Kissinger and Blair Warn of Conflict

MTKissinger heading to the podium to make a speech at the Renaissance Capital investment conference on Tuesday.
Visiting statesmen Tony Blair and Henry Kissinger said Tuesday that countries had to form strategic alliances to face major global challenges like energy security and climate change.

Kissinger, former U.S. secretary of state, and former British Prime Minister Blair were speaking at a Renaissance Capital investment conference, where Kissinger said Russia and the United States, accounting for 90 percent of the world's nuclear arsenal between them, have to set aside their differences to solve issues that cannot be tackled unilaterally.

"None of these [issues] can be dealt with by confrontation between the U.S. and Russia," he said. "It is not in the U.S. interest to keep Russia down, and it is not in the Russian interest to look at the U.S. as an antagonist."

Relations between the Washington and Moscow have been strained as a result of U.S. plans for a missile-defense system in the Czech Republic and Poland and amid growing resentment of what Russia sees as U.S. meddling in its backyard, including its support of Georgia and Ukraine's ambitions to join NATO.

Kissinger, who received the Nobel Peace Prize in 1973, continues to retain considerable influence in foreign policy circles in Washington. He has traveled to Russia on a number of occasions over the past eight years, engaging in behind-the-scenes diplomacy in discussions of U.S.-Russian relations with senior politicians.

Kissinger met for a brief conversation Tuesday afternoon over tea with President Dmitry Medvedev and was expected to meet with Prime Minister Vladimir Putin later in the day.

Asked by a member of the conference audience where the next major international conflict might come from, Kissinger warned that the search for energy security could lead to aggression as countries scramble to secure energy supplies.

"If supply is limited and demand increases, if countries compete for access to energy on a purely national basis, we are bound to see a repetition of the colonial conflicts of 19th century," he said, cautioning that such conditions could degenerate into "intense political rivalry."

Kissinger's words struck a chord.

"This is an early warning signal, but I'm not sure it will do anything to make people move away from that kind of position. If anything, it might even hasten the grab for oil assets," said Marshall Goldman, associate director at the U.S.-based Davis Center.

"At the present time, Russia … is not in a position to worry there won't be enough for Russia. If anything, it might make Russia even more aware of the fact that they are in a very commanding position."

With one-quarter of the world's gas reserves and as the largest oil exporter outside of OPEC, Russia is favorably positioned to take advantage of any race for assets.

The price of oil has reached unprecedented highs in recent months, climbing close to $140 per barrel this week, while industry leaders have warned that it could be many years yet before alternative fuels will be in widespread use.

Kissinger's words were echoed by Blair, the Middle East envoy for the United States, Russia, the United Nations and the European Union — the so-called Quartet — who said world leaders had to respond properly to enormous challenges, through opening up and not protectionism.

"Power is shifting east, and it's shifting fast, not just to China and, in time, to India, but also to the Middle East and to Russia," Blair said. "Political and economic relationships are undergoing profound change."

To laughter from the audience, Blair admitted that Britain and Russia had had their difficulties over the last two years, but he said it was essential to have Russia on board to tackle issues of a global nature.

"We need to engage in strong strategic partnerships with [the] shift in power. Not to engage with this at a strategic level would be a … mistake of a profound nature," he said.

"Global challenges cannot be solved without the participation of countries like Russia," he added.

Relations between Russia and Britain are at a post-Soviet low, stemming back to the murder of Alexander Litvinenko, a former FSB agent, in London in late 2006.

More recently, BP has been embroiled in a battle with the Russian shareholders over the leadership of the 50-50 TNK-BP joint venture. The tie-up was hailed as a landmark in cooperation between the two countries back in 2003, when both Blair and Putin put their signatures to the deal.

Five years on, the project is unraveling and BP claims that the Russian shareholders are trying to take control of the project. TNK-BP, a wholly private company, remains an anomaly in a country that has undergone a creeping renationalization in the resource sector.

In a widely publicized address at last year's conference, Tony Hayward, just one month into his new role as chief of BP, issued an impassioned plea for Western markets to open up to Russian investment as he attempted to defuse the firm's conflict with state officials over the Kovykta gas field.

No representatives from BP attended, with the embattled CEO of TNK-BP, Robert Dudley, pulling out at the last minute.

Finance Minister Alexei Kudrin weighed in on the dispute Tuesday, telling reporters that there was still time to limit the collateral damage from the conflict.

"This is a specific case, and it hasn't affected the investment climate yet," Kudrin said. "The conflict itself isn't as important as how it ends. The conflict should be resolved in a civilized way, so it won't do any harm." he said.

The Russian shareholders, Alfa Group, Access Industries and Renova, or AAR, have called for Dudley's firing and a restructuring of the TNK-BP board.

Tim Summers, the company's chief operating officer, said the conflict, including AAR's threat to take BP to court in Stockholm over its hiring of foreign employees, could affect TNK-BP's operations.

"They are in dialogue with each other, and we hope that dialogue will be constructive and reduce some of the uncertainty for my team in terms of the operations of the company," said Summers, sitting in for Dudley, who had been scheduled to take part in the conference's energy roundtable. "I won't pretend it's been an easy time for our employees."

The fate of 150 BP employees, assigned as specialists, engineers and strategists to TNK-BP, remains uncertain, as their visas run out in July.

A court in the Tyumen region was due Wednesday to hear a lawsuit brought against TNK-BP by Tetlis, an obscure firm with a miniscule holding in the joint venture, which is challenging the legality of the foreign hires.

"The issues at stake are complex," said Summers. "The sooner it gets resolved, the better."

Summers defended the company's record, judged by reserve replacement ratio and dividend payments, following claims by Alfa Group chairman Mikhail Fridman that TNK-BP has underperformed, particularly compared with its Russian rivals.

Bob Foresman, deputy chairman of Renaissance Capital, warned that the dispute was "not helping anybody."

"It's obviously unhelpful for BP. It's very unhelpful for AAR, as it doesn't make them look good. It's unhelpful for the Russian government and administration and it is unhelpful for the market," Foresman said.

At the same time, he said talks with government officials had led him to believe that BP's presence in Russia was not under threat.

"No important decision maker in Russia wants to see BP leave Russia," Foresman said. "It's not about the authorities chasing BP out."

There has been much public speculation that AAR was looking to gain greater control of the joint venture ahead of a sale to a state-owned energy major like Gazprom or Rosenergo.

Gazprom CEO Alexei Miller, speaking at a different event Tuesday, said his firm had made no overtures toward TNK-BP, Interfax reported.

Gazprom has neither made nor received any offers for the purchase of shares in TNK-BP and is not related in any way to the conflict within the company," Miller told reporters at the opening of a new production unit at electricity utility Mosenergo.

Notably absent at Tuesday's conference was scheduled speaker Igor Shuvalov, the first deputy prime minister who was publicly upbraided by Putin last week for taking time out from work on domestic issues to speak at the St. Petersburg International Economic Forum last weekend.