MOSCOW, September 17 (RIA Novosti), Stanislav Fisher - If Vladimir Putin and Gazprom finalize their grand plan to expand into the Chinese energy market, the European Union will be left literally in the cold. After years of trying to reduce Gazprom's presence in Europe, the European Commission may see Gazprom leaving of its own desire. Such a scenario will not be pleasant for their European consumers.
Speaking at the building site of the Power of Siberia pipeline, Vladimir Putin outlined his strategy for the future of Russian natural gas exports.
“After we create a network of gas pipelines here, in the Far East and Siberia, we’ll have the possibility to unite the European part of the gas pipeline system with its eastern counterpart and, from the standpoint of export possibilities and expanding the geography of the country’s gas infrastructure development, this will give us big advantages in rechanneling gas flows, depending on the world market situation - either to send more gas to the West or to achieve a greater effect to the East,” the Russian President said.
“Rechanneling gas exports” is a worst-case scenario for the European Union. For years, Brussels has been making life difficult for Gazprom by constantly demanding price cuts and introducing discriminatory rules and regulations aimed at reducing Gazprom's influence in Europe. The European Commission proved that it doesn't shy away from using political blackmail against governments willing to cooperate with the Russian energy giant. The crusade against Gazprom's South Stream project, led by America’s Russophobe-in-chief, Senator John McCain and supported by Europe’s unelected bureaucracy, is the best proof that Europe is not willing to settle for honest, long-term cooperation with Russia. Brussels has been using its status as the biggest buyer of Russian gas to gain maximum leverage over Gazprom. This situation is about to change.
A new contract for gas deliveries to China is expected to be signed in November and judging by the President's statements regarding the re-channeling of gas flows, the political agreements regarding the contract have already been reached. The deliveries for the second contract will be made from the same gas fields that supply European consumers. In several years, Europe will have to outbid China and avoid angering the Kremlin in order to keep the cheap Russian gas flowing.
This scenario is so scary for Europe that the US-sponsored propaganda think tanks have had to publish “research” convincing Europe that it will forever remain an indispensable customer for Gazprom.
Dmitri Trenin, Director of Carnegie Moscow Center, tweeted:
Mikhail Krutikhin calls Gazprom's potential west-2-east gas export switch costly 2 Russia.See #EurasiaOutlook: http://t.co/DjYYmo8li8
— Dmitri Trenin (@DmitriTrenin) 2 сентября 2014
All the arguments presented by the US think tank and its Russian experts boil down to two factors: China can't possibly absorb all the Russian gas exports and Gazprom can't finance the pipelines to China. Let's start with the second argument. Gazprom may face some difficulties financing the two mega-pipelines, but Gazprom doesn't need to take this task on all alone. The Russian state has significant currency reserves which are currently invested in European and American bonds. If a fraction of this portfolio is sold, the Kremlin will have more than enough money to finance the pipelines, which will be far more profitable than US Treasury Bills and completely sanction-proof. As for China's alleged inability to absorb a significant amount of Russian gas exports, that's nothing more than wishful thinking. Beijing is desperately trying to find an energy source that is cheaper than LNG and cleaner than coal. Russian pipeline gas is almost twice as cheap as the LNG available in Asia and it is also cleaner than coal.
Therefore, it has a stellar future on the Chinese market. Actually, even if just half of the Russian gas exports to Europe are redirected to China, the European price of natural gas will skyrocket and some European regions will have trouble securing any kind of gas supply. Any LNG supply from the US will be very expensive, will require expensive modifications to the European gas transport system and will only be available if the EU manages to outbid Asian buyers, who currently pay 30-50% more than European buyers of Russian gas.
If the European Union doesn't change its policy towards Russia, in 4-5 years the landscape of the European energy markets will change drastically. We may even see the day when the European bureaucrats will feel nostalgic for the good old days, when Gazprom didn't have China as a customer.
