Russia Fears it Might Lose its Main Leverage Over Turkey if the Latter s Energy Dependency on it Were to Diminish, Professor Stephen Blank tells AOG

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AO / 8 INTERVIEW Rssia Fears it Might Lose its Main Leverage Over Trkey if the Latter s Energy Dependency on it Were to Diminish, Professor Stephen Blank tells AO Apart from the financial aspects,

1 AO / 8 INTERVIEW Rssia Fears it Might Lose its Main Leverage Over Trkey if the Latter s Energy Dependency on it Were to Diminish, Professor Stephen Blank tells AO Apart from the financial aspects, Rssia s energy policy reflects nmeros strategic and political considerations In the former Soviet Union, control over oil and gas pipelines is a means of controlling exporting contries themselves Energy investments in the Middle East and arms sales are closely interconnected The crisis in Ukraine cold have an adverse impact on the Soth Stream project (Following is the text of an interview with Professor Stephen Blank, a Rssia specialist who is Senior Fellow at the American Foreign Policy Concil in Washington and the Foreign Policy Research Institte in Philadelphia see following page for his biography). Arab Oil & as: In yor speech at the conference on "The control of energy in the Krdistan Region of Iraq", organized in Ab Dhabi at the beginning of March by Academy & Finance, yo indicated that Rssia's overall energy policy had mainly strategic and political motives. Cold yo elaborate on this viewpoint? n Stephen Blank: Rssia s energy policy has many strategic and political motives apart from making lots of money which the state can then channel into economic development projects. These goals apply to the entire swath of territory from Central Erope to the Asia-Pacific and they inclde the following objectives: - Enriching the topmost leadership by providing a hge stream of never ending rents that it can then se to by off rent-seeking elites who are bond to the new Tsar (Ptin) by their needs for rents and are ths obliged to serve the state in a recreation of the Mscovite service state where everyone served as a condition of having any property and property is and was eqated to power and position as nder fedalism. Sols be the state is a rent-granting state.

2 AO / 9 16 March Maintaining domestic tranqility by providing cheaper energy (althogh this is gradally diminishing). For years the price of energy at home was deliberately kept low to maintain social peace in a rather wastefl and inefficient energy economy which it still is. - Obtaining tax revenes for the state. Energy companies like azprom are tax-farmers as in the medieval formation for the state. They are granted monopolistic or oligarchical rights to a prodct or service on behalf of the state which takes large shares of it for tax benefits bt lets them live off the remainder (i.e. the rents as stated above) - In the CIS the goal is control over pipelines. It is a method of keeping control over CIS exporters who, with the exception of Trkmenistan s gas to China and the BTC and SCP pipelines from Azerbaijan to Trkey, mst traverse Rssian territory to sell their energy prodcts. - In Erope and Asia the prpose of energy is to gain leverage and inflence over > Stephen Blank Senior Fellow for Rssia at the American Foreign Policy Concil Senior Fellow at the Foreign Policy Research Institte Stephen Blank is Senior Fellow for Rssia at the American Foreign Policy Concil. He is also Senior Fellow at the Foreign Policy Research Institte, Philadelphia, PA. From 1989 to 2013, he was Professor of Rssian National Secrity Stdies at the Strategic Stdies Institte of the U.S. Army War College. In he was Doglas MacArthr Professor of Research at the War College. Prior to this appointment Dr. Blank was Associate Professor for Soviet Stdies at the Center for Aerospace Doctrine, Research, and Edcation of Air University at Maxwell AFB. WHO S WHO Dr. Blank's M.A. and Ph.D. are in Rssian history from the University of Chicago. He has pblished over 1,000 articles and monographs on Soviet/Rssian, U.S., Asian, and Eropean military and foreign policies. His most recent books (2012 and 2013) are as follows: - Editor, Politics and Economics in Ptin s Rssia, Carlisle Barracks, PA: Strategic Stdies Institte, U.S. Army War College, Editor, Central Asia After 2014, Carlisle Barracks, PA: Strategic Stdies Institte, U.S. Army War College, Editor, Rssia s Homegrown Insrgency: Jihad in the North Cacass, Strategic Stdies Institte, U.S. Army War College, October, Editor, Rssia and the Crrent State of Arms Control, Carlisle Barracks, PA: Strategic Stdies Institte, U.S. Army War College, September, Editor, Perspectives on Rssian Foreign Policy, Carlisle Barracks, PA: Strategic Stdies Institte, U.S. Army War College, September, Editor, Can Rssia Reform: Economic, Political, and Military Perspectives, Carlisle Barracks, PA: Strategic Stdies Institte, U.S. Army War College, Jne For a more detailed CV of Professor Blank inclding the references of several of its pblications please send s an at administration@stratener.com

3 AO / 10 contries politics by gaining a strategic share of a key sector. In Erope fnds from that sector are then sed, in tandem with intelligence penetration, criminal maniplations by organized crime, and Rssian bsiness operating for the government to corrpt politicians, political parties, political instittions, media (or even by media) and ths ndermine Eropean political instittions. In Latin America similar goals are prsed as well as offering cover for covert operations ranging from smggling, drg trafficking to gn rnning to insrgents like the FARC in Colombia. - In Asia the main objective is to gain wealth, inflence, power and enhanced standing. Moscow also seeks to attract foreign investment and technology transfer to develop Siberian and Arctic energy fields that are nderdeveloped, nexplored or beyond its capacity to work. - In the Middle East, as in Asia and Latin America we see the conjnction of energy investments, arms sales and a qest for military bases in an effort to gain leverage on local governments, reestablish Rssia as a genine great power in the area withot whom nothing can be done or agreed to, gain leverage pon potential exports to Erope, and obstrct Western, and especially American, efforts to organize a Middle Eastern political order. AO: Cold yo explain the links between energy and arms deals in Rssia's strategy in the Middle East, the Near East, North Africa and Sbsaharan Africa? n S. B.: Energy and arms sales are the key methods of forging ties with other states in the Middle East and Africa, the seqence by which these ties are created varies with the contry and ltimately does not matter mch. They are all key instrments by which Rssia gains inflence, leverage, and stats vis-à-vis those states and also keeps it defense sector going as is the case in other contries as well. However, in many cases Rssia ltimately seeks bases as in Syria, Cyprs, probably Egypt in the ftre, Vietnam, etc. AO: Why is Rssia spporting the Repblic of Cyprs regarding its dispte with Trkey over exploration in the Eastern Mediterranean? n S. B.: Rssia spports Cyprs to prevent Trkey from developing its own atonomos sorces of energy, to preserve Cyprs as a haven for the transferal of ill-gotten Rssian money which can then be landered or broght back nder foreign aspices to Rssia, and to establish a lasting base for power projection in the Middle East and Mediterranean. It also is very interested to prevent new sorces of gas from going to Erope withot its participation in the decision. AO: Several Rssian companies have been preqalified for the first exploration bid rond off Lebanon and Soyzneftegaz signed at the end of last year an exploration contract in the Syrian offshore. How do yo assess Rssia's growing interest in the Eastern Mediterranean? n S. B.: As stated above, Rssia s growing interest in the Eastern Mediterranean represents a coordinated effort to project itself into the Middle East as a great power who mst be reckoned with on all major regional isses. Again it seeks permanent lodgments, a basis for prolonged and endring inflence over local governments and energy shipments to Erope, and military, particlarly naval bases there. And ltimately it seeks to thwart U.S. efforts to organize a regional secrity order.

4 AO / March 2014 AO: azprom is working in the sothern part of Iraq (development of the Badra field) and the Krdistan Region of Iraq, a sitation that the federal government of Iraq does not normally accept. What is the rationale for Rssia and why is Iraq accepting so far this involvement by the Rssian state giant in the Krdistan Region? The deepening of energy relations between the Krdistan Regional overnment and Trkey is worrying both Moscow and Washington. Why? n S. B.: I am not certain that the development of the KR s energy assets worries Moscow becase it is participating in developing them. What it does fear is Trkey developing an atonomos sorce of energy that will redce or even ltimately terminate its main sorce of leverage pon Trkey, namely the hge dependence of Trkey on Rssian energy. Moscow is certainly not committed a priori to the integrity of Iraq or to Krdish independence thogh it does not want to see more insrgencies in the Middle East. Bt its actions in the KR do not sggest nde alarm at developments to date there except insofar as Trkey stands to be the big winner in energy exports there. AO: What cold be the impact of the Ukrainian crisis on the ftre of the Soth Stream project? n S. B.: It is still too early to give a definitive answer how the Ukrainian crisis will affect Soth Stream bt my gess is that it will redond negatively pon the project which is clearly driven by geopolitical considerations rather than by economic ones, namely the isolation of Ukraine from Rssian gas and the enhancement of Rssian inflence over Italy and the Balkans, if not Central Erope. I think there will be tremendos pressre to find alternative gas sorces for all of these contries and to sspend technological transfer and investment in Soth Stream whose costs keep going p and are already very high. There may also be pressre on Blgaria and Trkey not to allow it in their territories or territorial waters. We also may expect frther legal action by the EU against Soth Stream. The key here is whether or not a trly coordinated program of developing long-term alternatives to this project materializes. If yes it will probably be able to spply eqivalent amonts of gas at less cost and with less political interference and that wold severely ndermine Soth Stream. If no sch program materializes then any effect of this crisis will be short-lived and sperficial. AO: Will this crisis lead to a new interrption of Rssian gas exports to Erope? n S. B.: Undobtedly the search for alternatives to Rssia, if it enjoys any sccess, will lead to disrptions (a better word than interrptions) and declines in Rssian spplies to Erope. Becase energy and geopolitics are now so imbricated together, especially in Rssia s case, and becase the Eropean gas market is satrated, relatively stagnant in terms of qantitative growth and accessible to so many sppliers, it will be relatively easy to find alternatives to Rssia if the will is there to invest in it and I think that de to this crisis we will see that will materializing despite Moscow s best efforts to prevent sch a development. AO: Yo stress the opportnistic natre of Rssian policy in the energy field. What are some of the most striking examples of this natre in the recent past? n S. B.: Moscow s energy opportnism is strikingly evident, e.g. in its desire to play both sides of the Iraqi-Krdish minet, in its effort to negotiate now with Iran to break the sanctions regime before negotiations with Iran over its nclear program begin and its overall effort,

5 AO / 12 described above to se energy as a kind of Swiss army knife that cts in many directions simltaneosly for the prsit of nilateral political gain from Erope to the Pacific. AO: In yor speech at the Ab Dhabi conference yo nderlined that Rssia is often contribting to instability in "neighboring contries" in order to keep or increase its inflence on them. Cold yo develop this isse for s? n S. B.: Rssia either exploits existing fissres within or between neighboring contries or creates them in order to destabilize them, generate a pro- Rssian party with whom it cold work, and try to leverage its inflence in them. Essentially it operates a protection racket like the Mafia. Either cooperate with me For the Kremlin Rssian statehood can only srvive as an empire srronded by satellites on my terms or bad things will happen. This is the only way it can prevent the genine integration of Erope and of Erasia arond a pro-liberal and pro-western agenda and seize opportnities to recreate its empire, gain a free hand in world affairs, and obstrct the U.S. by fomenting conflict sitations in regions that are ndergoing stress. It does this in Latin America, Erasia, and the Middle East and wold do so in the Asia-Pacific if it cold. As a revisionist state that believes Eropean and Erasian integration, especially arond the pro-western agenda, is a mortal threat to the regime and to the contination of Rssian statehood - which its leaders believe can only srvive as an empire srronded by satellites - it mst foment trobles in neighboring areas to jstify its willingness to intervene there. Indeed, as one Rssian analyst said last year, a great state has either adversaries or clients. And if one starts with that otlook the rest follows logically.

La Russie redoute de perdre un levier clé sur la Turquie si la dépendance énergétique de ce pays à son égard devait diminuer,

La Russie redoute de perdre un levier clé sur la Turquie si la dépendance énergétique de ce pays à son égard devait diminuer, PA / 8 ENTRETIEN La Rssie redote de perdre n levier clé sr la Trqie si la dépendance énergétiqe de ce pays à son égard devait diminer, expliqe a PA le professer Stephen Blank Otre les aspects financiers,