The russian military intervention in the Crimea reawakens Cold War era East-West tensions.
If the US or the European Union imposes sanctions on Russia, the Kremlin could well respond with gas supply cut offs as it has done in the past with Ukraine, Georgia, Belarus, Central Asian states to achieve its foreign policy objectives.
Is the next energy Cold War a conflict between the EU and Russia’s Eurasian Union? What impact will such a confrontation in the heart of Europe have on the price, supplies pipelines and transit hubs of oil and gas in the Black Sea, the Baltic and Central Asia?
The United States has the power to intimidate Russia with its vast new natural gas supplies, made possible by the technological feat of hydraulic fracking. Even North Dakota produces almost one million barrels of oil equivalent a day and Texas produces more oil and gas than Abu Dhabi, Qatar, Kuwait or Oman. If Russia can wield a gas weapon to intimidate Georgia, Belarus or even the EU, Washington can intimidate Russia with its own “gas weapon”.
Russia has used gas prices and supplies as an instrument of state policy to pressure Ukraine. In 2006, 2008 and 2009, Russia’s Gazprom shut gas supplies to Ukraine in winter to force Kiev into diplomatic concessions. Now Gazprom wants to bankrupt Ukraine by not selling it Soviet era subsidised gas. The de facto chairman of Gazprom, of course, is none other than Vladimir Putin.
It is not possible for the United States to supply Ukraine with American gas. The EU, led by Germany, with its vast industrial base and power grids, is dependent on Russian gas imports. Russia is the world’s largest exporter of natural gas and Gazprom owns the largest proven gas reserves in the world. However, hydraulic fracturing is a long-term threat to Russia, Iran, Qatar, Algeria and other gas producing states.
The Ukraine crisis has turned US natural gas into a key instrument of energy diplomacy. The next decade could see East- West “Gas wars” whose impact will reshape world economics. If Russia annexes the Crimea, Washington will have no choice but to impose sanctions. This could cause panic buying of oil and gas and guarantee a global recession at a time of when China is slowing and US interest rates have begun to rise. The pro-Big Oil Republican Party, want the US to change its laws and flood global markets with oil and gas. This could mean Germany, Italy, Turkey, Poland and even Britain could reduce their gas dependence on Gazprom, even though Ukraine and Belarus probably cannot switch suppliers. Russia cannot supply Western Europe with natural gas without access to Ukraine’s pipeline network. After Crimea, this access could well be denied, another scenario for a global gas panic.
It is only a matter of time before the White House allows Big Oil export permits to ship liquefied natural gas (LNG) via tankers. This will pressure Russia, since its European clients will be easily able to switch suppliers, as they know Gazprom is a Kremlin’s diplomatic weapon.
The writer is a Dubai-based research analyst in energy and GCC economics.
If the US or the European Union imposes sanctions on Russia, the Kremlin could well respond with gas supply cut offs as it has done in the past with Ukraine, Georgia, Belarus, Central Asian states to achieve its foreign policy objectives.
Is the next energy Cold War a conflict between the EU and Russia’s Eurasian Union? What impact will such a confrontation in the heart of Europe have on the price, supplies pipelines and transit hubs of oil and gas in the Black Sea, the Baltic and Central Asia?
The United States has the power to intimidate Russia with its vast new natural gas supplies, made possible by the technological feat of hydraulic fracking. Even North Dakota produces almost one million barrels of oil equivalent a day and Texas produces more oil and gas than Abu Dhabi, Qatar, Kuwait or Oman. If Russia can wield a gas weapon to intimidate Georgia, Belarus or even the EU, Washington can intimidate Russia with its own “gas weapon”.
Russia has used gas prices and supplies as an instrument of state policy to pressure Ukraine. In 2006, 2008 and 2009, Russia’s Gazprom shut gas supplies to Ukraine in winter to force Kiev into diplomatic concessions. Now Gazprom wants to bankrupt Ukraine by not selling it Soviet era subsidised gas. The de facto chairman of Gazprom, of course, is none other than Vladimir Putin.
It is not possible for the United States to supply Ukraine with American gas. The EU, led by Germany, with its vast industrial base and power grids, is dependent on Russian gas imports. Russia is the world’s largest exporter of natural gas and Gazprom owns the largest proven gas reserves in the world. However, hydraulic fracturing is a long-term threat to Russia, Iran, Qatar, Algeria and other gas producing states.
The Ukraine crisis has turned US natural gas into a key instrument of energy diplomacy. The next decade could see East- West “Gas wars” whose impact will reshape world economics. If Russia annexes the Crimea, Washington will have no choice but to impose sanctions. This could cause panic buying of oil and gas and guarantee a global recession at a time of when China is slowing and US interest rates have begun to rise. The pro-Big Oil Republican Party, want the US to change its laws and flood global markets with oil and gas. This could mean Germany, Italy, Turkey, Poland and even Britain could reduce their gas dependence on Gazprom, even though Ukraine and Belarus probably cannot switch suppliers. Russia cannot supply Western Europe with natural gas without access to Ukraine’s pipeline network. After Crimea, this access could well be denied, another scenario for a global gas panic.
It is only a matter of time before the White House allows Big Oil export permits to ship liquefied natural gas (LNG) via tankers. This will pressure Russia, since its European clients will be easily able to switch suppliers, as they know Gazprom is a Kremlin’s diplomatic weapon.
The writer is a Dubai-based research analyst in energy and GCC economics.
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