Tuesday, September 26, 2006

Russia to Cut Natural Gas Sales to the U.S.?

Russia to Cut Natural Gas Sales to the U.S.?

Via Russian Herald via UPI via a Vedomosti article - unnamed Moscow sources are reporting that Russia may decide to ship more natural gas to Europe, rather than export liquified natural gas to the U.S. per a prior agreement. It is probably nothing more than rumor at this point, given the nature of the news article and the far-off dates involved. Theoretically, this move would be in retaliation for perceived affronts from the U.S. against Russian interests.
Specifically, Moscow will sell a substantial amount of natural gas from its giant Shtokman field in the Barents Sea to Europe instead of the United States, as previously announced, Vedomosti reported.

Among reasons cited for the switch is perceived U.S. intransigence on conditions for Russia's accession to the World Trade Organization and Washington's decision to sanction arms export agency Rosoboronexport and on aircraft maker Sukhoi for their close ties to Iran.

'The (United States) could not have expected that Moscow would not notice the Rosoboronexport and Sukhoi issues,' the paper quoted an anonymous Kremlin source as saying.

'Now it can be said that delivery to Europe and the United States from this source will probably occur on a basis of parity,' Vedomosti quoted another source as saying.

Shtokman is the world's largest natural gas field and is expected to begin production in 2010.
It should be said that the move - if it ever occurs - makes purely economic sense, simply due to pipelines, proximity to markets, and demand. The United States currently imports less than 16% of its natural gas and has relatively abundant natural resources in that regard. Europe is far more dependent upon gas and petroleum imports than the U.S. It is also a much more friendly (even eager) trading partner, with relatively few restrictions on doing business with Russian companies. This particular area of trade isn't of current interest to the U.S. government.

There may be a point in the future, where U.S. businesses will truly pressure our government to open up trading restrictions or to affect policy changes between the United States and Russia. Certainly, Boeing has some causes for concern with U.S. policies towards the Russian Federation and how it might affect both future aircraft sales and access to Russian titanium. However, that day has not yet arrived and the U.S. seems content to allow European and Asian businesses to take the lead in both investment and trade with Russia. Natural gas imports are unlikely to be the tipping point issue.
Some additional quotes via RIA Novosti on the Vedomosti article:
Steven Dashevsky, head of research with the Aton brokerage, said the move was politically motivated. The Russian authorities linked U.S. companies' participation in the Shtokman project with Russia's accession to the World Trade Organization, he said.

Another reason for the move might be the fear that Gazprom will not have enough gas to meet growing European demand, and Europe is far more important to the gas giant than America is, said Maxim Shein, head of research with Broker Credit Service.
Putin's statement has an element of bargaining with the United States in it, said Boris Shmelev, head of the Center of Comparative Political Studies at the Institute of Economics of the Russian Academy of Sciences. "Russia is trying to get political dividends out of its energy projects, and this is a way for Putin to demonstrate his freedom of maneuver in relations with different Western countries," he said.

Another article on this topic from the Times:
A US State Department official told The Times: “We understand that Gazprom (the Russian oil giant) is still considering the selection of partner companies to develop the Shtokman gasfield in the Barents Sea, and we hope that the Russian Government and Gazprom will choose partner companies in accordance with the technological and commercial goals of the project.”

Anger is mounting over continuing American resistance to Russia’s accession to the World Trade Organisation and a decision by the US State Department in August to impose sanctions on two Russian arms companies, Rosoboronexport and Sukhoi, for their alleged supply of arms to Iran. The hardening stance in Washington could rebound on American companies — notably Boeing, which imports titanium from Russia and has a project with Sukhoi to develop a civil jet aircraft.

Meanwhile, Chevron and Conoco are each angling to be selected as one of three partners to Gazprom in developing Shtokman. Costing more than $20 billion (£10.5 billion), the huge development will take place within floating pack ice in the Arctic Circle, beyond the reach of helicopters.

The Russian President indicated that the proposal that Shtokman gas be shipped to Europe had come from Angela Merkel, the German Chancellor. “Gazprom is reviewing this possibility,” Mr Putin said. “Such a decision might be made in the very near future.”

That could boost the fortunes of three European energy firms that are competing for a piece of Shtokman — Norsk Hydro and Statoil, of Norway, and Total, of France.

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