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Politics & economics - May 27

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The Gazprom nation

Pepe Escobar, Asia Times
Whatever the results of the EU-Russia summit this Thursday in the Black Sea resort of Sochi, there seems to be one clear winner: the Gazprom nation - Russia.

With the United States - the European Union's No 1 trade partner and North Atlantic Treaty Organization (NATO) ally - mired in the Iraq quagmire and the EU with an ongoing constitutional crisis, Russia is exceptionally positioned to have its way in the negotiations leading to the post-2007 "Strategic Partnership Treaty" between the EU and Russia. Russian analyst Sergei Karaganov recently warned, energy security is also "a powerful catalyst" for replaying the Cold War.

Natural gas, "blue gold" in industry lingo, has become, in an emerging multipolar world, the prime source of intractable conflict and a formidable political and diplomatic weapon in the hands of such states as Russia, Iran, Venezuela and Bolivia.

Gas, unlike oil, complies with the constraints on carbon emissions defined by the Kyoto Protocol. It is even more abundant than oil; proven reserves, with existing technology, may last as many as 70 years, compared with 40 or so for oil. According to the International Energy Agency (IEA), gas will be consumed in a faster progression (2.3% annually) than oil (1.6%), carbon (1.5%) or nuclear power (0.4%).

But there's a catch: for this to happen, says the IEA, the industry would need global investments totaling at least US$100 billion a year.

Before the January Russian-Ukrainian crisis, there had not been a geopolitical gas war. Now we've entered the era of pipeline power, where geopolitical turmoil is intimately linked to gas-pipeline routes, as in the Northern European Gas Pipeline, the Russian-German project under the Baltic Sea (bypassing Baltic states and Poland); the pipeline from Siberia prioritizing either China or Japan; and the pipeline from Venezuela to Argentina via Brazil, bypassing Bolivia.

Geopolitical turmoil is also linked to pipeline routes in the making, as in the Arctic, which pits the US against Canada, Russia against Norway (in the Barents Sea) and Denmark (in Greenland) against Canada. According to the US Geological Survey, 25% of the world's gas reserves still to be discovered lie in the Arctic.
(26 May 2006)

Carter's energy policies look good

Joel Connelly, Seattle Post-Intelligencer
As Jimmy Carter was introduced at Thursday's Mariners game, and later stood to leave his box at Safeco Field, fans gave the 39th president a warm ovation and shouted greetings.

When did you last hear of a politician NOT hearing from boo-birds at the ballpark?

Viewed as unlucky and/or over his head while in the White House, Carter has evolved into the most successful ex-president in American history.

...[Carter] was far ahead of his time in attempting to construct an energy policy that would have liberated America from dependence on Middle East oil and vulnerability to Islamic extremism.

"When I took office, we were importing 8 million barrels of foreign oil a day," he said in an interview Thursday. "We reduced it by 2 million barrels by the time I left office.

"We are now back up to importing more than 12 million barrels a day. It is primarily because the Bush administration, and administrations that preceded it, refused to increase fuel efficiency limits on cars and develop new energy sources."

The Carter administration, in the late 1970s, set a goal of meeting 20 percent of the nation's energy needs by 2000 by means of alternative energy sources (wind, solar) and conservation.

The Energy Department was created. Fuel efficiency standards for cars and trucks were increased. Experimental solar panels were installed on the White House roof.
(26 May 2006)

Russia Stock Exchange (RTS) Starts Trading In Contracts for Oil and Oil Products

Press Release, Russian Trading System
Moscow, June 22, 2006. "Russian Trading System" Stock Exchange starts trading in contracts for oil and oil products. Effective June 8th, 2006, the following contracts will be traded on FORTS (Futures&Options on RTS) – cash-settled futures and options on Urals oil, diesel oil, aviation oil and black oil. Contracts with settlement in July, August, September 2006, etc up until June 2007 will start trading simultaneously.

Settlement of futures and options contracts for oil and oil products will be performed in rubles based on pricing information supplied by Platts. The contracts will be traded for 1 month. Minimal initial margin will amount for 10%. RTS will charge the fee equal to 1 ruble per contract.

Futures and options contracts on oil and oil products are financial instruments that allow manufacturers to hedge risks associated with price decrease, thus making their production activity more effective and predictable. These contracts can be used as means of hedging price changes in different sectors of the economy depending on oil and oil product prices. New instruments will be interesting for active investors who would be able to reap profits from those price changes.

Russian trading system is the oldest stock exchange of the modern Russia founded by market participants in 1995. RTS is the leading stock exchange in Russia in the number of stocks traded.
(26 May 2006)
Note that the date of the press release is in the future - June 22.

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