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Global Security (Russia)

I agree with the hon. Gentleman, and I think that I can take the whole question of energy security a step further. It is widely believed that Russia is able to exert influence over the rest of the world because of its hold over large oil and gas reserves. That is true, but Russia is dependent on its markets in Europe, and on technological assistance to modernise its ageing oil and gas industry. We concluded that Russia needs to take account of the fact that at the moment—although this may change in time—it has few alternative customers to the large markets to its west. The technological progress and the huge investment that would be required to divert resources to the east and south will take a number of years and cost a great deal of money. In that respect, Russia has few alternative customers. We even came to the conclusion that it might have a shortfall in production to meet its export market commitments. That is linked to Russia's relationship with neighbouring countries with which Gazprom has some cosy relationships. Clearly, the export of energy supplies in Turkmenistan and in other parts of the former Soviet Union is very important here. At present, Russia benefits from purchasing at below world market prices from a number of neighbouring countries and sells its own products at world prices to Europe. In time, that may be challenged and it may change. Russia faces a potential shortfall, particularly if domestic demand grows, partly because of the woefully inefficient way in which its oil and gas is used within its own economy. There is chronic energy inefficiency in the Russian economy, so the relationship is not one-sided; Russia needs the co-operation of Europe and the rest of the world to help modernise its oil and gas industries.