International Association for Energy Economics | 19 The Geopolitics of Barents Sea Oil and Gas: the Mouse and the Bear By Ole Gunnar Austvik* L and and sea areas in the European arctic region are dominated by Norway and Russia. The frst off- shore seismic surveys were undertaken on the Russian side in the 1970s, leading to the discovery of the giant felds Shtokmanovskoye, Ledovoye and Ludovskoye. Further south in the Pechora Sea many smaller felds were identifed. To the east of Novaya Zemlya, in the Kara Sea, the Russians discovered two other giant gas felds: Leningradskoye and Rusanovskye (Moe 2004). On the Norwegian side there has been less exploration. The frst licenses for oil and gas exploration were awarded in 1980, leading to the discovery of the Snøhvit gas feld in 1984. There are also potential oil and gas deposits in the disputed area between Norway and Russia, where no drilling has as of yet taken place. The seismic surveying conducted in the area by the Soviet Union prior to 1982 provided cause for optimism (the Russians are said to have identifed the large Fedinsky High feld in this area). Taking the two countries together, more than 100 wells have been drilled in the Barents Sea. As- sessments indicate that there are some 5-6000 mtoe (million tons of oil equivalents) in the area; 80 % of this on the Russian side. Some three quarters is expected to be natural gas. At present Snøhvit is the only offshore feld considered commercially viable and under development. Exploration activities have, however, not been very intensive on either the Norwegian or the Russian side. The assertion that 25 % of world unknown reserves are to be found in the Arctic (U.S. Geological Service) remains unfounded. But there is no doubt that reserves are substantial in a global context. The exploitation of most of the resources depends, however, on the availability of new sub-sea technologies, substantial amounts of capital, political will and, on the Russian side, a trustworthy statutory and political framework. Geopolitics is defned as the study of the way geographical (and often also historical and social) factors help explain the power of nation states (reference.com). In classical formulations the links and causal relationships between political power and (physical power over) geographic space were empha- sized (Kjellen 1917). In the more economic and political integrated world of today, the term seeks to understand how control over territory infuences political power and political and economic outcomes through factors, mechanisms and institutions in the international economic and political system (Agnew & Corbridge 1989). Hence, the geopolitics of any resource rich region is to be understood not only from the area’s own resource endowment. The size and location of other energy resources, how available they are, who controls them, their cost, how regional and global energy markets balance, and energy prices in general, are also important. From this perspective, we will focus on some basic elements for an under- standing of the geopolitics of Barents Sea oil and gas developments. Norwegian – Russian Energy Relations During the Cold War security issues dominated policies in the North, with Norway under the U.S. and NATO umbrella. Norway and Russia competed in energy markets, but their adherence to opposite eco- nomic and political poles oriented exports to a large extent to different markets. Norwegian oil and gas was almost entirely directed to Western European countries (and some oil to the U.S.), while more than half of Soviet exports were devoted to Eastern Europe and the Soviet Republics. After the break-up of the Soviet Union, international economic and political integration processes have become more comprehen- sive in depth and scope than ever before. Russia has notably increased its exports to Western Europe. A stronger awareness has emerged of joint interests in market developments, prices and contractual terms between Norway and Russia. As Russia moves (slowly) towards a market economy and integration into the EU and world economy, she is converging with Norwegian petroleum policies in some areas (Austvik & Tsygankova 2004). Even though Russia has no EEA (European Economic Area) agreement with the EU, she is integrated into EU energy markets (although not in such a one-sided manner as Norway), and been infuenced in similar ways as Norway by downstream market changes and policy measures, such as market regula- tion and taxation. Russian gas policy is, however, not “domestifed” within the EU and they have been able to arrange their petroleum industry in a rather independent manner. As a result Gazprom has not been forced to unbundle its activities, and instead strengthened its position over the past years as a producer and transporter of gas within Russia. 1 There are signifcant structural differences between the oil and gas sec- * Ole Gunnar Austvik is with Lillehammer Univer- sity, Norway. He may be reached at: ole.gunnar. austvik@hil.no See footnotes at end of text.