Russian President Putins Unconventional Weapon - Natural Gas Supplies to EU + Ukraine - James Surowiecki (Putin mayve stirred up a hornets nest rival competitors for their main markets) Quote: You might take Putin’s brandishing of the gas weapon as a shrewd geopolitical move. But it’s a classic case of putting short-term interests ahead of long-term gain. Although the region’s need for Gazprom supplies may strengthen his hand in the present, the strategy is forcing Europe to end its reliance on Russia. After the crises of 2006 and 2009, Europe increased imports from Norway and Qatar. It built new facilities for receiving liquefied natural gas, and upgraded storage capacity, so that supplies could be stockpiled in case of a cutoff. It imported more coal. Pipeline connections within the E.U. were improved, making shortages easier to alleviate. The Crimea crisis will give new impetus to these efforts. The U.K.’s foreign secretary has said that the crisis is likely to make Europe “recast” its approach to energy. A draft document prepared for a forthcoming E.U. summit deplored the Continent’s “high energy dependency” and called on E.U. members to diversify their supplies. These moves are reminiscent of what happened after the oil crises of the nineteen-seventies made it clear to the West and Japan that relying on OPEC suppliers was foolish. Europe installed energy-saving technologies and invested heavily in nuclear energy and natural gas. France built fifty-six nuclear reactors in the fifteen years after the oil embargo of 1973. This time around, we’re sure to see more infrastructure for liquefied natural gas and more emphasis on renewables. Europe may also finally make its peace with fracking—a hard sell till now, not just because of environmental concerns but also because European landowners typically don’t own the mineral rights to their property, and so have no incentive to allow drilling. But there are Eastern European countries, including Poland and Ukraine, sitting on billions of cubic feet of shale gas, and Ukraine signed exploration contracts with Chevron last year. Russia is clearly anxious. Gazprom executives have been quick to belittle fracking’s potential, and the issue has turned Putin into the world’s most unlikely environmentalist. Fracking, he says, makes “black stuff” come out of your faucet. But an increase in U.S. exports will hurt Russia no matter where the gas actually goes; the U.S. is well placed to compete with Russia in Asian markets, which are increasingly important to Gazprom’s business. Indeed, the boom in U.S. gas production has already weakened Russia’s hand. Former suppliers are free to export elsewhere; Qatar quadrupled its supply of gas to Europe between 2008 and 2013, and now provides a tenth of Europe’s imports. More fundamentally, increased supply means increased competition, which puts pressure on how much Russia can charge for its gas. unquote newyorker/talk/financial/2014/03/24/140324ta_talk_surowiecki?printable=true¤tPage=all
Posted on: Thu, 20 Mar 2014 06:06:19 +0000
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