is lying through his teeth when he says Iran's nuclear program is strictly for the peaceful generation of electricity.
After all, if you're sitting on some of the world's biggest oil reserves, why do you need nuclear power? Therefore, the thinking goes, he must be trying to build nuclear weapons.
Iran Awash in Oil? "There's a possibility that Iran's oil production may have peaked and now be set to decline.'' - Deborah White, economist,
Ahmadinejad may or may not be pursuing nuclear weapons. But whether he is or not (and we'll get to that in a moment), this fact is inescapable...Iran does need nuclear energy to keep its economy going. Because Iran's oil reserves are running out - fast.
Hardly!
Societe Generale SA
And Ahmadinejad is hardly the first Iranian leader to realize this. In fact, the pro-American Shah knew this when he was still in power in the 1970s. He saw Iran's oil as a resource to be exported to the West...but he wanted nuclear power to ensure his country's self-sufficiency decades into the future.
"Petroleum is a noble material, much too valuable to burn," he said. He signed a deal with U.S. Secretary of State Henry Kissinger in 1975 called National Security Decision Memorandum 292. It spelled out all the details of how U.S companies would sell Iran vital equipment to get its nuclear energy program up and running.
That's right...the U.S. government helped get the ball rolling on Iran's nuclear program, never figuring the Shah might be overthrown one day and replaced by radical Shiite mullahs!
But once the mullahs were in power, and in command of Iran's massive oil industry, they quickly realized what the Shah knew - that the oil wasn't going to last forever, and nuclear power was essential if their nation was to grow and prosper.
Iranian Oil Expert Reveals Devastating Secret
One of the people who made that reality crystal clear to Iran's new leaders was Dr. Ali Morteza Samsam Bakhtiari. He started working for the National Iranian Oil Co. back when the Shah was in power. And his expertise was valuable enough that when the ayatollahs took over, they kept him on. For 35 years, he worked for the company in a variety of senior positions until he was forced out by a mandatory retirement age. Iran's "Massive" Oil "As for Iran, the usually accepted official 132 billion barrels is almost 100 billion barrels over any realistic assay." - Dr. Ali Morteza Samsam Bakhtiari, retired senior energy expert, National Iranian Oil Co. Now Dr. Bakhtiari is free to speak up to the rest of the world about what's really going on with Iran's oil supply. And the picture is not pretty.
Reserves - a Big Lie!
Understand that the usual estimate of Iran's petroleum reserves - the one most often reported in the media - is 132.5 billion barrels. That's the second highest in the Middle East, after Saudi Arabia. How much oil does Dr. Bakhtiari think Iran really has left?
Try somewhere between 35-45 billion barrels!
The dirty little secret Ahmadinejad is sitting on is that his country's oil industry is struggling day after day after day to keep its oil production somewhere between 3-3.5 million barrels per day.
Here's another part of the problem: Ahmadinejad is moving quickly to shut the major international oil companies like Royal Dutch/Shell out of his country. "I want to expand the domestic industry. In the oil field, the priority will be on domestic contractors, specialists, investors, and workers."
Translation: The international majors aren't welcome - even though they have experience and expertise in Iran that Iranians don't have. Ahmadinejad's nationalistic bravado is crippling his country's ability to tap into even the dwindling amount of oil it does have. So the Iranians can't open up the oil spigots even if they want to.
So...we know that Ahmadinejad is being straight with the world when he says his country needs nuclear energy. That brings us to the question of whether he's being straight when he says his country's nuclear program is for only peaceful purposes - or whether at the same time he's pursuing atomic weapons.
Nowhere to Go "It's going to be very challenging for Iran to increase oil production." - Francisco Blanch,
I'm here to tell you right now that whether he is or not really doesn't matter.
but Down
senior energy strategist,
Merrill Lynch
Because peaceful or not, Ahmadinejad won't give up his nuclear program...and President Bush won't let him pursue it.
These are two headstrong leaders, and only one can get his way.
A confrontation between the United States and Iran is all but inevitable - with a disastrous outcome.
Disaster in the Desert: The Coming U.S.-Iran War
Please look at this map of Iran and its neighbors. To Iran's west are nearly 150,000 U.S. troops in Iraq. To its east are about 20,000 U.S. troops in Afghanistan. And to its south, two U.S. naval strike groups are deployed in the Persian Gulf and the Arabian Sea - the USS Enterprise and the USS Iwo Jima Expeditionary Strike Group.
Now look at this next map. To Iran's north is a nuclear-armed Russia. To its east, a nuclear-armed Pakistan. To its west, a nuclear-armed Israel. And to its south, nuclear-armed U.S. ships in the Persian Gulf.
Now, put yourself in Ahmadinejad's shoes for just a minute. He looks around and he sees his country surrounded on all sides by nuclear powers...and on three sides by American forces. And he hears the Bush administration demand his country give up its nuclear program.
No wonder he's paranoid.
And between his paranoia...and Bush's insistence that it's "unacceptable" for Iran to have a nuclear weapon...and both countries conducting war games in the Persian Gulf...a military confrontation could break out at any minute.
In the space of just two days in late 2006, the following stories were making news:
- President Bush's close ally, U.K. Prime Minister Tony Blair, called on him to include Iran in the process of stabilizing the situation in Iraq. Bush said no dice...Iran has to give up its nuclear program first
- The same day, Ahmadinejad declared his country's nuclear fuel program would soon be completed, and the world had no choice but to "live with a nuclear Iran"
- Most ominously, a senior U.S. official the following day said if Iran refuses to abandon its nuclear program, the United States would one day have to consider a pre-emptive strike. This is not just idle chatter. This is someone high up in the Bush administration using the media to send a very clear signal to Iran: Back down or face the consequences.
But Ahmadinejad shows no sign of backing down. He can't afford to. He's not all that popular with his people, but his nuclear program is very popular...It's a source of national pride. If he gave it up, he'd look like a weakling and his claim to power would be history.
Bush has two years left in office. He's convinced Iran is pursuing nuclear weapons, and he's declared over and over that Iran can't be allowed to do so. Keeping nuclear weapons out of Ahmadinejad's hands is a job Bush won't entrust to his successor.
Airstrikes on Iran would send oil to $150 a barrel in very short order, so you know Bush won't launch an attack in 2008 - not if he wants his successor to be a Republican like himself.
So Bush has only a very limited window in which to take decisive action to put a stop to Iran's nuclear program. And that window starts right now - as you're reading this.
Airstrikes on Iran Are Nearly Inevitable in 2007
By the time you read this, two U.S. aircraft carriers will be stationed in the Persian Gulf, and a third could well be on the way. Their mission: to support an attack on Iran.
Says Vincent Cannistraro, a 27-year veteran of the CIA, "Planning is going on, in spite of public disavowals by [Defense Secretary Robert] Gates. Targets have been selected. For a bombing campaign against nuclear sites, it is quite advanced. The military assets to carry this out are being put in place."
The Pentagon is already conducting "second-stage" planning for airstrikes. The first stage is when the generals talk in hypothetical terms: "If we conducted airstrikes, what consequences would follow?"
They've moved beyond that. They're already preparing for the consequences...indeed, the worst-case scenarios:
- A vital oil route cut off. The generals are figuring out how to secure oil transport lines if Iran responds to airstrikes by moving to block the Strait of Hormuz. Look again at the maps and you can see this is one of the most critical "chokepoints" for world trade. 40% of the world's oil exports passes through this chokepoint, including oil from all of the top five Middle East oil producers - Saudi Arabia, Iran, the United Arab Emirates, Kuwait, and Iraq
- Riots threatening U.S. naval facilities. They're also figuring out how to prevent riots in nearby Bahrain, where Iran has stirred up revolts in the past by the Shiite majority against the Sunni government. Bahrain is home to the U.S. Fifth Fleet.
But there's one worst-case scenario that no amount of planning by the generals can prevent...and it spells disaster for the U.S. troops in Iraq.
This map shows the one supply route the American troops in Iraq rely on. Everything they need to survive in a hostile land - their ammunition, their food, their fuel - comes through this one route from the south, via Kuwait and other Gulf ports.
What if this supply line is cut?
It could easily happen one of two ways:
A Devastating Blow
to U.S. Power"If the U.S. were to lose the army it has in Iraq, to Iraqi militias, Iranian regular forces, or a combination of both, the world would change. American power and prestige would never recover."
- William S. Lind,
military analyst1.)
Shiite militias already in Iraq could cut off our troops. After all, they won't take very kindly to seeing their fellow Shiites in Iran being bombed. One of the largest militias, the Badr Brigade, was sheltered and trained by Iran while Saddam Hussein was still in power, and the Badr Brigade's political arm makes up the largest faction in Iraq's current government. True, they wouldn't be in the government at all if the United States hadn't toppled Saddam, but if they're forced to choose between Washington and Tehran, they'll go with their Shiite brethren in a heartbeat.2.)
Iran's army could cross into Iraq to cut off our troops. True, U.S. air power could knock out large numbers of Iranian infantry in short order, but all the Iranians have to do is wait for bad weather to strike, when the planes can't fly, and make their move. Retired Col. W. Patrick Lang, who worked in the Defense Intelligence Agency, says, "The Iranians could cut those supply lines just like that - the trucks are easy to shoot at with RPGs," (rocket-propelled grenades).
Or it could be a case of both the militias and the Iranians moving to cut our troops' supply lines. But no matter who does it, the results for U.S. troops would be devastating. No ammo, no fuel, no food...There would be no choice but to evacuate, with massive loss of life. While it's too late to prevent a showdown between the United States and Iran, it's not too late to protect yourself from the devastating economic consequences. I'll show you exactly how in just a bit. But first, I want to introduce you to the next member of our Rogues' Gallery. He's considered one of America's closest allies. But he's harboring a vital secret at the heart of the New Energy Crisis...and all the while adding fuel to the fire in Iraq.
With "Allies" Like This, Who Needs Enemies? Saudi Arabia's King Abdullah
King Abdullah ascended to Saudi Arabia's throne less than two years ago. But he'd been running the show for the better part of a decade after his half brother King Fahd had a stroke.
Abdullah is sitting on the world's biggest oil reserves. But he's also sitting on this big secret: Those reserves may not be anywhere near as big as advertised.
The U.S. government assumes that in the years to come, Saudi Arabia will be able to crank up its current output of 9 million barrels a day to something like 20 or 25 million. That's an incredible assumption when even the Saudis themselves claim the number is closer to 15 million.
But is 15 million even an accurate number? We don't know. The Saudis refuse to let anyone come in from the outside to independently verify their claims.
In other words, they're saying, "Trust us."
Take a look at the chart below. It tracks Saudi oil production from 1970 up to now. Notice when production reached its all-time peak: 25 years ago! Yes, it's perked up in the past few years as the price of oil has steadily climbed from $20 to $60 a barrel...but with all that money for them to make now, why haven't the sheikhs turned the spigots wide open?
Increasingly, the answer is becoming obvious...THEY CAN'T.
Ninety percent of all the oil Saudi Arabia's ever pumped out of the ground has come from just seven giant oil fields. And after five decades, all of them are starting to wear out. Yet they still account for 90% of Saudi Arabia's current output. And as you'll see in a moment, the country is turning to ever-more desperate measures to keep those giants going. The Saudi Patch - "The kingdom's decline rate will be among the world's fastest as this decade wanes." - Donald Coxe, The Saudis say they have lots of oil yet to come online, using new technology in old fields, along with the discovery of new fields. (Just where these fields are no one's saying...the last big one in Saudi Arabia was found in 1968!)
Drying Up!
analyst, Bank of Montreal
But again, the Saudis won't let anyone come in from outside and verify their claims! "Trust us."
Well, as Ronald Reagan once said, you need to "trust, but verify." And if you can't verify the Saudis' claims, you're left with analyzing what we know the Saudis already have.
And that's a pretty scary picture.
The World's Biggest Oil Field - Fading Fast
The world's largest oil field is in Saudi Arabia. It's called Ghawar. It pumps out about 5.5 million barrels a day - 60% of Saudi Arabia's entire output. At least that's what the Saudis say. But again, they won't let anyone confirm that.
As it turns out, they might have good reason.
Word is getting out from sources inside Saudi Arabia's oil industry that Ghawar's real production might be only 3 million barrels a day! One Oil Field Signals "The big risk in Saudi Arabia is that Ghawar's rate of decline increases to an alarming point. That will set bells ringing all over the oil world because Ghawar underpins Saudi output and Saudi undergirds worldwide production." - Ali Morteza Sansam Bakhtiari, Even if the true number is what the Saudis claim it is, the picture's still not pretty.
a Frightening Trend
National Iranian Oil Co.
Turns out that most of Ghawar's output is concentrated in a tiny area at the northern end of the field. The Saudis say there's plenty more oil to be found in the central and southern part, but what they don't say is that it's not as much oil compared with the north...and the quality of oil is a lot lower - thicker, more viscous. But that's not the only problem.
See, in large oil fields, the natural pressure of the reservoir forces the oil to the surface. But as more and more oil is pumped out, the only way to keep the pressure up is to inject water back into the reservoir.
After a while, this starts to damage the reservoir...the water starts to contaminate the oil. Author Paul Roberts found that at Ghawar, the amount of water mixed in with the oil is now 30%. That's a dangerously high level.
How Oil and Water Do Mix - With Disastrous Consequences for Oil Production!
Investment banker Matthew Simmons has worked with the oil industry for decades. He's advised the Bush administration on energy policy. And he's studied the Saudi oil industry as closely as anyone - examining hundreds of technical papers to see how raw data square with the Saudis' extravagant claims. What he's found is that the water-injection technique that's keeping Ghawar on life support is also being used on every other major oilfield in Saudi Arabia - the fields that supply 10% of the world's oil right now.
Bottom line: Production at all of these fields has peaked. It's all downhill from here. Texas oilman Jeffrey Brown figures that at this moment, Saudi Arabia has reached the same point in ultimate recoverable reserves that Texas reached in 1972 - the year oil production there reached its peak.
The oil won't run out tomorrow, but it will run out eventually.
And there are even more disturbing signs that all is not as advertised in Saudi Arabia's oil industry.
The Saudis Drill More and More...but There's No More Oil to Show for It!
Look again at that chart of Saudi oil production. It's gone up a lot since 2001. But Saudi oil exports have stayed flat! The Saudis need oil to fuel their growing economy. So even though they're pumping out more (for the moment), it's not getting to the United States and other thirsty developed countries, because the Saudis need it for themselves!
Here's something else to think about as you look at that chart. The increase that started in 2001 was pretty much over by 2003. But since 2003, the number of drilling rigs in Saudi Arabia has tripled. Triple the drilling, triple the output, you'd think. But no...all that new drilling, and the country is still generating between 9-10 million barrels a day. So they've had to triple the number of wells just to keep running in place! Drilling to Destruction! "If Saudi Arabia has damaged their fields, accidentally or not, by overproducing them, then we may have already passed Peak Oil." - Matthew Simmons, investment banker to the oil industry Maybe the Saudis know that if they pump up production any more, if they start gushing more water into their aging fields, they'll only dig their own grave that much sooner. Even a retired executive vice president at Saudi Aramco, the country's state-owned oil giant, admits the most optimistic number for Saudi oil production is 12 million barrels a day - any more and the Saudis would run the risk of permanent damage to their reservoirs.
Don't get me wrong...there may still be a large amount of oil in Saudi Arabia. But it's not the kind that you can just stick a well in the ground and expect bountiful quantities of light, easy-to-refine oil to gush out. No, the stuff that's left is buried in earth that's a lot more rocky, and the oil itself is a lot harder to refine.
The days of cheap, easy oil in Saudi Arabia are just about over. But when will King Abdullah tell us?
Maybe never...not until it's too late. Some ally.
And if you think that's stabbing America in the back, wait till you see what this "ally" is doing to our troops in Iraq...all in the name of preserving his country's own dominion over its oil fields!
The Saudi Stab in the Back
The Saudi royal family belongs to the Sunni branch of Islam. Ever since the Shiite ayatollahs took over in Iran nearly 30 years ago, the Saudis have been scared to death of Iran...scared to death of Shiite fundamentalism spreading across the Middle East...and ultimately threatening their rule in Saudi Arabia.
You see, while Saudi Arabia is primarily a Sunni country, ruled by Sunnis, the majority of the population in the Saudi oil patch is Shiite!
The last thing in the world the Saudis want is Iranian influence to spread and stir up the Shiites who happen to be sitting on the Saudi oil fields. This has been the royal family's obsession for decades. They even egged on Saddam Hussein to invade Iran in 1980, launching the bloody eight-year Iran-Iraq war.
Saddam's rule in Iraq was a very good thing for the Saudis. Iraq's Sunni minority ruled over the Shiite majority, serving as a protective buffer between Iran and Saudi Arabia.
So you can imagine how the Saudis feel now that Iraq is run by Shiites, many of whom lived in exile in Iran during Saddam's rule!
When King Abdullah met with Vice President Cheney in November 2006, he had this very blunt message: If America pulls out of Iraq, we'll have to start funding the Sunni rebels in Iraq to keep the Shiites in check.
Of course, the Bush administration figures on U.S. troops staying in Iraq for years to come...but the fact of the matter is Saudi citizens are already giving millions of dollars to supply weapons to Iraq's Sunni rebels...while King Abdullah and his courtiers look the other way. Saudi Cash for "They sent boxes full of dollars and asked me to deliver them to certain addresses in Iraq. I know it is being sent to the resistance, and if I don't take it with me, they will kill me." - "Hussein," We're talking about the people who carry out most of the attacks on U.S. troops in Iraq right now - being funded by the Saudis!
Iraqi Insurgents
Saudi truck driver
This frightening fact is buried in the report from the Iraq Study Group - the bipartisan blue-ribbon panel that spent much of 2006 figuring out what's gone so wrong for America in Iraq.
Of course, the Saudi leaders will deny it all day. But the evidence is becoming overwhelming.
With little effort, the Associated Press found truckers carrying boxes of cash from Saudi Arabia into Iraq - cash they knew was destined for Iraq's Sunni insurgency. It made them very uneasy to know they were funneling cash to the rebels...but it made them more uneasy to know that if they didn't, they were dead men.
One shipment of $25 million went straight to a Sunni cleric in Iraq. Other shipments go to Sunni political leaders. And all of it winds up in the hands of Sunni fighters determined to attack U.S. forces.
Indeed, some of the money is being used to buy Strela missiles on the black market. These are shoulder-fired missiles made in Russia that can take down American aircraft.
How Saudi Dollars Pay for Russian Missiles to Shoot Down American F-16s
In late November 2006, an American F-16 was shot down over Iraq. The Pentagon was oddly quiet about the cause of the crash. But not the Iraqi insurgents, who crowed about bringing down the jet with a Strela missile.
I suppose if I were in the Pentagon, and I knew the Sunni rebels in Iraq were acquiring weapons that could shoot down American aircraft at will, I'd want to keep it quiet too.
But in a way, none of this should surprise us. The weapons are cheap - dirt-cheap compared with aircraft - and the Saudis have known for decades how effective they can be. That's because they learned from the Americans.
Really, it's breathtaking how history repeats itself.
Twenty years ago, the Saudis were buying Stinger missiles from the United States to help jihadis in Afghanistan throw out the Soviets.
Now, the Saudis are buying Strela missiles from Russia to help jihadis in Iraq throw out the Americans!
The Saudi Who Spoke up - and Paid for It Dearly
Again, Saudi leaders swear up and down that none of this is happening. They insist they're following the money trail and putting a stop to it. But if that were true, perhaps Nawaf Obaid would still have a job.
He's a U.S.-trained analyst commissioned by the Saudi government to track the flow of money - and fighters - from Saudi Arabia into Iraq. He was given access to Saudi officials and Saudi intelligence.
And he called it as he saw it - telling American newspapers in 2005 about interrogations of nearly 300 Saudis captured while trying to sneak into Iraq, and in 2006 about Saudi leaders' desperate desire to counter Iranian influence in Iraq - and their willingness to do it by supporting Iraq's Sunnis.
The Saudis rewarded Obaid for his honesty by firing him. Clearly, they want to keep a lid on this story.
Even if the Saudis want to clamp down on this Sunni pipeline of money and weapons, they can't afford to. The moment they do, their Sunni subjects will turn on them.
That's why they looked the other way when Saudi citizens were funding Sept. 11. They can talk all day about being pro-American, but when push comes to shove, it's all about maintaining their own grip on power.
In a world of power-hungry Rogues like Abdullah and Ahmadinejad, it's essential that you take steps to protect your wealth with energy-related investments that stand to make big gains directly from the turbulence they'll unleash during the New Energy Crisis. I'll tell you all about them...after we meet another member of our Rogues' Gallery, another leader who's liable to start a war over energy resources.
Russian Rogue: Vladimir Putin
Vladimir Putin commands a nation that sits atop immense reserves of oil - and natural gas.
In fact, his country generates 19% of the world's oil and gas supply. That makes Russia No. 1, surpassing Saudi Arabia's 18%.
In fact, if you look at oil alone, sometimes Russia produces more oil than Saudi Arabia.
That's what happened last June, when Russia pumped 9.23 million barrels per day, versus the Saudis' 9.19 million. Take a look at the chart below and you can see why some experts believe there's a good chance Russia might overtake the Saudis permanently as the world's leading oil producer.
But all is not as it seems. Russian energy resources are proving to be far less plentiful than once thought. And Putin, a former KGB agent who knows all about power and how to use it, is becoming very territorial about the resources at his command. Sure, the surface story looks phenomenal. Russia's oil output jumped 50% between 1999-2005. New technology made it possible to extract oil from fields thought to be depleted. Russia alone was meeting half of the growth in world oil demand. Russia's Tapped "Russian oil production could stagnate for years, industry officials are warning, a shift that could help keep world prices for fossil fuels high." - The Wall Street Journal And then in 2005, Russian oil production stalled.
Out Too!
The upward trend is unlikely to resume. The head of Russia's biggest oil company says the new technology did everything it was supposed to, but now those fields once thought to be depleted really are depleted. New fields must be found - a massively expensive undertaking that will take years.
Russia still has plenty of active oil fields, and they're generating lots of oil, but it won't last forever. Analysts say Russian fields overall are declining between 5-10% a year. And there's another problem - Russia's pipeline capacity. The country may be pumping out more than 9 million barrels per day, but the current pipeline system can handle only half that amount. Building new pipelines will take years.
What's more, Russia's existing pipelines are in terrible shape. Every couple of years, a pipeline break spills an average 7,000 barrels of oil, and smaller breaks are more frequent. Upgrading the existing pipelines will take years.
But Putin may not be all that interested in modernizing Russia's pipeline system. He has more than enough capacity to meet his own country's needs - and that's his No. 1 priority. All that oil he's sitting on he sees as a resource first and foremost to develop Mother Russia. And he doesn't want any foreigners cashing in - as President Bush has learned, to his great dismay.
Putin to Bush: Why Should I Fork Over Money to Your Oil Companies When I Can Keep It for Myself?
Bush met with Putin twice in 2002, discussing how the two countries could cooperate to get Russian energy to the United States. Western oil companies proposed major investments in Russian firms. BP took 50% ownership of one company. Exxon Mobil was poised to take a huge stake in another.
But that was when oil was still under $30 a barrel. By 2004, prices were skyrocketing - and Putin changed the rules of the game. Russia's Oil Pumps Stall...What's Next? "If we don't work for the future now, the country could see a decline in output in five-10 years." - Vladimir Bogdanov, He declared no foreign firm could control more than 50% of any Russian oil company. And he raised taxes on foreign firms investing in Russian oil. That was enough to kill off a proposed pipeline from the Caspian Sea to a port north of the Arctic Circle that would have supplied supertankers to haul oil directly to the United States.
CEO of OAO Surgutneftegas, Russia's No. 4 oil producer
Big Oil's been shut out. And Putin's not about to let it back in.
Just look at what the Russian gas giant Gazprom is doing with its a huge natural gas field in the Barents Sea called Shtokman. At first, Gazprom was planning to bring in one or more of the majors, including Chevron and ConocoPhillips, to develop the field.
But suddenly, last October, Gazprom said it will go it alone. Never mind that Gazprom has no experience developing a field of this size. And Gazprom's head didn't even bother to inform the companies directly...they read about it on the newswires!
Then there's another huge gas field on Russia's Pacific island of Sakhalin. Royal/Dutch Shell is helping develop it - or it was, until Russian environmental regulators revoked a crucial permit in September. It's Putin's not-so-veiled attempt to shut out Shell and let Gazprom keep the whole thing to itself - just like Shtokman. Three months later, Shell threw in the towel, agreeing to hand over its stake to Gazprom.
Putin's playing for keeps. Big Oil need not apply. He's transforming Russia's energy industry into his personal fiefdom, brazenly loading up its companies with his cronies - and punishing anyone who stands in his way with multibillion-dollar fines and jail time!
Putin's Plunder, and His Cronies' Corruption
Consider Gazprom, Russia's big natural gas producer. Its market value is $225 billion. That's more than Wal-Mart's! Its chief executive worked with Putin when he was mayor of Moscow in the 1990s. So did its chairman, who also happens to be Russia's deputy prime minister!
Then there's Rosneft, the oil company that raised $10.4 billion during an initial public offering in July. Its chairman happens to be Putin's deputy chief of staff!
Can you imagine the reaction in this country if President Bush hired an oil executive to work in the West Wing - and that person still kept his job with the oil company?
But in Russia, people don't bat an eye. They've learned not to - because anyone who crosses Putin pays dearly. Mikhail Khodorkovsky could tell you all about that.
Actually, he can't tell you. Because he's serving a nine-year prison term.
Khodorkovsky was once a billionaire who ran the oil firm Yukos. Putin had him arrested in 2003 and hit Yukos with a bill of $28 billion for back taxes.
Many of Yukos' assets are now in the hands of - surprise, surprise - Rosneft! What's left of Yukos was declared bankrupt just weeks after Rosneft's IPO, and now Rosneft's president says he's interested in picking up more of Yukos' assets.
All that plunder is making Putin's balance sheet look pretty good. Oil and gas revenues have enabled Russia to pay off all its foreign debts. Eight years ago, Russia had next to nothing in cash reserves. Today? $250 billion.
That's a lot of money. What does Putin plan to do with it?
The evidence is becoming clear: He's looking to recapture some of Russia's lost imperial glory, to regain some of the territory lost when the Soviet Union broke up in 1991.