Russia's Oil Plans

According to President Vladimir Putin, Russia is growing impatient with European concerns about the reliability of the oil and gas which Europe buys from Moscow.

Russia's Oil Plans

If protests and worries continue, Putin warned last week, Russia would look to channeling its hydrocarbon production to energy-hungry China as well as to Japan. A month ago, on a visit to Beijing, he speculated openly about running an oil pipeline from Siberia to China.

The Russian president's remarks might have been tailor-made to boost unease at a time of already great uncertainty in the world's oil and gas markets. The remarks would indeed appear to be counterproductive as far as Russia's European customers are concerned. Already jittery, thanks to this winter's cut in gas supplies to the Ukraine, Western European countries are hardly likely to be reassured by a threat to divert energy production eastward.

Further European alarm has been caused by the predatory ambitions of Russia's state-owned energy companies, most particularly the renationalized commercial behemoth Gazprom, which currently supplies a quarter of Europe's gas. Gazprom is looking to buy European energy companies and, with high energy prices swelling its income, its pockets are deep. The negative reaction to this eventuality on the part of European politicians last week caused Putin to remark caustically: "When [European] companies come to us, it's called investment and globalization, but when we go there, it's called expansion by Russian companies."

It is understandable if, after its years of muddled free-market reform and its decline from superpower rivalry with Washington, Moscow is now enjoying the position of a commercial power in which it finds itself thanks to its energy production. Ever since the modernizing reforms of Peter the Great, Russia has swung between a concept of itself as a uniquely Slavic nation in culture as well as an integral part of European civilization. Until well into the 20th century, its major assets were its huge armies and its massive landmass, which protected it against the attacks of both Napoleon and Hitler and earned it a respected place at the top table of European powers.

Today its strength rests most strongly upon its ability to supply energy. It is no longer a prime magnet for international investment. The 1998 ruble collapse and loan default raised the cost of doing business in Russia. The extremely unreliable business and legal climate has further dented early enthusiasms. How wisely Moscow uses its newfound power and, indeed, how it uses the rising tide of foreign exchange flowing into its once almost bankrupt treasury are crucial both for Russia itself and its neighbors. Putin is nobody's fool. Maybe his contradictory comments were meant to stir up the price-sensitive energy markets. Iran might cut oil supplies if the UN applied sanctions which Moscow and Beijing currently oppose. Unfortunately, however, energy supply continuity and assurance underpin healthy world economic growth. Playing with them can produce changes beyond those expected in addition to others which nobody foresees.

Last Mod: 20 Eylül 2018, 18:16
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