Energy security and armed forces fuel supply problems.

As is evident from historical records, the importance of fuel for combat operations and warfare in general has been growing rapidly. Western diplomats claimed, after WWI, that the Entente Cordiale had won by saddling the crest of the petroleum wave. WWII, in turn, showed with utmost clarity that the notions of "defense capability" and "sufficient fuel supply" were one and crucial for any state, however big and well armed. Already in that period fuel was nearing 50% of all war materiel (ammunition included) supplied to the troops.

Recent history is equally eloquent on the point that precisely sufficient fuel supply is among the most significant factors in victory in any war. The postwar progress in military affairs and state-of-the-art weaponry and military equipment in use in the armed forces made the main energy type, fuel, even of greater importance.

At the same time, scientific observations suggest that the last 150 years was when mankind used up approximately a half of the explored non-renewable reserves of the main natural resources which the Earth had accumulated over the five billion years of its existence. In the first place this refers to liquid fuels (petroleum and natural gas), of which practically as much was consumed in the last 50 years as had been discovered in the bowels of the planet. According to latest Petroleum and Gas Institute estimates, total world petroleum reserves are in the environs of 0.5 trillion tons: of these, 121 billion tons has been extracted, 160 billion tons has been discovered, and 205 billion tons is yet to be found. Russia, with 2.5% of the world population, accounts for 40% of all world natural riches, including 13% and 36% of all explored world oil and gas reserves, respectively. It must be indicated at this point that the growth of this country's explored oil reserves, which totaled 1.1 billion tons between 1985 and 1991 and thus was the double of the annual production figure, shrunk to 250 million tons between 1991 and 2000 (and starting in 1994 failed to make up for current production). This resulted in oil reserves falling off, by 2001, 13% nationwide and 17.55% in Western Siberia (the main oil area producing 69% of all Russian oil and 92% of natural gas).

It must be emphasized that prospecting is a high-risk and by far not the least costly oil business component. It takes years and even decades to prospect and ready for development major oil and gas provinces, which is the reason why private oil companies the world over are rather reluctant to invest in such projects. Normally it is the state that would take upon itself this role, to profit later by selling explored and confirmed reserves to oil companies for sums exceeding the price of unexplored areas. There are only five companies controlling the overwhelming share (70%) of Russia's oil reserves. To hike their capitalization, oil companies would buy ever-new fields, while not planning to develop them within the short term. Indeed, the Russian companies are among the world leaders as owners of explored reserves. Simultaneously the level of investments in maintaining and increasing production in Russia is dozens of times below that of the world rivals'. Most of the Big Five boast an oil recovery ratio that barely comes within 0.2, which means that more than 80% of oil remains under the ground. This being so, the emphasis tends to shift to natural gas whose share in national fuel and energy expenditures has reached 60%.

For the Armed Forces, however, converting engines of power plants and units of combat systems, weapons and military equipment from liquid petroleum fuels to natural gas does not seem possible at the present time for the following main reasons: first, the conversion will reduce performance characteristics of combat systems and WME models, natural gas being inferior to liquid petroleum fuels in power; second, there are neither infrastructure capabilities nor equipment and facilities to preserve and echelon stores of natural gas intended for mobilization deployment of troops (forces) or to keep these supplied with natural gas in peacetime and during a war; third, operational characteristics of engines may decline (for example, unreliable engine start-up is possible in below-zero temperatures).

The forecasted shrinking of the national oil reserves is forcing the oil refining industry to engage in R & D for how to increase the degree of oil processing along with fuel output. Expanding the range (number) of dopes involved in the production of oil products and mostly geared to the civilian sector of the economy will reduce fuel's operational properties, primarily its quality in long-term storage and mixing. Shorter timeframes of long-term fuel storage will create problems where availability and refreshment of fuel mobilization reserves are concerned, and will affect the mobilization readiness of the Armed Forces.

Yet another negative thing, as I see it, is the merger of oil companies, a very intensive process all over the world. In the U.S., there is not a single major company left whose name wouldn't be composed of the names of companies that joined it. Experts believe, however, that financially powerful oil companies grow bigger not only to develop but also to swallow smaller brethren, something that may lead to the emergence of a super-monopoly that the state is unable to control. Russian experts so far speak about the oil sector's consolidation rather than monopolization. But if the state is concerned with its own energy security it ought to take care that the former should not pass into the latter: under the existing economic conditions monopoly high fuel prices will affect negatively the troops' (forces') status of fuel supply.

In recent years foreign investors repeatedly offered to buy Russian oil companies (the latest offer came from China which wanted to purchase Slavneft for 3 billion dollars). The situation where control over petroleum production, refining, and oil product sales will focus in foreign nations rather than the Russian Government will likewise impact negatively on the strategic development of the fuel and energy complex and the country's security as a whole.

In 2003, Directive No. 1234-r of the Government of the Russian Federation endorsed the "Energy Strategy of Russia," which purports to do the following: to use with utmost efficiency natural fuel and energy resources and energy sector potential for economic growth and better living standards; to protect the rights and legitimate interests of the citizens and economic entities; to provide for defense and security of the state, for effective management of the state property, and for a qualitatively new state of the energy sector.

It has been much of a problem in recent years to supply the RF Armed Forces with certain brands of petroleum oils and lubricants (POL) (particularly aircraft oils) whose production and delivery has been discontinued by the home industry. The early 1990s saw a breakup of economic and production ties in the former USSR's refining complex, and that caused a dramatic downturn in the manufacture of authorized POL brands and dopes, some of which dropped out of production altogether. Following the disintegration of the USSR the main dope developers (Masma in Kiev, Ukraine; Kuliyev plant in Baku, Azerbaijan), as well as potential manufacturers (in Drogobych, Ukraine; Pavlodar, Kazakhstan; Sumgayit, Azerbaijan) found themselves outside of Russia. On top of that, a number of plants stopped manufacturing the oil base for oils, a situation that prompted some well-known foreign firms with years of experience in the field to step in. As a result the Russian market of oil products saw an influx of imported dopes (dope packages) that sold in huge amounts. The fact that these supplies are dependent on the political and economic situation in international relations directly influences reliable and stable fuel deliveries to the Armed Forces and, consequently, the defense security.

As is to be regretted, there are cases on record where industrial designers engaged in developing double-purpose equipment or even combat systems would often assign their operational POL brands without regard for domestic industrial capabilities and availability of raw materials. It will be impossible to supply these models with "unauthorized" POL varieties in wartime (when deliveries of foreign-made oil products and dopes will be stopped), while converting them to other (authorized) POL brands will require additional financial and material outlays. The problem must be addressed now, in peacetime, and immediately.

The state of the infrastructure of the oil product supply system is causing justified concern. Currently the regions of the Russian Federation are characterized by an extremely uneven distribution of facilities that produce, store and transport oil products. Estimates of possible peacetime and wartime materiel flows in the territory of the Russian Federation show that fuel shortages are likely to arise as efforts are made to supply troops (forces) engaged in combat operations in certain strategic sectors. Meanwhile the national oil product supply infrastructure (primarily pipelines and storage facilities) has remained underdeveloped for years.

Thus, the main fuel supply problems facing the Armed Forces are the following: lower level of oil reserves in Russia; monopolization of the oil product market; the possibility that oil reserves may become foreign-controlled; weaker state control and supervision over the effective use of oil and quality of oil products; an unjustifiably broad range of oil products; discontinuation of the manufacture in Russia of a number of main POL brands; the lack of production in Russia of a number of oil product dopes and as a consequence the producers' use of imported dope packages; insufficiently developed national oil product supply infrastructure; low level of annual funding for the state's military organization.

The Defense Ministry is pursuing a number of measures in order to solve the above problems. In keeping with the "Plan of Organizational Development of the Armed Forces of the Russian Federation," the Central Directorate of Rocket Propellant and Fuel (CDRPF) of the Ministry of Defense of the Russian Federation drew up, in 2000, the "Concept of the Development of the Fuel Service of the Armed Forces of the Russian Federation for the Period till 2015," which defined the main trends in developing the Service: development of the mobilization base, improvement of combat and mobilization readiness, as well as of the pattern, make-up and organizational foundations of activities; development of the Armed Forces' fuel supply physical infrastructure; improvement of the personnel's operational-logistical, combat, specialized and mobilization training; cultivation of the personnel potential.

The concept principles have been realized in these programmatic documents accepted by the Fuel Service: "Program for the Improvement of the Technical Support System of the Armed Forces of the Russian Federation in Respect of the Fuel Service for the Period till 2015" and the "Program for the Comprehensive Development of Chemmotology in the Armed Forces of the Russian Federation for 2001-2005." The main measures envisioned by these conceptual and programmatic documents for the period till 2005 have been practically implemented, while the long-term measures are scheduled to be included in the State Weapons Program for 2006-2015.

One of the main tasks facing the Service at the present stage is optimizing its structure and securing timely and high-quality oil deliveries to troops (forces), while making rational use of material resources and financial funds. Of fundamental importance in this sense is meeting the requirement for the sufficiency of forces and assets of the Fuel Service for providing troop (force) groupings and the Armed Forces as a whole under any conditions in wars or armed conflicts. It is also required that its strength and TOE structure should conform to missions tackled by the troops (forces) it supports. To achieve that, the first stage in its reform (due to wind up in 2005) will further improve the structure of its combined units, units and organizations as well as that of the RF MOD CDRPF as a whole.

Improving the Fuel Service infrastructure is planned within the frame-work of infrastructure development of the state military organization. Before 2005, the approved conceptual and programmatic documents suggest the following schedule:

* first, it is necessary to prepare the basis for a modern system of permanent fuel bases (depots), which shall be made up of permanent fuel bases (depots), main oil product pipelines (MOPP) adapted to operation within the pipeline-depot system and provided with a technical cover designed to assure their safety in the special period (a);

* second, to secure higher mobility, maneuverability and productiveness of field fuel dumps by improving the technical level of elastic storage containers.

Parallel to measures intended to put depots and bases in conformity with the modern operational-logistical, technical and ecological requirements, the Fuel Service has drawn up and implements the "Concept of Further Improvement and Development of Permanent Rocket Propellant and Fuel Bases and Depots," and its follow-up, draft "Comprehensive Program of Reconstruction and Maintenance of Tank Capacity of Permanent Fuel Depots and Bases." Theoretical precepts of both documents have been partly put into practice.

Currently the Russian oil market is divided into spheres of influence between a few major vertically integrated oil companies (b) (that is, companies possessing production, refining and marketing divisions). The RF MOD CDRPF practices competitive signing of supply contracts with these for the necessary amounts of fuel from specific refineries located in military districts or in the vicinity of fleet bases. The location factor enables considerable cuts in transportation costs, thus saving federal budget allocations.

It is still a big problem how best to supply fuel to foreign-deployed troops (forces). The oil product purchases and deliveries in question are preceded by a detailed economic analysis that takes into consideration fuel prices in a host country, customs conditions, transportation tariffs, as well as the status of interstate relations. The analysis results in decision-making on whether to buy fuel locally or bring it from Russia.

Aside from that the RF MOD CDRPF also tackles the problem of storing the Armed Forces' regulation fuel stocks by way of building them up and redistributing within the Russian Reserve, and committing fuel for storage to permanent MOPP. Another type of activity pursuing the same goal is revising the stock holding level and nomenclature of materiel subject to storage as emergency reserves, the purpose being to optimize its amounts in the RF AF. For example, in keeping with the Government's order of April 4, 2000, No. 292-24 and a decision of the Defense Minister, the Fuel Service jointly with the stock company Transnefteprodukt are putting oil products for storage in permanent MOPP, something that helps take the edge off the problem, given the reduction of bases and dumps and the lack of sufficient funding for their upkeep and maintenance.

With the termination of production and delivery of a number of main low-tonnage POL brands, particularly aircraft and armor oils, the appropriate needs of troops (forces) are met from the available reserves the Defense Ministry and the Russian Reserve have at their bases and dumps. Simultaneously there is a series of organizational measures in progress to prolong service life of oils, to convert military equipment to replacement brands, and to restore home production. Specifically, two programs were drawn up between 2000 and 2002: "Program to Organize Production of and Modernize Low-Tonnage Domestic Petroleum Oils and Lubricants for the Needs of the Armed Forces and Aviation of Russia," which envisaged manufacture of 17 most scarce POL brands (of these 12 brands have been developed and allowed to be produced and applied as of today), and "Program to Organize Production of Domestic Dopes that Make Part of POL for WME" (due to be implemented before 2008), which includes organization of home manufacture of the most important POL dopes on the basis of local raw materials.

As far as the problem of recovery of components of liquid rocket propellant is concerned, the main efforts of the Fuel Service in this respect are directed at the industrial processing of excessive blend oxidizers.

The state of equipment and facilities in possession of the Fuel Service and their technical availability to the Armed Forces are urgent problems as well. In the Armed Forces these equipment and facilities are mostly represented by models that the industries developed and supplied to units in the 1970s to 1990s. The recent amounts of orders and supplies for federal (state) needs were insignificant or lacking altogether in a number of nomenclature points. To keep technological lines from disintegration, industries were asked to manufacture only a few models of those. A number of plants, where the share of batch production for federal (state) needs was quite small, turned down all military orders on the pretext that small-batch production was a loss of money. Meanwhile in recent years the existing amount of budget funding for the state defense order with regard to purchases of the technical assets permits to make good their natural loss only to 10-12% on the average. For this reason, the availability to the Armed Forces of fueling and fuel transportation motor vehicles (FFTMV), to name just these, has declined steadily.

As of today, performing timely major overhauls is the main way to keep the Service combat-ready and extend operational life of its equipment and facilities. Allocations for maintenance of technical assets the RF MOD CDRPF receives each year fill 20-21% of the minimal annual need and enable major overhauls on 450-500 units of FFTMV, whereas the capability of maintenance plants run by the RF MOD CDRPF is enough for over 3,500 reference repairs a year. In keeping with the "Comprehensive Plan of Maintenance of the Main Equipment and Facilities of the Fuel Service for the Period from 2001 to 2005," approved, in 2000, by the Chief of RF Armed Forces Rear Services--Deputy Minister of Defense of the Russian Federation, repair shops of military districts (fleets) organized major overhauls of technological and specialized equipment of FFTMV, while the repair plants of the RF MOD CDRPF went over to comprehensive major overhauls of the basic chassis units.

A drastic change in the existing state of affairs pertaining to the technical support of the Fuel Service is feasible only at an appropriate level of funding for R & D, as well as for purchases and maintenance of equipment and facilities within the framework of the State Weapons Program for 2006-2015. A perusal of the draft SWP'2015 shows that the funding level expected to come into effect in 2006 is much lower than the required one. Under these circumstances the main aim in technical support relative to the Fuel Service is, as before, upgrading the physical infrastructure through faster development of the technical potential and its maintenance at a level that enables execution of its peacetime and wartime tasks. For this it is necessary to straighten out the composition of the available fleet of equipment and facilities (primarily equipment with overdue storage periods and insignificant operational potential); to develop promising models of equipment and facilities and to organize their batch delivery to troops (forces); to improve the system of technical servicing and maintenance of equipment and facilities wielded by the Fuel Service and to secure its changeover from resource-wise operation (the planned preventive method of maintenance of equipment and facilities of the Fuel Service) to technical-state-based operation (maintenance proceeding from the actual state of equipment); to create a unified territorial system of technical support relative to the Fuel Service that will cater to the Armed Forces as well as all other troops and military units of the Russian Federation.

In addition, the physical infrastructure of the Fuel Service should correspond to its prescribed levels of combat and mobilization readiness, to tasks involved in the timely strategic deployment of the Armed Forces in a period of threat at minimal material and financial costs, and to requirements regarding the survivability of infrastructure facilities of the oil product supply system and operational readiness and safety of fuel stocks.

R & D stocks to be created in the Fuel Service should prospectively (when funding grows) help organize in Russia the industrial batch production of new POL models, specialized liquids and equipment and facilities of the Fuel Service. So far, however, the following has been achieved:

* preliminary specifications have been approved in accordance with the existing procedure on the basis of decisions accepted jointly with the RF MOD CDRPF, with industries initiating development of experimental FFTMV models at their own cost;

* Armed Forces strength grows as batch purchases are made of promising Fuel Service equipment and facilities developed (modernized) in the course of R & D;

* new guideline and regulatory documents have been drafted for the Fuel Service;

* investigations have been undertaken to see if new materials and technologies of the home industry can be used in promising R & D, development is nearing the end of certain modern models of equipment and facilities on the basis of the domestic industry;

* four experimental models of Fuel Service equipment and facilities have been accepted for the Armed Forces, which were developed in the course of R & D in keeping with the State Weapons Program for the Period from 2001 to 2010;

* "Program to Create New and Modernize Existing Methods of Qualifying Tests Used to Pass Petroleum Oils and Lubricants for Use in Technology" has been developed;

* range, stand and fire tests have been organized for new brands of POL, specialized liquids, as well as additions and dopes for these;

* new qualifying methods have been developed to test fuels and oils, which yield reliable information about the level of operational properties of new and modernized POL as early as the test stage.

The appropriate decision accepted by the Security Council of the Russian Federation in 2000 gave further impetus to the "Program of Transition of the Armed Forces, Other Troops, Military Units and Bodies to Interagency (Conjugated) Unified Rear Support System." Its implementation within the Fuel Service posed a rather acute problem relative to unification of the rear support systems of the Armed Forces, other troops, military units and bodies, which includes a number of measures, specifically:

* transition to a unified planning, accounting and reporting system; as is suggested, it ought to be based on the system currently existing in the Armed Forces; to deal with the problem, the requirements of the Defense Ministry's guideline documents should be applied to other troops, military units and bodies;

* organizational coordination of the activities of the command and control elements of the rear services of all power structures; their fuel services should be made to adopt an identical structure and go over to this fuel and technical supply pattern: Rear Services of the Armed Forces (RF MOD CDRPF)--fuel services of the military districts (fleets)--fuel services of units and combined units of the districts of the Border Troops and the Internal Troops, FSB, and regional centers of the Emergencies Ministry. The Fuel Service of a military district (fleet) should become the main element in this scheme.

As of today, some of these measures have been implemented. The interagency (conjugated) unified rear support system has been tested with good results in the Kaliningrad Region and on Sakhalin. The experience thus obtained warrants the conclusion that the program will be implemented within the prescribed timeframe.

In turn, the Armed Forces Fuel Service will secure the connecting functions between the national oil product supply system and the state military organization, which have been legislatively unified in order to perform this single task: the fuel needs of troops (forces) should be met in an unconditional, complete, uninterrupted and timely manner in the peacetime and during a war.

Lt. Gen. G.N. OCHERETIN

Chief of Central Directorate of Rocket Propellant and Fuel at RF MOD

(a) As is evident from analyzing the regularities inherent in the evolution of weapons and the scale of the international terrorist threat, facilities comprising the pipeline-depot system should be characterized by a high degree of protection and technical equipment, an optimal level of mechanization and automation of the production processes, an enhanced productivity, as well as ecological safety and a prescribed reliability where the preservation of fuel stores is concerned.

(b) The biggest of these are the open stock companies NK LUKOIL, NK YUKOS, Siberian NK, Rosneft, NGK Slavneft, and TNK-VR. It is the territorial distribution of refineries that mostly determines an oil company's dominant role in some or other region of Russia.