Piping Hot: Russia, Europe, and natural gas

1
Piping Hot Russia, Europe, and natural gas
2
Russia and natural gas
Gazprom- -State-controlled natural gas (ng)
producer -85 of all ng in Russia -Has
EXCLUSIVE RIGHT to export ng
(2006) Russia- -exports 173 billion cubic
meters (cm) of ng- 1 in world -produces 653
billion cm of ng- 1 in world Keep in
mind Reliance on Russian natural gas in
Europe Residual Cold War feelings
3
(No Transcript)
4
The E.U. and energy dependence
Russia supplies through Belarusian and
Ukrainian pipelines -25 of ng -25 of
oil -80 Russian ng for Europe carried through
Ukrainian pipelines Demand increasing Need for
unifying voice- E.U. breakdown in common
policy? i.e. Czech interests vs.. W. European
interests Investment in other gas producing
entities? (end of pres.)
(Centre for European Reform)
5
Russia and Ukraine
-Post-Cold War- HUGE subsidies offered by Russia
to former satellites to retain influence in
Eastern Europe -Orange Revolution in 2004-
pro-Western uprising and souring relations with
Russia pulled Ukraine from Russias sphere of
influence NYT (2006) -70 of natural gas from
Russia -Pre-2006- 50/1000 cm ng -2006- first
major dispute- Russia increases price to 250-
Ukraine cannot pay it -Thus, Russia cuts off
energy (January 1) -Shortages reported in
Poland, Hungary, and Western Europe -Ukraine
begins to siphon gas from pipelines intended for
other E. European countries- Russia ANGRY. -By
Jan 4, agreement is made for 100/1000
cm -Political price paid by Putin, Gazprom,
Russia- Europe learns a lesson -RosUkrEnergo
and corruption
6
(No Transcript)
7
Russias economic woes
Georgian War (summer 2008) -Shows lack of
political and economic stability -Lack of
investor faith- 7 billion lost because of Crude
Oil price- 147 on July 4 2008 to 39 as of
2/24/09 Gazprom HEAVILY in debt Looming
recession after years of 7 growth -13
inflation -20 of loans predicted to be in
default by the end of 2009 Russian ruble- costs
Russians 6-10 bn/week. -devaluation, declining
foreign currency reserves Political instability
over economic crisis -400,000 have lost
job -Protests
8
Ukraine-Russia gas crisis 2009
Stemming from economic crisis- In this tough
time for the Russian government, with lower oil
prices and a weaker ruble, they want to show
strength David Hauner, London economist at Bank
of America Russia increases price demand from
179.50/1000 cm to 418- closer to price W.
Europe pays -Ukraine refuses, too high a hike
the country's control of pipelines entitles it
either to subsidized prices or higher
transit fees (IHT, 2009) -Ukraine emergency
loan from IMF- 16 billion -Natural gas cut off
from Thursday, Dec 31 2008 to Wednesday, January
7 2009 -17 countries cut off or see substantial
drop in supply- dead winter -Poland- 10 freeze
to death (-13 F) The shutoff at the peak of
the heating season carried more than financial
overtones it is the most confrontational move by
Russia toward a neighboring country since the
August war in Georgia NYTimes article, Jan 1
2009
9
(No Transcript)
10
Resolution, and lingering effects
Ukraine moving from a subsidized cost to paying
near the market price Price moved to 360/1000
cm HOWEVER- gas prices expected to fall
dramatically- could be paying 150 by the summer
(Ronald Smith of Alfa Bank, Moscow) Russia will
pay discounted rate for transport of ng in 2009
market price in 2010. -Is anything set in
stone? E.U. agrees to monitor Ukrainian
pipelines per Russias request (Jan 9)- siphoning
concerns Effects -Russia shows a weakness- a
need for cash in the face of economic troubles-
damaged reputation -E.U. pressured to unify
policy, invest in a single reliable market-
concerns over security of supply -Escalating
tensions between Ukraine and Russia
11
Future?
Ukraine owes Gazprom 615 million in fines from
unpaid debts- disputed Ukrainian 2010 election
implications- current government
UNPOPULAR -Fragmentation b/w PM and
President Nabucco pipeline and larger Arab
pipeline (Mashreq, Iraq, E.U., Turkey) -Central
Asia and Caspian, across Turkey, into E.U.- but
will only supply 5 of E.U. need (30 billion
cm) -Turkey and E.U. membership NEW North
Stream pipeline- 50 billion cm from Russia to
Germany by 2011 NEW South Stream pipeline- 31
billion cm -Rivaling Nabucco? Economic crisis
implications? The Russian problem -Reemerging
Cold War ideologies- geopolitics,
realpolitik -East/West divisions -"I cannot
forecast to you the action of Russia. It is a
riddle, wrapped in a mystery, inside an enigma
but perhaps there is a key. That key is Russian
national interest.
12
PLANNED NABUCCO GAS LINE- E.U. AND U.S. SUPPORTED
(WIKIPEDIA COMMONS)
13
PLANNED SOUTH STREAM PIPELINE
(WIKIPEDIA COMMONS)
14
http//www.nytimes.com/2009/01/02/world/europe/02g
azprom.html?scp10squkraine20stcse http//ww
w.usatoday.com/money/industries/energy/2009-01-08-
naturalgas_N.htm http//www.iht.com/articles/2009
/01/05/europe/ukraine.php http//www.bloomberg.co
m/apps/news?sidadiAd64qF8F8pid20601087 http//
news.bbc.co.uk/2/hi/europe/7240462.stm http//mem
rieconomicblog.org/bin/content.cgi?news2114 http
//www.setimes.com/cocoon/setimes/xhtml/en_GB/feat
ures/setimes/features/2008/02/14/feature-02