Fearing Energy Dependency, Bulgarians Demand Re-opening of Nuclear Reactors
Highlighting the complex and widespread impacts of the Russian-Ukrainian natural gas dispute, protesters in Bulgaria demanded on Sunday the reopening of two nuclear reactors in that country. The reactors, which are left-over from the Soviet-era, have been shut-down since 2006 as a requisite for gaining entry into the EU.
Now, with natural gas supplies being sharply reduced as a result of the Russia-Ukraine dispute, Bulgarians are demanding more energy independence.
Reuters reports that “About 2,500 protesters with placards reading ‘Speed up Bulgarian energy’ and ‘Restart’ marched through [Bulgaria's capital] Sofia,” and that “Prime Minister Sergei Stanishev said the government would study all the arguments about possibly restarting the units after meeting the organizers.”
Russian-Ukrainian Deal Reached (Again)
The natural gas stand-off between Russia and Ukraine appears to finally have reached a resolution on Sunday. Despite previous reports of settlements, this international dispute has continued for days, including a 12 day shut-off of Russian natural gas deliveries for Europe via Ukraine.
The agreement reached on Sunday was between the Russian and Ukrainian prime ministers, Valdimir Putin and Yulia Tymoshenko. This was of geopolitical significance for Russia, which has been trying to marginalize Ukraine’s pro-western president, Viktor Yushchenko, in favor of Tymoshenko, who is seen as more friendly to Russia.
The deal sets the price of Ukrainian natural gas at around 20% of market prices paid by European customers. This will likely result in a price of between $208 and $240 per 1,000 cubic meters.
Russia-Ukraine Gas Dispute Cools Off… For Now
Although Russia and Ukraine have apparently reached an agreement to accept international monitors in order to reestablish natural gas flows to Europe, this is unlikely to be the end of this geopolitical saga. Both countries are still far apart on a final solution, with Moscow insisting that Ukraine pay “market prices” (or higher) and Ukraine insisting it should receive cheaper gas, in part due to its importance as a conduit for Russian gas to Europe.
Illustrating the gamesmanship and hostility involved in this recent stalemate, Russia actually raised its price demands every time Ukraine rejected a prior offer. (Starting at $250 and eventually reaching $450 per 1,000 cubic meters.) READ MORE
Russian Flow of Natural Gas via Ukraine Shut Off Completely
The Russia-Ukraine natural gas dispute has escalated significantly with Russia cutting off basically the entire flow of natural gas on that pipeline on Wednesday. As a result, Europe, which depends on Russia for 25% of its natural gas supplies may see serious shortages as soon as next week. The countries particularly dependent on these supplies include Bulgaria, Romania, Greece, and Turkey. However, western countries, including France and Germany may also face shortages.
Although Russian energy monopoly Gazprom says that it is increasing its deliveries to the EU via other routes, traditionally 80% of the gas is delivered through Ukraine. Consequently, there may not be enough alternative pipeline capacity to make up for the massive shortfall. Currently, Russian gas supplies to Europe are half of normal.
Unfortunately for the EU, it doesn’t have a whole lot of leverage in this situation. They are truly dependent on Russia (and Ukraine) for a large portion of their natural gas supplies, and are stuck in the dead of winter with greatly diminished gas. They have few alternatives and Czech Prime Minister Mirek Topolanek, whose country currently holds the EU presidency, seems unlikely to convince Russia to change its ways.
Europe Being Dragged Into Russia-Ukraine Natural Gas Dispute
Despite claims this week that Ukraine would permit natural gas intended for the EU from Russia to be delivered, there are reports from Poland and Hungary that deliveries from the pipeline have begun to fall. Poland is reporting a 6% decrease in deliveries and Hungary a 25% decrease.
Russia claims that Ukraine is illegally siphoning off gas intended for these countries, while Ukraine asserts that it is Russia that has decreased the output. Leaders of both nations are currently trying to make their case to EU leaders.
Russian natural gas monopoly, Gazprom says that Ukraine can no longer be trusted and that it will have to find an alternative route to get gas to Europe. Whether this is practicable remains to be seen. Fortunately, the EU nations have substantial natural gas reserves, having experienced a similar situation in 2006, the last time these two neighbors reached an impasse.
Via AFP (link may expire)
Ukraine Aims to Calm Fears of Natural Gas Disruption for EU
As the Russian halt of natural gas deliveries intended for Ukraine entered its second day, Ukrainian officials began touring European capitals to provide reassurances that transport of natural gas through Ukraine to the rest of Europe would continue. Since almost all natural gas delivered from Russia to EU countries must travel through Ukraine, concerns have been raised that Ukraine might divert some of that gas for its own use. This is what happened the last time Russia halted natural gas deliveries to Ukraine in 2006.
However, Ukraine asserts that it has enough natural gas reserves to last it through the winter, and regardless, will continue to permit transit of all Russian natural gas through its country to the EU. READ MORE
Russia Shuts off Natural Gas Deliveries to Ukraine
On Thursday, Russian energy monopoly Gazprom, shut off the entire flow of natural gas to Ukraine for that country’s domestic consumption. Ostensibly, the dispute is over price and transit fee negotiations, however, larger geopolitical and economic issues are surely the underlying causes.
The Kremlin has often used its control of Russian natural resources as a tool for international relations. In 2006, Russia shut down deliveries of natural gas to Ukraine for three days, which many attributed to tensions between the two countries stemming from Ukraine’s Orange Revolution in 2004. And earlier this year, the Czech Republic saw a decrease in oil deliveries from Russia, three days after it signed an antiballistic missile agreement with the U.S.
If the current interruption in Ukrainian deliveries continue, Western Europe will also experience shortages, as they receive their natural gas from Russia on the same pipeline.
Russian Natural Gas Monopoly Gazprom Falls Far
A year ago, Gazprom, the Russian natural gas monopoly, aspired to be the largest corporation in the world. Buoyed by high oil prices and political backing from the Kremlin, it had already achieved third place judging by market capitalization, behind Exxon Mobil and General Electric.
Today, Gazprom is deep in debt and negotiating a government bailout. Its market cap, the total value of all the company’s shares, has fallen 76 percent since the beginning of the year. Instead of becoming the world’s largest company, it has tumbled to 35th place. And while bailouts are increasingly common, none of Gazprom’s big private sector competitors in the West is looking for one.
Russia may not join global climate agreement
Russia, the third biggest greenhouse gas emitter in the world after China and the US, indicated on Friday that “If the conditions for the international agreement are not favorable for [Russia] we may not join such an agreement.” This sentiment was conveyed by Alexander Pankin, the deputy head of the Russian delegation at the UN Climate Change Conference in Poznan, Poland, which ran from Dec. 1-12.
The Poznan Conference began negotiating a final replacement to the Kyoto Treaty to hopefully be signed in Copenhagen at the end of 2009. But Russia warned that if the new pact did not set commitments for countries based upon their economic and social standing, Russia would not sign.
Russia, which finally ratified the Kyoto Protocol in 2004 after many years of internal debate, plans to cut emissions to 30% below 1990 and then reduce them further but has not given a percentage for possible cuts by 2020.
Climate change may benefit Russia
The National Intelligence Council released its Global Trends 2025 report on Thursday. In it, the NIC made predictions on a number of global trends, including some of the geopolitical effects of climate change. Of particular note, the report indicated that Russia may actually benefit from climate change. Specifically, the melting arctic could open up new swaths of Northern Russia to mining and drilling in regions such as Siberia. Russia, which has built up an extractionist economy, would see a large boost in revenues from these new resources. However, the report notes, that for Russia to experience a real growth in power, they will have to integrate more fully into the global system.
A European Pickens Plan?
Not exactly, but the European Commission did release a comprehensive energy plan that is aimed at making Europe’s energy policy “secure, sustainable, and competitive.” Europe, which gets almost half of its gas, a third of its oil, and a quarter of its coal from Russia, is even more vulnerable to energy disruptions from geopolitical events than the United States. (Our biggest direct suppliers are Canada and Mexico.)
The EC’s energy plan aims to address this dependency on Russian energy, as well as environmental concerns. READ MORE
Drop in oil price stymies Iran, Venezuela and Russian foreign policies
Not only is our over consumption of oil destroying the environment, but it is giving incredible wealth and power to petro-states like Iran, Venezuela and Russia. However, now with the plunging price of oil and natural gas, these countries that have enjoyed windfall revenues over the past few years are facing a new reality of imbalanced budgets and cost cutting.
Oil has fallen from $147, a few months ago, to below $80 today. Neither Iran or Venezuela can maintain their spending levels with oil below $90, and Russia apparently counts on around $70 barrels (note: this number is different from the approx. $82 level we sited before). However, Russia has squirreled away nearly $200 billion in a rainy day fund, so they are somewhat insulated from short-term price dips. READ MORE
Oil drops, emissions decrease, petro-states lose revenues, but this is not a solution!
With environmental policy so closely tied to the price of oil, the dramatic drop in its price in recent weeks is of special interest. Today, oil prices fell to $77.61 a barrel, which is its lowest level since October 2007. Additionally, the International Energy Agency cut its forecast for daily global demand for oil to about 86.5 million barrels. This would represent the slowest growth in oil consumption in 15 years. Additionally, petro-states like Iran, Venezuela, Russia, and Saudi Arabia are seeing a dramatic decrease in revenue. READ MORE
As oil prices fall, a lesson should be learned (lower demand=lower prices)
As the global economy slows, oil prices continue to fall. Much can be learned from this fact. Mainly, that the “drill baby drill” demagogy we have seen our leadership digress into lately, is completely misguided. The most important weapon against high oil prices is our ability to lower demand. Unfortunately, demand is currently being lowered due to our financial crisis, rather than a shift in our energy policy. Nonetheless, one lesson that should be learned is that once we get our economy back on track and oil prices begin to trend back up, the solution is to decrease demand through a comprehensive shift in energy policy, rather than a politically motivated drop in the bucket from increased drilling. READ MORE
Saudis: “Yes! Yes! Drill, America, drill!”
The world’s petro-states must be so torn right now. On the one hand, the slowing global economy is decreasing the demand for oil, thereby causing its price to drop. This, in turn, is taking a big chunk of revenue out of those country’s coffers, and causing dramatic economic turmoil in places like Russia. These states, including Russia, Venezuela and Iran, among others, have built much of their economy upon extractionist policies and are quite vulnerable to the declining market price of oil. Consequently, in the short-term they see this as a catastrophe and look for ways to re-establish the high prices.
However, on the other hand, sophisticated players in the oil game realize that it was the rapid spike in gas prices in the United States that caused the first material and widespread shift in conservationist policies and social norms in over thirty years. What the threat of climate change and terrorism could not achieve, an increase in prices at the pump quickly accomplished. That is, namely, a fundamental change in people’s behavior and thinking towards oil consumption.
As The Mustache often notes, every time a petro-state elite hears us chanting “drill, baby, drill” or sees us failing in other ways to develop alternative energy sources, they must jump out of their seats and yell “‘Yes! Yes! Drill, America, drill!” because, as Friedman notes, “an America that is focused first and foremost on drilling for oil is an America more focused on feeding its oil habit than kicking it.”
Now, the real challenge for reform leaders like T. Boone Pickens and Al Gore, will be to inspire and lead the public in light of lower gas prices. As we’ve seen with the recent financial crisis, in our free-market society, imminent risks are often ignored until they’ve already passed the point of no-return. Whether the threat is to our national security or environmental interests, we allowed our oil dependency to continue far too long. We cannot allow this temporary drop in gas prices to lull us back into complacency again.
