ALGERIA-With World Watching Ukraine, Russia Makes Energy Moves in Africa - US News

Vladimir Putin, center, walks through a Russian gas facility in 2011 with Gazprom CEO Alexey Miller, right, and former German Chancellor Gerhard Schroeder, left. Russia has been expanding its gas projects in Africa.

Call it a “shale” game.

As the world watches Ukraine in the wake of Russia’s armed takeover of the Crimean peninsula – and, by extension, waits to see whether the Kremlin will follow through on threats to cut natural gas supplies to Ukraine and Western Europe – Moscow also appears to be rekindling a lucrative Cold War-era relationship that may one day pose just as large a threat to the region's energy economy.

Already, Russia provides about 30 percent of Western and Central Europe’s natural gas, much of which is piped through Ukraine. But since invading, the Kremlin has raised prices on its neighbor and threatened to completely shut off gas supplies if Ukraine doesn't fork over roughly $2.2 billion that Russia says it owes the state-owned company Gazprom.

The moves have prompted international indignation: warnings and economic sanctions against Russian leaders by the U.S. and European Union, a vote last month by the Group of 8 industrialized democracies to expel Russia from the trade group, and – as President Barack Obama warned this week during a visit to Japan – perhaps more sanctions to come.

But more than 1,600 miles away, Russia's been making comparatively quieter moves into the energy sector, and to far less notice.

Over the past decade, and especially in recent months, the country has been ramping up natural gas exploration and production in Algeria and other corners of the African continent, including Nigeria, Egypt and Mozambique. The country is seeking "a stranglehold on Western Europe" that it could tighten – or threaten to tighten – anytime it wishes, says Assis Malaquias, a defense economics expert at the Africa Center for Strategic Studies in Washington, D.C.

[READ: Europe, Russia Ensnared in 'Energy Cold War,' Experts Say]

By 2015, experts say, Moscow's control of Europe’s gas supply could leap by as much as 10 percentage points to 40 percent. Moreover, Southern European countries like Italy and Spain, which draw much of their natural gas from North Africa, would join the list of those affected by an increased Russian presence on the continent.

“Western Europe should be very concerned," Malaquias says. "Very."

With nearly half of the continent's gas supply in its grip, Russia's leverage on the world stage would become enormous and subsequently limit European and American options on any number of issues, from the ongoing civil war in Syria, to the fuel supplies Russia provides for American troops in Afghanistan, to another Ukraine-style land-grab in Europe.

For years, most of Moscow's mining activity in Africa has involved production of minerals like platinum, chrome, manganese and diamonds. Natural gas, though, presents new opportunities.

Italy gets a large portion of its natural gas from Algeria. Pictured, a facility near Milan.

Unlike minerals, Russia doesn’t need the energy supply for traditional purposes – it's already one of the world's largest exporters of oil and natural gas, and it earns more than half of its revenue from energy sales. Europe, however, "especially needs North African gas," Malaquias says. "What the Russians are doing is a very clever strategic ploy, because the bigger they are in terms of their presence in the energy sector internationally, the more leverage they have on everybody."

Algeria, meanwhile, was once one of the Soviet Union's closest African allies, and it is the third-largest supplier of natural gas to the 28-nation European Union, behind Russia and Norway. Egypt, Mozambique and Nigeria  are also home to “a hell of a lot of energy,” says Chester Crocker, a professor of strategic studies at Georgetown University and a former assistant secretary of state for African affairs.

“Already, we’ve seen the European Union hemming and hawing over sanctions to Russia for its conduct in Ukraine,” says J. Peter Pham, director of the Africa Center at the Atlantic Council, who wrote last month about Russia’s advances in Africa. “This would add another reason to pause for Europeans if, in some future crisis, they face not only cutoffs of supplies from Russia, but potentially cutoffs from alternative supplies in Algeria.”

[ALSO: U.S. Sends Airborne Infantry to Russian Front Door]  

Russia already boasts booming trade relations with Algeria, especially in the area of weapons and military equipment. From 2003 to 2012, Algeria spent almost $54 billion abroad on military sales, nearly 91 percent of which went to Russia, according to data from the Stockholm International Peace Research Institute. In fact, those purchases accounted for 10 percent of Russia's total arms exports, making Algeria one of the Kremlin's best customers after only China and India.

Those arms sales appear to be paving the way for other lucrative trade arrangements, especially in the world of energy. Earlier this month, Algerian President Abdelaziz Bouteflika, who just won his fourth term in office, promised during his campaign he would implement economic reforms and loosen restrictions on foreign investment.

Natural gas has figured prominently in those plans.

"Shale is important as we have some of the world's biggest reserves. French and American firms are interested," Bouteflika campaign spokesman Amara Benyounes told Reuters earlier this month. "We don't have a [financial] resources problem. It's about getting partnerships with foreign firms as we lack knowledge and technology."

Russia is a particularly attractive partner. The first country to recognize Algeria's independence from France in the 1960s, it became one of Algeria's closest allies during the Cold War, and the recent arms sales have helped to renew those ties. In February, Algeria made an offer: After eight years of negotiations, it invited Russia's Gazprom to join a large gas exploration project. 

Gazprom agreed.

President Abdelaziz Bouteflika, sitting, votes on April 17 in Algiers. 

“Those ties between Algeria and Russia are slightly starting to expand into the realm of energy,” says Michael Nayebi, a North Africa analyst with Stratfor, a private geopolitical intelligence firm. “This is just Gazprom trying to diversify a little bit and expand into other markets after investing only in domestic gas fields.”

Russia still faces hurdles before it can truly monopolize the European energy market. Cornering a sector that large is far more difficult than, for example, monopolizing minerals production, Crocker says. What’s more, transporting natural gas requires plenty of expensive trains, ships, pipelines and import and export terminals, all of which will take time and loads of cash to build. 

“There’s a lot of infrastructure that stands in front of all this,” Crocker says. “That’s not to say that people talking about a squeeze play on Europe are wrong – it’s just a very indirect squeeze play and may be a very long time coming.” 

[MORE: Ukraine Crisis Forces ‘Wait-and-See’ Approach to Arctic Oil]

Still, others warn Russia’s moves should serve as a wake-up call to American and European leaders. "You don’t have to have a very cold winter in Western Europe before citizens start getting upset," Malaquias says. "Gas is a commodity, but it's a special commodity. It’s not chocolate or coffee. You get a bit grumpy if you don’t have a cup of coffee, but you’ll survive. Gas is different."

It's for this reason some urge Europe and the U.S. to act now – both by investing in natural gas resources in Africa and by easing restrictions on exports of American natural gas.

“Just because the situation isn’t going to be immediate doesn’t mean the solution should be put off forever,” Pham argues. “This is exactly how Europe ended up in the vulnerable position it is now.”

U.S. News national security reporter Paul D. Shinkman contributed to this report.

http://www.usnews.com/news/articles/2014/04/25/with-world-watching-ukraine-russia-makes-energy-moves-in-africa