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Russia attacks the West’s Achilles’ heel

W Joseph Stroupe, Asia Times
Russia has found the Achilles’ heel of the US colossus. In concert with its oil-producing partners and the rising powerhouse economies of the East, Russia is altering the foundations of the current US-led liberal global oil-market order, insidiously working to undermine its US-centric nature and slanting it toward serving first and foremost the energy-security needs and the geopolitical aspirations of the rising East.

All this is at the impending incalculable expense of the West. What is increasingly at stake is secure US access to global energy resources – strategic US energy security – because the West’s traditional control respecting those global resources is seriously faltering in the face of the compelling strategies undertaken by Russia and its global partners.
(22 Nov 2006)
First of three part series. See number 2: Russia tips the balance

Putin issues veiled warning to east Europe

George Parker, Financial Times
President Vladimir Putin of Russia issues a veiled warning today to Poland and other east European states that they risk “creating fresh division lines in Europe” by treating Moscow as an enemy instead of a long-term strategic partner.

Mr Putin, writing in the Financial Times, suggests that some in Europe try to fit European Union-Russia relations into “the obsolete model of friend or foe”. He argues that there should be nothing to fear from growing interdependence between the two sides. Although he does not mention Poland by name, the Russian president clearly has the country in his sights, along with the seven other former communist countries that joined the EU in 2004 and regard Moscow with suspicion.

Poland has been the most vocal in its criticism, threatening to veto the start of talks this Friday in Helsinki on a new EU-Russia partnership deal, which would take in areas such as energy, trade, human rights and visa regimes.
(22 Nov 2006)

Europe Backs Down on the Energy Charter

Vladimir Vodo and Dmitry Butrin, Kommersant
The European Union has softened its stance on Gazprom’s long-term contracts, EU External Relations Commissioner Benita Ferrero-Waldner said Monday at a presser on the European Energy Charter. At the same time, Poland which has blocked EU-Russian talks has agreed to a steep hike in Gazprom’s gas prices for 2007.

A session of the Energy Charter Conference has opened in Brussels. The Conference is a working party of the agreement which is in charge of the further development of EU members’ relations with their suppliers. The meeting put further relations with Russia in the forefront of discussions. To remind it to our readers, Russia’s ratification of the charter is directly connected with the signing of a new cooperation deal between the EU and Russia after German Chancellor Angela Merkel and French President Jacques Chirac demanded that Russia put its signature on the EU energy blueprint. The EU-Russian agreement expires in 2007 while the new one is expected to be signed in early 2007.
(21 Nov 2006)

Why Russia has a gas shortage

Vasily Zubkov RIA Novosti
MOSCOW – Russia controls 29 trillion cu m of proven gas reserves and over 1.2 billion metric tons of gas condensate. This is about one third or one fourth of the world’s total reserves, depending on which estimate is used.

Next year’s shortage will be just above 0.5% of the amount Russia will have at its disposal, 785.7 billion cu m (this includes the output of Gazprom and independent producers, as well as gas purchased from Central Asia). This does not seem like a lot, all the more so as a partial reduction of exports in the first nine months of 2006 (by 0.3% to countries outside the CIS and by almost 30% to the CIS) could make up for it. Nevertheless, if the gas sector is not reformed, the problem will get worse and worse, and by 2010 Russia may have a shortage of about 30 billion cu m.

The country’s main gas producer is Gazprom, which accounts for over 90% of total output. This year, Russia is expected to produce at least 551 billion cu m, and 561 billion cu m next year. But it no longer has any significant reserves left that could be put into production anytime soon. The depreciation of Gazprom’s fixed assets is approaching 60%, and its key fields are similarly exhausted. The development of new ones is moving farther and farther into the Arctic, in the zone of permafrost and the northern sea shelfs.

Gas producers’ operating costs are rising fast. Today they stand at $6 per 1,000 cu m, having almost tripled since the late 1990s. On the Yamal Peninsula, which lies in the Arctic and has 26 gas fields, they will exceed $20 per 1,000 cu m because of extremely severe conditions. A geologist told me that Yamal is “a piece of something unknown frozen together over millions of years, and it is unclear how it will be possible to build or produce anything there.” ..
(17 Nov 2006)