Are you ready for the next Cold War? Casey Research energy strategist Marin Katusa cautions that Russia and China have forged an alliance with the goal of world supremacy through control of the energy market and Vladimir Putin is winning. Katusa recently penned the book “The Colder War,” and in this interview with The Energy Report, he discusses why investors need to pick companies wisely to profit in this turbulent energy landscape.

The Energy Report: Your book, “The Colder War,” is based on the idea that world domination will come through control of the energy economy, and that Russia is winning the fight. How is Russia using the petrodollar to achieve energy supremacy?

Marin Katusa: Under the leadership of President Vladimir Putin, Russia has reestablished itself as the alternative to the American superpower. Putin has aligned himself with nations like China to work in concert against U.S. interests globally. Furthermore, a new bank formed by the BRICS countries—Brazil, Russia, India, China and South Africa—will attempt to assert itself as an alternative to the International Monetary Fund.

The Colder War will be a long battle, just like the first Cold War, but in the Colder War, judgment day of the petrodollar will be the critical battle. One must understand global politics and the Colder War to be a successful investor in the energy sector.

TER: What is China’s role in this struggle?

MK: By the end of 2014, China will become the largest net importer of oil in the world. It signed a natural gas deal worth more than $400 billion, but importantly, the business was transacted in rubles and yuan, as opposed to U.S. dollars. I can assure you that China won’t be trading in U.S. dollars moving forward. And it has been making numerous energy deals with nations that oppose the U.S., including Iran. South Africa, Brazil and other likeminded nations are following Russia and China. But it is under Putin’s leadership that emerging markets are uniting to fight the interests of the U.S. globally.

TER: What is Africa’s role?

MK: Western companies are shying away from the political instability in northern Africa. At $75/barrel ($75/bbl) for oil, and with current metal prices, it’s difficult to develop energy and metal resources in Africa. Northern Africa has great potential, but it’s lacking the infrastructure that Europe, Asia and North America have. The Chinese and Russians have significantly more investments in Africa than Western firms. The Chinese plan in 50-year cycles, whereas North American companies need to plan in quarterly cycles for their shareholders. It’s a very different mindset. Africa will play a key role in a few decades, but currently isn’t a key player globally.

TER: What about Latin America?

MK: Latin America has great potential for resources, both energy and metal. But at current oil prices, there is much cheaper oil to be had in the Middle East and Russia. Mexico in 2015, when the nation opens up Bid Round 1 to foreign companies, will be very exciting for both shale oil and heavy oil onshore, and for the bigger companies offshore in the Gulf of Mexico. Many savvy energy companies and investors are already eyeing the potential. Energy investors should look at what successful resource titans like Ian Telfer are doing with Renaissance Oil Corp. (ROE.VN:TSX.V) to gain exposure to the big potential of shale oil in Mexico.

TER: Discuss the relationship between China and Russia. How are these countries approaching world domination this time around? Is this actually a partnership?

MK: Russia and China don’t look at it as world domination—they look at it as advancing their national interests, which they are working together to achieve. That’s no different than what America’s been doing. The difference between the Colder War and the Cold War is that China and the emerging markets did not play such a significant role the first time around—and the fact that judgment day of the petrodollar will determine who wins the Colder War.

“It is under Putin’s leadership that emerging markets are uniting to fight the interests of the U.S. globally.”