THE JOURNAL OF ENERGY

AND DEVELOPMENT

Lee Morrison,
Book Review of
“The New Geopolitics of Natural Gas,”
Volume 42, Number 2

Copyright 2017
 BOOK REVIEW

The New Geopolitics of Natural Gas, by Agnia Grigas. Cambridge,

Massachusetts: Harvard University Press, 2017, 401 pages. $33.

Reviewed by Lee Morrison*

A Foundational Work on Changes in Eurasian Gas Markets Related to

Emerging U.S. Gas Abundance

T here has been an extraordinary evolution in the global natural gas sector since
2010. Surplus resources, new producer states, a rapid and impressive in-
frastructure buildup, and the proliferation of international LNG trade are reshaping
economies. Perhaps of greater importance, however, the market power and spheres
of political influence of traditional actors have shifted significantly. Agnia Grigas’
new book The New Geopolitics of Natural Gas “assesses the political implications
of the transforming global gas market…”1 where gas is plentiful, internationally
transportable, competitive, and no longer subject to the same degree of manipula-
tion by long-standing energy monopolies and cartels.
Grigas is a Senior Fellow at the Atlantic Council and frequently writes about
the politics of Eurasia. She holds degrees from Columbia University and St.
Anthony’s College at Oxford, and a Doctorate in international relations from Bra-
senose College, also at Oxford. Her work frequently appears in the New York Times,
Forbes, Bloomberg, Reuters, and in numerous scholarly journals. In this, her third
book, Grigas expands on previous writings about the relationships between Russia

*Lee Morrison is an energy infrastructure advisor based in Denver, Colorado. He holds

a business degree from Baylor University, an M.S. in information science from the University of
North Texas, and an M.S. in Global Energy Management from the University of Colorado Denver.
His areas of study include the corporate leadership and organization, the evolving business models of
U.S. oil and gas companies, and effective strategy in capital projects in energy. He may be reached at
Lee.Morrison@EagleEnergyAdvisors.com.

The Journal of Energy and Development, Vol. 42, Nos. 1 and 2

Copyright Ó 2017 by the International Research Center for Energy and Economic Development
(ICEED). All rights reserved.
287
288 THE JOURNAL OF ENERGY AND DEVELOPMENT

and Europe, and she effectively lays out how natural gas fundamentally underlies
many of their recent contentious political maneuvers.
As a political scientist, the author uses five analytical lenses to describe gas
markets: supply, demand, transit, dependence, and interdependence. From the
perspective of a macro-economist, these are variations on market power where
perfect interdependency is analogous to perfect market symmetry, and where the
strength of each may be measured in part by diversity. A diversity of supplier
nations shifts market power to consumers giving them additional leverage. A
diversity of consumer nations shifts market power toward suppliers. And, both
suppliers and consumers rely on a diversity of transit options. This provides
a framework for the author’s subsequent discussions about Russia, China, Europe,
and Central Asia, and how the new natural gas abundance of North America has
altered global markets by facilitating diversity.
Chapters 1 and 2 provide a concise history of global hydrocarbon development and
use. It includes a roadmap of how the OPEC oil embargo of 1973 led to U.S. leadership
in shale technologies by motivating public incentives in the development of hydraulic
fracturing, horizontal drilling, and 3D seismic imaging. It also describes the growth of
LNG trade and the proliferation of global energy infrastructure prior to the shale rev-
olution in North America. Grigas acknowledges in this chapter that geopolitics, and
indeed, gas markets, are continually evolving. Newly proposed international pipelines,
additional LNG import and export facilities, the burgeoning development of shale gas
reserves around the world, and the rapid rise of renewables all facilitate diversity in
supply and move the world closer to a long-predicted yet still elusive global gas market.
The United States may not dominate gas markets, but its newfound gas independence
has resulted in the diversion of formerly imported shipments and greatly enhanced
international LNG trade. This has increased global supply diversity among consumer
nations, and fundamentally limited monopolistic powers of producers.
Chapter 3 is devoted to Russia and the politics of supply. The Kremlin and Gazprom
remain tightly interwoven, and the company has been historically used to induce or
discourage behaviors among its dependent customers and transit states. Natural gas is
a disproportionately large part of the Russian economy. Without it, Russia may not have
an economy sufficient to be included in the G8. Born in Soviet Lithuania, Grigas shares
valuable first-hand insights into the Russia’s declining market powers resulting from the
early signs of decoupling of the EU from Russian gas dependence. This has given the
nation a sense of urgency as it turns to China to diversify its customer base. China will
absorb much of Russia’s natural gas capacity, but it will also dictate the terms of the
relationship, thus diminishing the political influence of Russia over the longer term.
The politics of demand and dependence are discussed in chapter 4 as related to
natural gas in Europe. The recognition of Russian dependence from the 1970s
through the 1990s, and fears of depletion of Norway’s significant reserves began
to drive Europe to seek alternative suppliers. In the early 2000s, Gazprom lost
more than 20% market share in Europe largely due to bolstered development in
 BOOK REVIEW 289

Algeria and the United Kingdom and LNG arriving from Qatar. Subsequent Russian
supply disruptions also led to a fundamental shift in European demand politics.
Energy efficiency, renewable energy, and LNG import facilities were quickly
moved to the fore to diversify supplies. Although Europe is now on a more fa-
vorable trajectory, Grigas calls for additional energy unity. Implementing the much-
discussed Energy Union would enhance Europe’s market power through a common
energy strategy, a unified voice, and it would create a forceful negotiating bloc.
Grigas effectively contrasts events in Ukraine and Belarus to illustrate the
politics of transit states in chapter 5. Among many other similarities, they both lie
between a monopolistic supplier, Russia, and a dependent consumer, Europe; and
the infrastructure of both nations was mostly built by Soviet investment. However,
Ukraine chose a more assertive relationship with its post-Soviet Russian partner,
while Belarus was more capitulatory. The results of both divergent policies have
been less than ideal from a Western perspective. Ukraine has seen the disastrous
effects of lost territory and military occupation, Belarus has experienced political
subservience and reluctant foreign investment, and both have experienced wide-
spread corruption and graft related to gas transit contracts.
The omission in this chapter, in my opinion, is a discussion of the emergence of
Turkey as a critical transit state. Numerous pipelines are proposed or under de-
velopment from Central Asia, Southern Russia, and Iran, but all must flow through
Turkey. And the emerging Russia-Turkey alliance, albeit of convenience, may be
foreboding as producer and consumer nations attempt to realign their geopolitical
strategy reflecting this new reality. The contrasts of these three transit states in
relation to the Russian sphere of influence are striking. While Turkey is apparently
entering with exuberance, Ukraine appears to be exiting with critical injuries, and
Belarus remains mired for the foreseeable future.
Chapter 6 describes Central Asia and the Caucuses. Again, Grigas aptly describes the
resource development of these regions, their reserves and infrastructure, and their historic
and current relationships with Russia. Russia once relied on gas from these regions as
throughput to supply Europe. But as Russia’s gas production grew, it no longer needed
these supplies and has since left them largely isolated. China quickly filled this void by
building a vast pipeline network connecting Kazakhstan and Turkmenistan in what will
become the world’s largest pipeline network. If a proposed Trans-Caspian pipeline is
added to this system, the production of Azerbaijan may also become available to China.
China is viewed more favorably than Russia as a trading partner with Central Asia and
the Caucus states because (1) China is the consumer rather than a non-dependent
throughput state, (2) China has built the infrastructure at considerable expense and now
needs a return on its investment, and (3) China is focused on building supply diversity
through strategic trading alliances while Russia is focused on controlling its satellite
states to maintain its sphere of influence and its throughput supplies enroute to Europe.
The final chapter is devoted to China, and to a lesser extent, India. Both are, of
course, among the largest and fastest growing consumers of natural gas. But China
290 THE JOURNAL OF ENERGY AND DEVELOPMENT

has had the benefits of foresight and favorable geography which led it to develop
diversity in its supply. The country has significant domestic shale reserves which are
being developed aggressively, and it has also built noteworthy LNG gasification
capabilities as it recognized the potential need for imports. In addition, China
continues to pursue piped gas from Russia, Myanmar, and other nations, and it has
become assertive with its territorial claims in the South China Sea to seize rich
reserves in the region and to control vital shipping lanes to the Middle East. China’s
needs are great, but it is now well-positioned for both growth and market leverage.
In contrast, India is in a much more tenuous situation. With a population and
economic growth rate greater than China, and with its now urgent air quality dif-
ficulties, India, more than any other nation, needs a rapid transition to cleaner en-
ergy. But India is an isolated consumer with few ready opportunities to diversify its
supply. The Himalayas and political instability in Afghanistan and Pakistan nearly
preclude pipeline connections with gas-rich supplier states, and India’s intrastate
pipeline infrastructure is highly fragmented and inadequate. The country has large
gas reserves, but they are mostly undeveloped and unproved, and significant gas
hydrates deposits in the Bay of Bengal are currently uneconomic. For now, India
remains a very large consumer with rapidly growing demand in a weak bargaining
position. It does not require an economist to recognize the destination of this path.
Grigas has a forthright writing style, and The New Geopolitics of Natural Gas is
densely packed with business models, history, facts, and descriptions of the po-
litical influences on natural gas markets. Short on charts and graphs, a laptop is an
indispensable tool for a more robust understanding of the text. The book provides
an excellent overview of Eurasian politics and of global gas economics, and it
demonstrates how new North American energy abundance has kicked off a great
geopolitical transition which has only just begun. The United States may never
dominate global gas markets, but it has established a price ceiling and diminished
the political influence and market powers of monopolists.
A good book simultaneously satiates and stimulates curiosity. It answers
questions and provides information, but leaves the reader wanting more. Grigas
illuminates the shifting market power and geopolitics of key gas trading re-
lationships in Eurasia. The dominance of Russia as a producer is ending. Europe’s
market power is strengthening. And alliances of the former Soviet republics in
Central Asia are shifting. The book’s discussion, however, inspires many more
questions, then leaves them unanswered.
First, as previously mentioned, a deeper exploration of the role of Turkey as a transit
state is needed. Producer nations are wrestling for position, and Turkey is growing more
assertive as the world begins to recognize its geographic importance. Turkey also has an
eye toward rekindling its historic ties with Central Asia, and it is an important player in
China’s OBOR initiatives. All of these developments will impact global gas markets.
Second, India’s potentially profound effect on energy markets warrants more
attention. Its tremendous opportunities for LNG and pipeline infrastructure, and its
 BOOK REVIEW 291

exponentially growing gas demand will fundamentally alter spheres of influence

in geopolitics and in gas markets. It is likely to emerge as the largest consumer of
global LNG, and has the potential of absorbing much of the capacity of Australia,
Qatar, and others. India will likely compete for China’s supply diversity, thus
creating new geopolitical pressures in the region.
Third, ASEAN is quietly emerging as a powerful and formidable trading bloc.
It controls vital LNG shipping lanes and energy trading centers, and it has already
demonstrated that it will not idly tolerate China’s claims of the resource-rich South
China Sea. It also has substantially more hydrocarbon reserves than all of Europe.
As a producing cartel with substantial market power, ASEAN will likely impact
both China and India.
Fourth, events in North America may have ignited this geopolitical evolution in
natural gas, but its future role in global gas trade must not be overlooked. With its
newfound abundance of proved reserves, enthusiastic capital sources, blossoming
shale technology, and rapidly declining operational expenditures, it is unlikely that
American producers will be content on the sidelines as observers to these global
developments. Further North American integration will strengthen its geopolitical
position regarding both supply and demand. And as China’s attention and investment
shift away from Latin America toward its Eurasian initiatives, it seems that South
America will grow increasingly important as a market for North American gas.
And last, Africa is a continent divided and unwisely disregarded in global natural
gas geopolitics. It has vast reserves, much of which remain unexplored. But in the
absence of significant trans-African connectivity and liquefaction capabilities, its
potential impacts on global gas markets are wholly unknown. North Africa will likely
grow increasingly important as a supplier to Europe; and East and West Africa will
continue having difficulty attracting enough capital to fully develop their reserves.
Rapidly growing domestic gas markets across Africa could make the entire continent
self-sufficient, which, ironically, would have a negligible effect on global gas markets.
Grigas’ work brings to light a variety of issues in the gas sector that change the
course of world geostrategy. Clearly, Russia’s market power as a supplier is waning,
China’s market power as a consumer is expanding, and Europe’s dependency is
quickly dissolving. However, Turkey, India, ASEAN, the Americas, and Africa are
wildcards. Each has the capability to sway the politics of supply, demand, or transit
and completely change global gas markets. Perhaps these will be the principal topics
in a follow-up to Grigas’ work, a book I eagerly await.
NOTES
1
A. Grigas, The New Geopolitics of Natural Gas (Cambridge, Massachusetts: Harvard Uni-
versity Press, 2017), p. 2.