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Russian Energy Politics

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  • Russian Energy Politics

    Is Europe Caving to Russia on Pipeline Politics?

    The European Union appears to be softening its stance on a controversial Russian pipeline project, even as it seeks to wean itself off dependence on Russian gas. And it’s unlikely to find much pushback from Washington.

    The Nord Stream 2 project, meant to pipe natural gas from Russia across the Baltic Sea into Germany, unleashed a blizzard of opposition, particularly from Eastern European countries and even former President Barack Obama’s administration, after it was announced in 2015. Some critics say the pipeline doesn’t make economic sense and isn’t needed; the original Nord Stream pipe is only about half used. And many worry it would redouble Europe’s reliance on Russian energy imports and make it easier for Moscow to use energy as a blunt political tool to strongarm neighbors.

    But now, Europe’s initial resistance to the project appears to be weakening. Sweden dropped objections to Gazprom’s request to use Swedish ports during the pipeline’s construction. Germany has defended the project against stiff resistance from fellow EU members, particularly Poland, saying it would save cash and reduce emissions. Other countries, like the Netherlands, are deafeningly silent on the controversial project, while their own industries quietly seek a way to join in on the pipeline action. And the newly-released European Commission’s “State of the Energy Union” report, despite paying lip service to Europe’s need to diversify sources of energy supply, doesn’t mention Nord Stream 2 once.

    That has some eastern countries irate. During her meeting with German Chancellor Angela Merkel, Polish Prime Minister Beata Szydlo called Nord Stream unacceptable to Warsaw. “This project is not an economic one. It’s a geopolitical one,” a Polish diplomat told Foreign Policy.

    Those geopolitics come home to roost, like Russia’s little green men, in Ukraine. Some in Brussels, and in the previous U.S. administration, were worried that Nord Stream would allow Russia to fulfill its dream of bypassing Ukraine, its traditional middleman for exports to Europe. Drying up Kiev’s revenues from gas transits — worth $2 billion a year — would further imperil the shaky Ukrainian economy, at a time when Kiev has its hands full with renewed fighting in Russia’s semi-official war in the eastern part of the country.

    Like many Russian pipeline projects, Nord Stream 2 has proceeded in fits and starts. Western companies who partnered with Russia’s state-owned Gazprom all abandoned the project after it bogged down in regulatory battles and intense political scrutiny. But Gazprom has forged ahead, and Europe’s growing acceptance suggests its stubbornness may be paying off.

    And then there’s the United States. Obama and senior administration officials pushed Europe for years to reduce its dependence on Russian energy, and actively opposed Nord Stream 2, as well as other Russian pipes meant to do much the same thing. At the same time, the Obama administration and many lawmakers urged greater exports of liquefied natural gas from the United States to terminals in Europe, to give at least Western Europeans more supply alternatives.
    "Every man has his weakness. Mine was always just cigarettes."

  • #2
    Poland wants U.S. sanctions to cover Nord Stream 2

    WARSAW (Reuters) - Poland wants the United States to impose sanctions on the planned Nord Stream 2 gas pipeline between Russia and Germany, Prime Minister Mateusz Morawiecki said in a newspaper interview published on Monday.

    U.S. Secretary of State Rex Tillerson said in Warsaw on Saturday that the United States sees Nord Stream 2 as a threat to Europe’s energy security.

    The project would double Russia’s capacity to pipe gas across the Baltic Sea to Germany and beyond to 110 billion cubic meters (bcm) per year.

    “Yes, we talked about Nord Stream 2. We want the construction of the Nord Stream 2 pipeline to fall under the U.S. sanctions bill ...which includes, among others, sanctions against Russia,” Morawiecki told newspaper Dziennik Gazeta Prawna (DGP).

    “The interpretation of this document so far by the U.S. State Department was ambiguous and unsatisfactory for us,” he said.

    Poland imports most of the gas it uses from Russia but plans to diversify, making it a lucrative market in a battle for gas exports between Washington and Moscow.

    The country opened its first LNG terminal at the Baltic Sea port of Swinoujscie in 2016 and last year Warsaw received its first spot delivery of U.S. liquefied natural gas (LNG). State-run gas firm PGNiG plans to buy more following an agreement signed in November.

    Poland does not intend to extend its long-term import deal with Russian exporter Gazprom when it expires in 2022 as it looks to rely more on Swinoujscie and on a planned gas link with Norway. Poland also has LNG import deals with Qatar.

    Warsaw along with Ukraine and the Baltic States fears Nord Stream 2 would increase Europe’s dependence on Russian gas.
    "Every man has his weakness. Mine was always just cigarettes."


    • #3
      Ukraine 'desperately concerned' Russia could soon attack its gas pipeline, foreign policy expert says

      Ukraine is worried that one of Europe's most contentious energy developments will leave its gas pipeline vulnerable to a Russian attack, according to a leading political risk expert.

      The Nord Stream 2 gas pipeline is an $11 billion project directly connecting Germany with Russia. Critics argue that the pipeline, which is to be laid under the Baltic Sea, will increase Europe's dependence on Russian gas.

      "The Ukrainians are desperately concerned about the Nord Stream 2 project, as it would remove the logic of Russia steering clear of attacking their gas pipeline," Ian Bremmer, Eurasia Group founder and president, said in a research note published Monday.

      "Germany's not impressed by those concerns, and economic interests lead the way," he added.

      The mission statement of Nord Stream 2's Switzerland-based holding firm says the project is "building on and continuing the strong, four-decade legacy of cooperation in the energy sector between Russia and the European Union."
      Nord Stream 2 'undoubtedly' bad for Ukraine

      Ukraine, which is still fighting a conflict with Russian-backed separatists, has struggled to cope with Moscow's monopoly-like dominance of gas supplies to Eastern Europe in recent years. Kiev is also worried that Nord Stream 2 could mean it is subsequently cut off from gas transit fees.

      Georg Zachman, senior fellow at the Brussels-based think tank Bruegel, said in a blog post last month that be believed Nord Stream 2 would "undoubtedly be bad for Ukraine."

      He estimated that the completion of the project could cost Ukraine up to $2 billion a year, largely because of significantly lower gas transit revenues. That would amount to approximately 2 to 3 percent of Ukraine's gross domestic product (GDP).

      Moscow's ability to shut off natural gas supplies, which it has done during past pricing disputes, is a long-standing concern for several other European states.

      Nordic countries have also expressed security concerns over the Nord Stream project as the pipeline is laid near their shores. The pipeline is scheduled to become operational in 2019.
      "Every man has his weakness. Mine was always just cigarettes."


      • #4
        “This project is not an economic one. It’s a geopolitical one,” a Polish diplomat told Foreign Policy.
        Cliche of our times


        • #5


          • #6
            German MPs call for clarification on contentious Russian gas pipeline Nord Stream 2

            As a German coalition government may emerge soon, a key issue that undid an earlier deal may now create more political havoc. Will Berlin accept a worsening of relations with eastern neighbors while securing cheaper gas?

            Seven German politicians from across the political spectrum have called on the German government to clarify its position on the politically contentious planned Nord Stream 2 gas pipeline linking Russian sources with German consumers.

            "Real cooperation cannot mean that Germans and Russians agree anything over the heads of our EU partners, so the EU is split, and trust is lost," the group wrote in a joint open letter to the German newspaper Frankfurter Allgemeine Zeitung.

            "Russia sees energy and the economy as a political weapon," Elmar Brok, a member of the European Parliament and co-author of the letter, told DW.

            "Energy has always been a political weapon, as Putin himself has said, so this separation of politics and economics is extremely dangerous." He added: "We hope that there will again be a broad discussion in Germany and in other European countries."

            The pipeline would concentrate almost all Russian exports to the EU to one route and, they argued, make it easier for Moscow to cut off Eastern Europe or bypass their transit networks.

            With Germany being the EU's largest importer of Russian gas, the group of MPs also expressed fears that increasing the share of Russian gas in the German energy mix could give Moscow greater political leverage over Berlin.
            "Every man has his weakness. Mine was always just cigarettes."


            • #7
              From The Diplomat, more here:

              Russia’s Unhappy Energy Marriage with China

              With all the quiet chaos beneath the surface in Moscow, Beijing seems poised to benefit.

              As Putin has become the longest-serving Russian leader since Stalin, the country’s economic and political stagnation is drawing more and more comparisons to the Leonid Brezhnev era. Putin’s political system cannot survive the stresses imposed by major reforms needed to improve the economy, creating a deepening dependency on foreign policy in all its forms to secure legitimacy and, more importantly, money. By all appearances, his Chinese counterpart, Xi Jinping, is tightening his control of the state and policy. This dynamic poses problems for the Kremlin’s most important relationship with a non-Western power.

              Talk of Putin and Xi’s close personal relationship is largely a matter of PR messaging at a time when Russia needs China. Positive pronouncements do little to hide the difficulty both sides have in reaching real economic agreements in particular. Recent developments in the two countries’ energy ties and shifting personal power among those in and close to the Kremlin suggest that relations with China will continue to be warmer than ever on the surface, but ever more difficult to manage as the domestic political divergence between the two grows.

              Evolving Energy Relations

              Given the overly personalistic nature of Russia’s policymaking community, institutional gaps in knowledge pose serious risks. Russia’s elites suffer from what Carnegie Moscow’s Alexander Gabuev has diagnosed as a “near complete illiteracy” concerning China. State oil giant Rosneft has emerged as the country’s de facto leader for much of its China policy because of its importance in delivering the Kremlin necessary budget revenues. But Rosneft and its CEO Igor Sechin’s policy influence hit a big snag recently with news about CEFC China Energy, a key partner, and a shift in China’s institutional landscape.

              Early last September, CEFC China Energy paid $9.1 billion to acquire 14.16 percent of Rosneft’s shares from Glencore and the Qatar Investment Authority (QIA). The purchase helped shore up Rosneft’s privatization deal from the previous December, which had run into various complications due to sanctions. Supply deals worth hundreds of millions of barrels of oil over the next five years have followed, as well as a deal making CEFC Rosneft’s primary oil trader in Asia.
              "Every man has his weakness. Mine was always just cigarettes."


              • #8
                It's actually beyond me how Russia is going to survive the shift from fossil fuels to renewables in the next 15 years, as renewables become cheaper even without subsidies than even cheap oil, the expectation being from many analysts that peak oil demand will hit sometime in the next 5 to 15 years and then the price will decline and oil quickly becomes super cheap. I mean it seems they are doing virtually nothing to diversify their economy.

                Does anybody know how Russian oil and gas supplies fare with extractions costs? Say compared to cheap straw in the ground saudi oil and expensive shale in north Americ...


                • #9
                  Originally posted by tantalus View Post
                  Does anybody know how Russian oil and gas supplies fare with extractions costs? Say compared to cheap straw in the ground saudi oil and expensive shale in north Americ...
                  As of 2016 production costs for a barrel of oil or gas equivalent were: $9 for Saudi Arabia, $19 for Russia, $21 for US (non-shale), $23 for US (Shale), and $28 for Venezuela.

                  Russia needs prices to stay at or above ~$53 per barrel to maintain the current level of government expenditure.


                  • #10
                    Originally posted by SteveDaPirate View Post
                    As of 2016 production costs for a barrel of oil or gas equivalent were: $9 for Saudi Arabia, $19 for Russia, $21 for US (non-shale), $23 for US (Shale), and $28 for Venezuela.

                    Russia needs prices to stay at or above ~$53 per barrel to maintain the current level of government expenditure.
                    Thanks for that