Russia's eye on the Mare Nostrum
Moscow's ambition to raise its level of energy influence in the Mediterranean clashes with certain objective issues: the weak recovery of the Russian economy, the uncertainty regarding the financial return on investments in the region, and the actual cost of the operation in a context of still unstable prices

On October 21, 2016, the British Royal Navy escorted the Russian fleet in the Mediterranean, more skeptical about the exhibition of grandeur than concerned about the real impact on military action in Syria. Meanwhile, Rosneft, the Russian oil monopolist, entered the Mediterranean energy market by making some major acquisitions. Two events that seem to aim at different sectors and directions, one at Syria and the Middle East, the other at Eastern Mediterranean gas and European supplies, but which, in reality, are likely two parts of one same strategy that aims to extend Russian dominance in the region, taking advantage of Russia’s favorable geopolitical situation and seeking the closure of the circle, with the Kremlin’s ambitions ranging from Turkey, to Iran, through to Egypt, by means of the energy weapon. A success that Russia could, however, be missing out on, undermined by a fragile economic condition and by the intrinsic instability of the area, which has impeded the development of its energy sector.

Russian interests in the Mediterranean

Russia’s desire to have a strong Mediterranean presence is historic and goes back to both imperial Russia through to Putin’s Russia; however, the reasons for this ambition are currently growing, and the energy component is significant. Rosneft’s entry to Zohr in fact suggests Russia’s desire to set foot in what could be a small energy revolution in the Eastern Mediterranean, which is also transforming historic energy importers, such as Israel and Cyprus, into exporters, through a series of discoveries such as the Aphrodite or Leviathan gas fields, of which Zohr is by far the largest (4-5 times the size of Cyprus’ Aphrodite, for example). The Kremlin could therefore gain some influence over increasingly expensive resources to the European Commission, as it is already considering an extension or deviation of its Southern Gas Corridor in that direction. Russia would therefore be able to influence both the original destination of the European project, Azerbaijani gas, and this potential alternative. Russia also benefits from strong political support from almost all countries in the area, with major involvement in terms of energy; Greece and Turkey are already consolidated partners, with the involvement of Athens in the European branch of Turkish Stream, the hypothetical ''Greek Stream''. Relations with Israel are perhaps more complex but stable, with a trade that exceeded $3 billion in 2014. Russia’s influence over Egypt is finally growing: it was the only Arab country to vote in favor of the Russian resolution on Syria at the UN in October 2016. Saudi oil company Aramco soon after, probably in retaliation, announced its decision not to supply products to Egypt at a subsidized price that month.

A presence at double value

A Russian presence in the Mediterranean would consolidate the Kremlin’s influence in this area, including through other sources of supply, in addition to those already at its disposal. In this way, Moscow could extend its strategy for energy use as a Trojan horse for its own geopolitical ambitions, as is already happening with Iran, Azerbaijan and Turkey, also to the Mediterranean, and especially to Egypt, which could slowly escape from the still very strong Saudi influence. The consolidation of Russia’s energy presence in the Mediterranean would not only serve to strengthen the political nature of this strategy, but would also explain it further. The arrival of the Admiral Kuznetsov aircraft carrier in the Mediterranean might not only have the aim of justifying a military spending which, according to estimates of the Stockholm International Peace Research Institute (SIPRI), would have doubled from 2004 to 2014, but could also serve as a support base to protect Russian interests in the disputed offshore reserves of the Eastern Mediterranean. In a kind of virtuous circle (for the Russians), their increased economic interests would motivate a greater military presence, in turn essential for greater influence over the Middle East, of which Russia is in search.

Moscow, entering the Mediterranean, could get some influence on an increasingly important energy resources for Europe, enjoying the support from almost all the countries

A strategy between light and dark

Achieving all this will not, however, be easy for Russia. Weighing on Russia’s energy involvement in the Mediterranean are, firstly, doubts related to the industry as a whole; the question is whether the tension between Turkey, Cyprus, Lebanon and Israel, as well as the instability and growing demand for Egyptian energy, may affect the stable development of gas reserves in the area, and whether these will ever be exported. Russia’s strategy could be nipped in the bud by the lack of development of the industry. The most critical point, however, remains the precarious condition of the Russian economy, with a GDP growth oscillating between -0.5% and -1% in the last two years, according to the estimates of the Russian Ministry of Economy. A crisis exacerbated by low oil prices and the cause, this year, for major budget cuts (including -27% for its own defense). The highly political use of energy by the Kremlin also has high, unsustainable costs, without a clear financial return, as demonstrated by the failure of South Stream. Greater control over extraction activities in the Eastern Mediterranean should then move on to a possible inclusion in the development of transport infrastructure - all still hypothetical, but in which a possible Russian involvement would increase the budget required by the Mediterranean strategy. If costs are added to this for maintaining Russian aircraft carriers (including repairs, given the tendency of the Russian fleet to break down) and ships in tow, for a mission that was and would be carried out well by the Syrian bases freely given by Assad to Putin, the question is on the real economic sustainability of Russia’s position in the Mediterranean.

An entirely domestic energy competition

Finally, the fragility of Russia’s position is complicated by an internal factor: the competition between Rosneft and Gazprom. The balance of power between the two companies is in fact reversing compared with ten years ago, when the former produced one-tenth of the oil compared with current levels and the latter’s monopoly on gas seemed unassailable. In April 2016, Rosneft’s market value even surpassed that of Gazprom, while its role in the gas sector continues to grow, undermining the dominant position of its competitor, which may therefore not be satisfied with Rosneft’s involvement in a key area for Russian interests, as is the Mediterranean. Russia’s strategy towards the Mare Nostrum therefore seems to be motivated by advantages and substantial interest, but is marked by great uncertainty regarding key variables: the recovery of the Russian economy, the financial return on the development of resources in the region, and the real cost of the operation in a pricing framework with great variability. A situation in which, also considering the very unstable boundaries between politics and economics, calculating the return of the operation will be very difficult.