The new energy crisis could suit Argentina

On taking office early last year, Joe Biden declared war on carbon. Reborn as a fierce eco-warrior, the US president said he was determined to retool his country’s enormous economy so it could operate without filthy fossil fuels. They would have to make way for solar panels, wind farms and the high-tech novelties that would soon be available. Without wasting a minute, he put a stop to a big pipeline project which, if completed, would already be bringing plenty of oil from the Canadian tar sands to refineries in places like Texas. Other Western leaders – especially the Germans who for several centuries have worshipped greenery – agreed with Biden. Fossil fuels were overheating the planet and should be banned forthwith. The future has arrived and people had better get used to it even if they would have to pay through the nose to keep their cars moving or stay warm when it got cold outside.

All this was bad news for Argentina. After huge deposits of shale oil and gas were found in northern Patagonia, it seemed that the country boasted yet another raw material resource which would enable whoever was in government to provide for the growing number of people who for the foreseeable future will depend on public-funded largesse. It was also hoped that fracking, which in the United States had transformed the energy business, would take off here too and make Neuquén a new industrial hub. But then worries about climate warming intervened; combined with political shilly-shallying and the usual bureaucratic incompetence, they put everything on hold.

Thanks to Vladimir Putin, attitudes have just done a U-turn. Fossil fuels are back in fashion. Western leaders are now searching frantically for exploitable oil and gas deposits that are beyond the Russian despot’s reach. This could, indeed should, renew interest in Argentina’s ability to help the Europeans get through winter without pumping large sums of money into the war machine Putin is using not just to fight enemy soldiers but also to murder large numbers of civilians in Ukraine by strafing refugees and bombing hospitals and schools.

If Argentina had a decent government, its envoys would be out there telling Europeans they are in a position to supply them with the oil and gas they so desperately need, though to get at it they would have to spend many billions of euros on drilling, infrastructure and pipelines comparable to the one designed to funnel Russian fuel to Germany, Italy and other countries that has just been halted. Perhaps some official representatives and businessmen are now trying to do this, but for understandable reasons few will take them that seriously.

In the short term, the Western reaction to the invasion of Ukraine by Putin’s hordes is bound to have a negative economic impact not only on Russians, of whom some are already beginning to feel the pain, but also on the inhabitants of many other countries, including Argentina which, because politicians are aware that people tend to vote against governments rash enough to ask them to pay more than a tiny fraction of what it costs to supply them with the energy they consume, must import considerable amounts of gas despite having more than enough underground to keep things humming along nicely for several decades to come.

According to current estimates, this year’s bill could well be about seven times bigger than had originally been expected; needless to say, there is simply no way the government can find the money required. While higher prices for agricultural products should soften the blow a bit, they could also lead to a repetition of the conflict between the farmers and the government which in 2008 came close to putting an end to Cristina Fernández de Kirchner’s term in office. Kirchnerite zealots are already wondering how best to get their fingers on any extra money that comes in and the farmers are letting them know they are willing to put up a fight.

Much depends on how long the war in Europe lasts and whether or not Putin remains in power. Military experts agree that Russia’s Armed Forces have performed far worse than had been predicted, while the Ukrainian ones have done far better than almost anyone had believed possible. They also say that, with spring rains fast approaching, the Russians could soon get even more bogged down than they already are. This, and the Ukrainians’ well-attested talent for guerrilla warfare, suggests that the struggle could go on for years even if the Russians do manage to bludgeon Kyiv into submission and install a puppet regime few outsiders would recognise. In that case, Western sanctions would continue to be applied, though in all probability many European countries would soften them as soon as possible because they have grown accustomed to relying on energy supplies from Russia.

Biden and others have taken to warning Russians that, unless Putin falls or, at the very least, quickly backtracks, they will be excluded from what remains of the Western world order for a great many years to come, Even if China did offer them some support, most would then face a very grim future without the consolation of thinking their country had returned to being a genuine great power. Would that be enough to counter the nationalistic enthusiasm Putin is trying to stir up, apparently with considerable success, and make enough of them rise in rebellion? If this happened, or if angry oligarchs ganged up against the autocrat they have been kowtowing to and, with the help of disgruntled military chiefs, decided to overthrow him, the troops could soon go home and the status quo ante get restored, which would give foreign governments an excuse to forget about sanctions which are expected to hurt just about everybody.

These are questions politicians the world over are asking themselves. Those who see themselves as realists agree that, no matter what happens, Europe should wean itself from its overdependence on Russian energy supplies and it is premature to think the world can get along just fine without fossil fuels, If they have it right, Russia’s unprovoked attack on Ukraine could be as big a game-changer as many have taken to saying it is and it would be far easier for Argentina to attract the sizeable investments needed to take proper advantage of what is thought to be one of the world’s biggest reserves of natural gas. On the other hand, while a rapid return to pre-war “normality” would be helpful to the country in the short term because it would bring down the price of the gas it still has to import, it would also make it that much harder to get the money needed to take proper advantage of what should be a key asset.