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Malaysia Downed Airline: Europe Depends On Russia Oil & Gas Shies Away From Sanctioning Russia–Republic Reporters

Malaysia Downed Airline: Europe Depends On Russia Oil & Gas Shies Away From Sanctioning Russia–Republic Reporters Europe, including Uk, Germany, France and other small European countries made so much fuse about Russia Buk-3, but cannot do more except exaggerated anger against Russia, when it depends on Russian oil and gas to survive winter months, Republic […]

Ukraine-pipeline-007

Malaysia Downed Airline: Europe Depends On Russia Oil & Gas Shies Away From Sanctioning Russia–Republic Reporters

Europe, including Uk, Germany, France and other small European countries made so much fuse about Russia Buk-3, but cannot do more except exaggerated anger against Russia, when it depends on Russian oil and gas to survive winter months, Republic Reporters has learnt.

Our source said: “France has opposed proposed sanctions against arms sales to Russia, in part because it is building two Mistral-class helicopter carriers for Russia’s military.
“For the time being, a level of sanctions has not been decided that would prevent this delivery,” President François Hollande of France said Monday. “The Russians have paid,” he said, and canceling the deal would require France to reimburse Russia $1.5 billion.

Chancellor Angela Merkel of Germany on Monday said that communication lines with Russia needed to stay open.

Juurd Eijsvoogel, a foreign affairs columnist for one of the leading Dutch newspapers, NRC Handelsblad, said, “Germany does not follow the U.S. blindly.”

In Ukraine, Europe is widely seen as waffling.

“It looks like they will not impose any strict sanctions,” said Svitlana Khutka, an associate professor of sociology at the National University of Kyiv-Mohyla Academy in Kiev.

“Why? Because they say they are very concerned, deeply concerned, very, very concerned, very much concerned, so very deeply concerned,” she said in an interview. “You just don’t believe that they are concerned, because it is quite evident that they have their own interests.”

“The Dutch have declared Wednesday, when the remains of passengers on board Flight 17 are expected to arrive in the Netherlands, a day of mourning. At the same moment, Dutch leaders are carefully trying to balance the open anger — an increasing number of people are calling the episode a war crime — with the country’s deep economic ties with Russia.

“In full-page advertisements in major Dutch newspapers, the government offered condolences, but described the downing of the plane as a “disaster” rather than a missile strike. In recent days, Prime Minister Mark Rutte has made sure to keep his lines of communication with Mr. Putin open, to “bring the bodies home,” he has said repeatedly.

Republic Reporters gathered that, “Behind the scenes, Dutch investors in Russia are also consulted, former insiders said. “Of course representatives of Shell are discreetly talking to the government throughout the plane ordeal, in order to minimize damage to the company,” Mr. van Wijnbergen said.

‘Many Dutch people said they hoped for a tougher stance toward Russia from Mr. Rutte.

“His real test will come after the bodies have arrived here, and after we have mourned,” said Mr. van der Kaaij. “I think many people in the Netherlands expect him to take a tougher stance. What kind of country are we if we just smooth this over?”

According to Jon Henley, “Russia supplies about 30% of Europe’s gas – should we be worried? Last December, Ukraine’s now-deposed, pro-Moscow president Viktor Yanukovych abandoned a trade deal with the European Union in favour of closer ties with Russia. One of the sweeteners in the $20bn support package that helped persuade him was a steep discount – around 30% – on the price that Russia’s gas giant, Gazprom, was then charging Ukraine for the natural gas on which it relies. This weekend, as relations between the two countries descended to an alarming new low, Moscow warned that the cut-price deal was unlikely to last much longer.

“Gazprom, which controls nearly one-fifth of the world’s gas reserves and supplies more than half of the gas Ukraine uses each year, insisted the threatened price rise merely reflected cash-strapped Ukraine’s inability to meet its contractual obligations. The state-owned company said that Kiev owes it $1.55bn for gas supplied in 2013 and so far in 2014, and shows little evidence of paying up. But this is not the first time Russia has used gas exports to put pressure on its neighbour – and “gas wars” between the two countries tend to be felt far beyond their borders. Russia, after all, still supplies around 30% of Europe’s gas.

In late 2005, Gazprom said it planned to hike the price it charged Ukraine for natural gas from $50 per 1,000 cubic metres, to $230. The company, so important to Russia that it used to be a ministry and was once headed by the former president (and current prime minister) Dmitry Medvedev, said it simply wanted a fair market price; the move had nothing to do with Ukraine’s increasingly strong ties with the European Union and Nato. Kiev, unsurprisingly, said it would not pay, and on 1 January 2006 – the two countries having spectacularly failed to reach an agreement – Gazprom turned off the taps.

The impact was immediate – and not just in Ukraine. The country is crossed by a network of Soviet-era pipelines that carry Russian natural gas to many European Union member states and beyond; more than a quarter of the EU’s total gas needs were met by Russian gas, and some 80% of it came via Ukrainian pipelines. Austria, France, Germany, Hungary, Italy and Poland soon reported gas pressure in their own pipelines was down by as much as 30%.

“While it was eventually resolved through a complex deal that saw Ukraine buying gas from Russia (at full price) and Turkmenistan (at cut price) via a Swiss-registered Gazprom subsidiary, the dispute gave the EU a fit of the jitters: a compelling demonstration, Brussels said, of the dangers of becoming overdependent on one source of supply. But three years later, the same row erupted again: Gazprom demanded a price hike to $400-plus from $250, Kiev flatly refused, and on New Year’s day 2009, Gazprom began pumping only enough gas to meet the needs of its customers beyond Ukraine.

“Again, the consequences were marked. Inevitably, Russia accused Ukraine of siphoning off supplies meant for European customers to meet its own needs, and cut supplies completely. As sub-zero temperatures gripped the continent, several countries – particularly in south-eastern Europe, almost completely dependent on supplies from Ukraine – simply ran out of gas. Some closed schools and public buildings; Bulgaria shut down production in its main industrial plants; Slovakia declared a state of emergency. North-western Europe, which had built up stores of gas since 2006, was less affected – but wholesale gas prices soared, a shock that was declared “utterly unacceptable” by Brussels.

So last weekend’s news that Gazprom intends to start charging Ukraine around $400 per 1,000 cubic metres for its gas, as opposed to the $270-odd it has been paying since Yanukovych spurned Brussels for Moscow – sparking the demonstrations that led to his downfall – might seem alarming. Many industry experts, though, point out that the world has changed since 2009, and that there are any number of reasons why Moscow’s natural gas supplies may not prove quite the potent economic and diplomatic weapon they once were.

David M. Herszenhorn said: “For starters, we are not now in early January but in March, considered the final month of the continental European heating season, when demand is likely to be highest. Moreover, this has been a particularly mild winter – the mildest since 2008 – and higher than normal temperatures are forecast to continue for several weeks yet, significantly reducing demand for gas and leaving prices at their lowest for two years. Energy market analysts at the French bank Société Générale said in a briefing note last month that European gas demand in 2013 was at its lowest level since 1999. In the UK, gas consumption is currently approaching a 12-year low.

“Partly as a result of weaker demand, but also because since the first “gas war” of 2006, many European countries have made huge efforts to increase their gas storage capacity and stocks are high. Some countries, such as Bulgaria, Slovakia and Moldova, which lack large storage capacity and depend heavily on gas supplies via Ukraine, would certainly suffer from any disruption in supplies. But Gas Infrastructure Europe (GIE), which represents the gas infrastucture industry, estimated that in late February European gas storage was 10 percentage points higher than this time last year and about half full; the National Grid puts Britain’s stocks at about 25 percentage points above the average for the time of year.

“The conflict won’t have any impact at all” on prices, a Frankfurt-based analyst told Bloomberg News. “The gas price is currently influenced by temperatures and storage levels, and both don’t favour demand right now.” Prices of gas for delivery next month have risen around 10%, but that reflects insecurities in the market about a possible military confrontation between Russia and Ukraine rather than worries about fundamental shortages of supply were Gazprom to turn off the taps, the analyst told the agency.

Other, structural changes have lessened the potential impact on Europe of a disruption to Russian gas supplies through Ukraine. New Gazprom pipelines via Belarus and the Baltic Sea to Germany (Nord Stream) have cut the proportion of Gazprom’s Europe-bound exports that transit via Ukraine to around half the total, meaning only about 15% of Europe’s gas now relies on Ukraine’s pipelines. Gazprom is also planning to start work in 2015 on a Black Sea pipeline (South Stream), meaning its exports to Europe will eventually bypass Ukraine completely. Ukraine itself has cut its domestic gas consumption by nearly 40% over the past few years, halving its imports from Russia in the process.

“Moreover, a boom in sales of US shale gas means longstanding gas exporters such as Russia now have to fight for their share of the market. Europe is increasingly installing specialist terminals that will allow gas to be imported from countries such as Qatar in the form of liquefied natural gas – while Norway’s Statoil sold more gas to European countries in 2012 than Gazprom did. “Since the Russian supply cuts of 2006 and 2009, the tables have totally turned,” Anders åslund, an energy advisor to both the Russian and Ukrainian governments, told the Washington Post.

‘Gazprom has no wish to see sales to Europe disrupted. At its annual meeting with investors in London on Monday, company officials were optimistic about its prospects despite a 13% fall in its share price triggered by recent events in Ukraine. Indeed, they predicted Russia’s share of Europe’s total gas supply would actually increase in future as overall consumption – and Britain and Norway’s gas production – declines.

“Europe accounts for around a third of Gazprom’s total gas sales, and around half of Russia’s total budget revenue comes from oil and gas. Moscow needs that source of revenue, and whatever Vladimir Putin’s geo-political ambitions, most energy analysts seem to agree he will think twice about jeopardising it. Short of an actual war, the consensus appears to be, Europe’s gas supplies are unlikely to be seriously threatened.

Meanwhile, G7 ‘energy ministers will meet in Rome next week to discuss how to counter Russian dominance of European energy markets.

‘Natural Resources Minister Greg Rickford said Friday the Group of Seven ministers are gathering in response to events in Ukraine that serve as a reminder of the connection between energy security and national security.

“My objective – and I know that of my fellow ministers – is to help advance global energy security in the short, medium and long term at a national, regional, and global level,” he said during a press conference on Parliament Hill.

“Russian gas accounts for a third Europe’s needs, 40 per cent of which is shipped through Ukraine. It is also a major supplier of crude oil and petroleum products.

“Ukraine depends on Russia for almost all its gas. Earlier this month, Moscow’s OAO Gazprom announced an 80-per-cent increase in the price it will charge the former Soviet republic, which it formerly subsidized.

“U.S. and European leaders have discussed reversing a pipeline through Slovakia to bring gas from western Europe into Ukraine.

Shawn McCarthy wrote:”The Ukraine crisis has focused increased attention on North America’s booming production of natural gas and crude – and the potential to export to Europe to replace Russia supplies. But Canada and the United States currently lack export facilities and are several years away from being able to supply significant volumes of gas to Europe.

“Prime Minister Stephen Harper has spoken in the past of Canada’s potential to be a global energy superpower that could supply large quantities of gas and oil to world markets, including Europe, if it can complete the pipelines and export terminals needed to reach the east and west coasts.

“Mr. Rickford said he will also use opportunity to meet bilaterally with U.S. Energy Secretary Ernest Moniz to press the case for approval of TransCanada Corp.’s long-stalled Keystone XL pipeline. The State Department has delayed a decision until Nebraska can settle a court case that challenges the state’s approval of the route.

He said the crisis in Ukraine underscores the importance of energy security, and the role that Canada can play in producing growing supplies of oil and gas. Mr. Rickford said he remains confident the pipeline will be approved once the Nebraska issue is settled.

“I’m not getting into the position that it wouldn’t go ahead – it’s a function of timing,” he said.

Bullet reacting to the piece quoting the article: ..”Gazprom is also planning a Black Sea pipeline (South Stream), expected in 2015, meaning its exports to Europe will bypass Ukraine completely

“What is “expected” in 2015?

– A firm decision to proceed?
– Commitment to fund and agreement of a project finance package with funding agencies? – ‘cos Gazprom certainly couldn’t finance South Stream on its own
– Placing of advance orders for the highly specialized pipe and other infrastructure?

“How the article reads, gas starts being shipped in 2015. No. This is a technically very demanding project, and will be hugely expensive. If all of the if – if – if’s are resolved this year, first shipment maybe 2019 or 20.

“Moreover, South Stream is presently planned to ship gas into Bulgaria, Greece, the Balkans and Italy. Gas for Central Europe, Austria, Switzerland, Southern Germany etc. would continue to be shipped via existing pipelines that transit Ukraine and feed the interchange and storage facility at Baumgarten, Austria.

“To stop shipping Gas via Ukraine, Gazprom would have to discard all of the existing pipeline infrastructure within Russia that collects gas from production fields and feeds it into the transit pipelines, and redirect this production via Nord Stream – which could take very little more gas than already committed to it – or a presently imaginary South Stream.

“A nice throw-away line, but pretty lazy reporting, really..”, he said.

Jon Henley: “That’s an error; words got lost in a last-minute edit following Gazprom’s presentation in London yesterday. Sentence should read: “expected to be started”. I’ll get it corrected.
update later….

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