The previous bipolar contestation between East and West was based upon which economic doctrine should prevail. Today’s primal security concern is that of energy resources. In Europe, the recent squabble between Russia and Belarus is threatening to disturb the ease with which Western Europe is able to turn up the thermostat in the (so far) mild winter.
The big change is that Russia seems more interested in earning top dollars for its resources, rather than subsidizing its neighbors and allies. Russia is no longer interested in “giving” its gas resources away cheaply when there are well paying, gas hungry customers around the corner. This could be good news for Europe, as this signals the intent of Gazprom to be more of a business partner rather than a political instrument: although in reality it is clearly both.
According to spokesman Sergei Kupriyanov, Gazprom is not Santa Claus. Isolated and dictatorial Belarus was accustomed to buying gas at a nearly 70% discount relative to market prices (around 46$ per 1000 cubic meters). Gazprom wants around 200$ per 1000 cubic meters. In the newly announced deal, Belarus will now pay around 100$ per 1000 cubic meters, which, looking at current prices, can still be considered a sweet deal.
If the re-pricing had been more aggressive, it would have created more pressure on Belarusian president Alexander Lukashenko by effectively ending a multibillion subsidy. Although the re-pricing is a welcome step in the right direction, it is merely Russia flexing its muscles. However, in the long term these are good signals to shareholders who are not keen on Gazprom being used as a political subsidy agent.
Looking at Western Europe, their dependence on foreign hydrocarbon sources remains a critical issue because, as the Economist put it, “a new hegemony, based on pipelines rather than tanks, is advancing”. As Europe's thirst for Russian resources increases, their independence decreases; and this time there is no “Iron Curtain” to hide behind.
The big change is that Russia seems more interested in earning top dollars for its resources, rather than subsidizing its neighbors and allies. Russia is no longer interested in “giving” its gas resources away cheaply when there are well paying, gas hungry customers around the corner. This could be good news for Europe, as this signals the intent of Gazprom to be more of a business partner rather than a political instrument: although in reality it is clearly both.
According to spokesman Sergei Kupriyanov, Gazprom is not Santa Claus. Isolated and dictatorial Belarus was accustomed to buying gas at a nearly 70% discount relative to market prices (around 46$ per 1000 cubic meters). Gazprom wants around 200$ per 1000 cubic meters. In the newly announced deal, Belarus will now pay around 100$ per 1000 cubic meters, which, looking at current prices, can still be considered a sweet deal.
If the re-pricing had been more aggressive, it would have created more pressure on Belarusian president Alexander Lukashenko by effectively ending a multibillion subsidy. Although the re-pricing is a welcome step in the right direction, it is merely Russia flexing its muscles. However, in the long term these are good signals to shareholders who are not keen on Gazprom being used as a political subsidy agent.
Looking at Western Europe, their dependence on foreign hydrocarbon sources remains a critical issue because, as the Economist put it, “a new hegemony, based on pipelines rather than tanks, is advancing”. As Europe's thirst for Russian resources increases, their independence decreases; and this time there is no “Iron Curtain” to hide behind.
3 comments:
The Economist of a few weeks ago featured Putin in gangster attire holding a gas pipe in his hand. I think that it is an excellent illustration of your point regarding Europe's dependency on Russian gas.
One must ask how to react to such a situation. Taking it for granted and hoping that the supply will be available as long as needed is not really an option. This will only increase the addiction.
The way to go ahead is to kick off - find an alternative drug, sorry, energy source, to break free.
Perhaps the answer should be to place the search for alternative energy sources at the top of the research projects of the European community.
quite valid point! we're slowly reaching a point where political risks associated with energy diversification are starting to outweigh alternative energy development costs.
The current low oil price is as much as a blessing as it is a curse. For one its keeping the heat of the topic such that the buzz of the energy question is a less than it was a year before when oil was at a record breaking high! Low prices should be a blessing, however, consumers are not seeing it back at the pump. For Europeans at the current exchange Euro/Dollar Exchange rate, prices should be at a "record" low. In reality the pric e at the pump is not vastly different than it was several years ago.
uhm wasn;t the iron curtain meant to keep commies in...rather than protect Europe. I do get what you are trying to say. Energy dependence can become the ultimate blackmail weapon, something a Nato is not designed or equip to defend against :)
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