Right now, the strength of each country’s negotiating position is determined by its ability to swiftly regulate the supply of oil on the global market. Saudi Arabia has been preparing for this for decades, while Russia has failed to take advance measures that would help, such as the construction of oil storage tanks.
The slump in gas prices will create plenty of problems, but at the same time it could provide a much-needed purging of an industry that in recent years has seen increasingly absurd projects unveiled for pipelines and LNG terminals.
The Power of Siberia pipeline is a long overdue step in the right direction in developing the strategic relationship with China in the gas sector. Yet plenty of questions remain about the implementation of future pipeline projects.
Don’t be misled by Western sanctions’ limited impact on Russia. In reality, they operate with an accumulating effect: the more time passes, the greater the potential technological backlog, financing gap, and negative consequences will be. In the long run, sanctions may jeopardize Russia’s oil and gas production volumes and the development of pipeline infrastructure, gradually squeezing the country out of foreign markets, limiting its export revenues, and undermining the stability of the Russian economy.
The main obstacle to energy negotiations between Russia and the EU is the clash between their perceptions of energy security. Moscow claims that the biggest threat to European energy security is Ukraine’s unreliability as a gas transit country, while Brussels believes the construction of new Russian pipelines circumventing Ukraine will do nothing to improve the EU’s energy security.
Unlike Russian gas pumped via Ukraine and Germany, that flowing through Turkey will face tough competition from Azerbaijani, Iranian, Iraqi, and possibly even Turkmen and Israeli gas. Gazprom’s rivals won’t need to ship their gas as far, and they will have much lower pipeline construction costs. The gas market in southeastern Europe is not that big and doesn’t have a lot of room for growth.
Why is Gazprom selling gas to Europe below cost? So that companies from the United States and other countries do the same, fall into a price war, and eventually go broke.
The construction of a new pipeline that will send Caspian natural gas to southern Europe is making Gazprom executives uneasy. Once the pipeline is completed, Gazprom will lose its monopoly in southern Europe and may have to resort to price dumping to stay competitive.
A recent slight increase in Russia’s oil output is likely to be short-lived. Oil production may start to decline by the end of the year, falling almost twofold by 2035 due to a lack of financing for new field exploration and development.
Ukrainian political activists have stepped up their campaign to isolate Crimea by sabotaging its electricity supply. Ordinary residents of Crimea are hostages of a hybrid political struggle between Ukraine and Russia.
