Russian energy model challenges OPEC

In the lead-up to the G8 summit in St Petersburg, Russia presented a revolutionary agenda that leaders of the developing states in Africa and Asia should have every reason to support. This is a new Russian scheme for supplying, consuming and pricing energy - principally oil and gas, but also coal and uranium - to the world.

The OPEC model has been limited to crude oil; the Russian model aims at covering supply of both crude oil and natural gas. The Russian model aims to supplant the Saudis, emphasizing Russia's global lead in gas reserves and in barrel of oil equivalent (boe). Already, Russia exceeds Saudi Arabia as the largest producer in boe terms (13.3 million boe per day, compared with 10 million boe/d for Saudi Arabia); the largest exporter in boe terms (18.7% of global hydrocarbon exports); and the largest reserve base (16.3% of world hydrocarbon reserves boe).

In the OPEC model, suppliers hold much of their cash and government securities in US-controlled institutions. In the Russian model, cash is held in the form of a currency basket; conversion from cash is sought into non-US assets, particularly in the European market.

The Russian model also extends to energy-convertible coal, uranium, and other mineral resources. The US, Australia, Canada and other resource-exporting states have sought to gain unlimited access to search and development of Russian minable resources. The Russian model rejects this, and instead assigns priority and equity control of domestic resources to national resource companies.

- This is big. With the export of more energy output in boe terms than Saudi Arabia, Russia is starting to assert its leadership. And, unlike the Saudi's, the Russians have nukes, which means nobody is going to mess with them any time soon.

This time, I think, the Russians have all the cards. Perhaps I will go long on Russia.

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