Russia is a Key Link to Oil

To give you an idea of where this article by a "distinguished professor of economics at the University of Mississippi" is coming from, I present you a self-explanatory quote by him - "...Russia's invasion and occupation of South Ossetia..."



Russia is a Key Link to Oil

December, 2008

If President-elect Barack Obama and his top advisers learn nothing else from Russia's invasion and occupation of South Ossetia this summer, it should be that Moscow aspires to be an energy superpower. Russia already is the world's second-largest producer of oil, pumping nearly 10 million barrels a day, and is the largest supplier of natural gas. Like all energy-exporting countries, Russia benefited enormously from the run-up in prices over the last decade. Every $1 increase in the price of a barrel of oil transferred about $1 billion into Russia's state budget. As a result, Russian foreign exchange reserves grew from $12 billion in 1999 to $470 billion at the end of last year, a balance equaled only by such countries as China, India and the Middle East oil producers.

Revived Russia

When its tanks rolled into Georgia, the Kremlin sent notice it intends to dominate the oil and natural gas resources of the former Soviet republics in the Caspian Sea basin, raising the threat of supply disruptions to Europe. That possibility could give Russia political leverage over Germany, the Czech Republic, Slovakia, Ukraine and other Central and East European countries that rely heavily on Russian fuels. As rising oil prices strengthened the Kremlin's hand, Mr. Putin clamped down on Russian businessmen, most notably by prosecuting and imprisoning Yukos Oil Co. Chief Executive Officer Mikhail Khodorkovsky. The new Obama administration needs to realize Russia has a potential stranglehold on America's European allies and will play its energy card when it wants to: to block the further expansion of NATO, for example, or the EU.

What's next?

Russia's next likely move, which could be delayed until the global economy starts picking up again, will be an attempt to orchestrate a global natural gas cartel patterned on the Organization of Petroleum Exporting Countries. About 15 gas-producing countries, led by Russia and Iran, met in 2004 and agreed to establish an "executive bureau" to coordinate "interests" in the global gas market. As world demand for natural gas begins to outpace supply, incentives for collectively reducing production and increasing prices will strengthen. For the United States, a combination of conservation, increased energy production and improvements in energy efficiency is the best defense against volatile oil and gas prices and Russian blackmail.

The most important step the United States can take on the energy front is to use more coal and nuclear power. America has a 250-year supply of coal, more plentiful on an energy-equivalent basis than the oil reserves of either Saudi Arabia or Russia. The president-elect should re-examine his position on coal in particular. "Clean coal" is not an oxymoron. Building more coal-fired power plants that use new technologies to capture and store carbon dioxide emissions deep underground and converting coal into liquefied fuel for transportation are sensible policies. Increasing our reliance on coal and nuclear power would free up natural gas for household and industrial uses and go a long way toward immunizing the United States from both OPEC and Russian blackmail.

William F. Shughart II is Frederick A.P. Barnard Distinguished Professor of Economics at the University of Mississippi and a senior fellow at the Independent Institute, Oakland, Calif.


Gazprom Threatens New Ukraine Gas Cut

Russian energy giant, Gazprom, says it will stop gas supplies to Ukraine starting January 1, until the country pays off its $2 Billion gas debt for supplies in November and December, and a new contract is concluded. On Thursday Gazprom spokesman Sergey Kupriyanov said the talks are in a deadlock. He said Ukraine has transferred $800 million for repayment of gas supplies in autumn, but also informed Gazprom that no more money would be transferred until the new year starts. “Thus we would have no legal grounds to supply gas starting January 1 and we won’t be able to turn to direct contracts with Ukraine until the debt is paid off,” Kupriyanov said.

The two sides have been negotiating for the past two months over a settlement of the gas debt but with no result. Also, Gazprom Deputy CEO Aleksandr Medvedev said the company has offered Ukraine several options to settle the issue, taking into consideration the complicated economic situation in the country, before adding “Unfortunately, none of the offered schemes were accepted to further settle the issue.” This comes after the signing of a memorandum, on gas cooperation, on October 2 between the Prime Ministers of Russia and Ukraine, Vladimir Putin and Yulia Timoshenko.

One of the key points of the document is the possibility of direct long-term cooperation between Gazprom and Ukraine’s Naftogas starting from January 1, 2009. It also facilitates Gazprom directly selling up to 7.5 billion cubic metres of gas per year, to Ukrainian consumers. The document also confirms the intention to move step-by-step to mutually agreed market gas prices for Ukraine, and specifies prices for gas transit through Ukraine’s territory. The necessary condition, specified in the memorandum, is paying off the gas debt in full by Ukraine’s Naftogas company.


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Dear reader,

Arevordi will be taking a sabbatical to tend to personal matters. New blog commentaries will henceforth be posted on an irregular basis. The comments board however will continue to be moderated on a regular basis.

The last 20 years or so has also helped me see Russia as the last front against scourges of Westernization, Globalism, American expansionism, Zionism, Islamic extremism and pan-Turkism. I have also come to see Russia as the last hope humanity has for the preservation of classical western civilization, Apostolic Christianity and the traditional nation-state. This realization compelled me to create this blog in 2010. Immediately, this blog became one of the very few voices in the vastness of cyberia that dared to preach about the dangers of Globalism and the Anglo-American-Jewish alliance, and the only voice preaching the strategic importance of Armenia remaining within Russia's orbit. From about 2010 to 2015 I did monthly, at times weekly, commentaries about Russian-Armenian relations and Eurasian geopolitics in general. It was very difficult as I had no assistance in this endeavor. The time I put into this blog therefore came at the expense of work and family. But a powerful feeling inside me urged me to keep going; and I did.

When Armenia finally joined the EEU and integrated its armed forces into Russia's military structures a couple of years ago, I finally felt a deep sense of satisfaction and relaxation, as if a very heavy burden was lifted off my shoulders. I finally felt that my personal mission was accomplished. I therefore felt I could take a step back, as I really needed the rest. Simply put: I have lived to see the institutionalization of Russian-Armenian alliance. Also, I feel more confident now that Armenians are collectively recognizing the strategic importance of Armenia's ties with Russia. Moreover, I feel satisfied knowing that, at least on a subatomic level, I had a hand in the outcome. As a result, I feel a strong sense of mission accomplished. I therefore no longer have the urge to continue as in the past. In other words, the motivational force that had propelled me in previous years has been gradually dissipating because I feel that this blog has lived to see the realization of its stated goal. Going forward, I do not want to write merely for the sake of writing. Also, I do not want to say something if I have nothing important to say. I feel like I have said everything I needed to say. Henceforth, I will post seasonal commentaries about topics I find important. I will however continue moderating the blog's comments section on a regular basis; ultimately because I'm interested in what my readers have to say and also because it's through readers here that I am at times made aware of interesting developments.

To limit clutter in the comments section, I kindly ask all participants of this blog to please keep comments coherent and strictly relevant to the featured topic of discussion. Moreover, please realize that when there are several anonymous visitors posting comments simultaneously, it becomes very confusing (not to mention extremely annoying) trying to figure out who is who and who said what.Therefore, if you are here to engage in conversation, make an observation, express an idea or simply attack me, I ask you to at least use a moniker to identify yourself. Moreover, please appreciate the fact that I have put an enormous amount of information into this blog. In my opinion, most of my blog commentaries and articles, some going back ten-plus years, are in varying degrees relevant to this day and will remain so for a long time to come. Articles in this blog can therefore be revisited by longtime readers and new comers alike. I therefore ask the reader to treat this blog as a depository of important information relating to Eurasian geopolitics, Russian-Armenian relations and humanity's historic fight against the evils of Globalism and Westernization.

Thank you as always for reading.