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The Putin-Barroso Gas Summit Flares Up EU-Russia relations

March 5, 2011

Analysis of:Putin, EU Commission Chief Clash on Energy Policy | www.npr.org

Russia and the EU Commission held a summit in Brussels in late February, which mainly focused on energy relations. Vladimir Putin headed the Russian delegation and European Commission President Jose Manuel Barroso headed the EU delegation. The agenda of the visit of the Russian delegation included three issues: Russia’s accession to the WTO; the EU-Russia energy trade; and the free visa regime for Russians traveling to the EU. The results were meager.

Should US Intervene in Libya?

March 5, 2011

Analysis of:Libyan battle over Zawiya becomes a test of will - LA Times | www.latimes.com

The situation in the Middle East has fundamentally changed the political arrangements in the region. What we are witnessing is the end of the post- WWI and WWII, post-colonial order in the Maghreb and North Africa, especially in Egypt and Tunisia, but possibly also in some of the Gulf states. U.S. has no reasons to intervene beyond a humanitarian intervention. US and its allies may send some forces to facilitate an evacuation of its citizens, which is within the realm of the international law.

The Gas War Exposes Europe's Energy Dependency

January 20, 2009

Analysis of:Russia and Ukraine to Sign Contracts Today to End Gas Dispute | www.bloomberg.com

            The Gas War Exposes Europe's Energy Dependency                             Dr. Ariel Cohen The clash over the price of natural gas as well as over geopolitics.  Russia, a major exporter, wanted top dollar. Ukraine, an importer and the transit country, wanted bargain prices and higher fees for transit. Ukraine failed to diversify its energy basket away from the cheap Russian gas, clean up corruption, and modernize its energy sector. Today, Ukraine consumes as much energy as Germany, but produces only 10 percent of German GDP.The strong side (Russia) won. Moscow signalled to the Ukrainians,  Europe and the U.S. that Ukraine should remain within the Russian sphere of influence, and NATO is a no-no.    The crisis demonstrates Europe’s strategic dependence on Russian gas.  In the long term, the situation must change, to keep Europe from falling hostage to Russia, by diversifying sources of gas and the energy basket, to include nuclear, clean coal, and renewables.    

The Kremlin is Consolidating Oil and Gas Control

July 3, 2008

Analysis of:Foreign energy companies in Russia stymied | www.iht.com

In 2003-2008, the Kremlin, under Vladimir Putin's leadership, has consolidated control over domestic and foreign hydrocarbon assets. The strategic goal is to make Russia's state-owned "national leaders", such as Gazprom, into global supermajors.  The crackdown started with YUKOS (2003-2004) and continued with Shell (Sakhalin Island); Exxon; Chevron (Caspian Pipeline Consortium); TNK-BP (Kovykta gas field); and Rusneft. The new natural resources law will limit participation of Western capital in exploration and development of large hydrocarbon fields, however, exceptions to the rule can be negotiated. International oil companies (IOCs) have to remain more agile and leverage their superior technological advantages and financial resources for access to Russian resources. With oil and gas becoming the most politicized commodities, IOCs need the backing of their home governments to remain competitive. 

Implications of $100 Oil for Producers (and Consumers)

January 7, 2008

Analysis of:Oil at $100 Suggests Volatility | www.iht.com

-- Oil producers may celebrate oil at $100 a barrel, but in the long term, there is no reasons to cheer. -- High energy prices hurt the developed and developing nations alike. And even the high growth engines, such as China and India, may start to slow down. If this occurs, oil prices are likely to plunge. -- There are at least three threats to the current Middle Eastern oil prosperity. One is macroeconomic, one is policy/regulatory, and one is technological. -- The oil bonanza will not last forever. To survive in the post-oil world, these countries need to start preparing now, when the times are good.  -- But without preparing for the future, some oil states may -- in a few decades -- return to what they once were: the harsh expanses of sun, sand, and sword.

Putin-Medvedev Russian Succsion: Good for Investors?

January 4, 2008

Analysis of:Annual review upbeat as Russia finishes the year strong | en.rian.ru

-- Investors are happy with Medvedev's nomination as the jump in the RTS indicated - stability is good for Russia. -- In the famous Davos speech of January 2007, Medvedev stated: "Even in the case of the state preserving the control stake (in corporations), we are focusing on the creation of public companies with a significant share of private investment in the capital." Medvedev's Gazprom is a good model of such an arrangement.  -- Тhe chances of massive liberalization in strategic sectors remain dim. Russian oligrachs, many of whom are tight with top politicians, don't favour economic openness, which brings with it competition. -- Western investors will be allowed to buy minority stakes in "strategic" companies, as recent acquisitions in VAZ by Renault and negotiations over GAZ by General Motors has showed. -- The situation in the oil and gas sector is even clearer. The state will keep controlling its commanding heights.

Global Instability Threatens Investors

January 3, 2008

Analysis of:European Commission presents new telecom regulatory package | ec.europa.eu

The West is facing an unprecedented year of weakness and confusion in the coming 2008. For the United States, 2008 is the year of choice. Тhe Presidential election campaign will be polarizing. American foreign policy, suffering from a number of setbacks, will further deteriorate in 2008 as principal decision makers of the Bush Administration leave.   The Middle East will remain a boiling caldron, with direct effect over energy prices. Pakistan is inching closer to a failed state, with Musharaff's legitimacy further scarred by Benazir Bhutoo's assasination and the threat of the Islamist takeover. The dollar weakens as more and more players prefer euro as a the currency of choice. China will be bolstered by the Olympic games in summer, but its reaction to the Taiwan UN membership referendum may cause instability in East Asia. The year promises to be one of the toughest in recent history, with implications to markets and asset valuations due to increased political risk.

International Energy Agency's Warning on the Coming Global Crunch

January 2, 2008

Analysis of:FDA science dearth puts public health at risk | news.yahoo.com

Global Energy Transformation   Ariel Cohen   The world is on the eve of a new energy order, which is going to change the way the Middle Eastern suppliers and consumers world wide do their business. The Persian Gulf is the richest and most important oil region in the world. In 2006, Persian Gulf countries produced 28 percent of the world’s oil and contained over half of the world’s oil reserves.   Most of the increases in production will have to come from OPEC areas and the national oil companies therein, IEA says.  While the Saudis at least are trying to contribute their share to supply increase, Iranian oil sector mismanagement is famous. Another important trend is resource nationalism. International Oil Companies (IOCs) no longer wield their historic power. It is the National Oil Companies that (NOCs) that will largely determine future oil supply.    In order to meet this demand the world is going to need a lot more production capacity—more than may be available.  

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