Ongoing tensions between the U.S. and Russia continue to unfold, even as allegations of President Trump's involvement in Russian meddling in the 2016 presidential election looks like it will finally lose steam. The Senate Intelligence Committee is approaching an end to its two-year investigation into meddling in the controversial election, and Democrats and Republicans on the committee both say they have found no direct evidence to connect the Trump campaign in a conspiracy with Russia. While that's good news for Trump, arguably one of the most embattled and divisive presidents in U.S. history, it still won't lead to better bilateral relations between Washington and Moscow in the foreseeable future.
One reason for this geopolitical quandary is that Russia has its hands in too much that contradicts U.S. policy, ranging from nuclear and ballistic missile development concerns, being on the opposite sides of the ongoing Syrian Civil War, Moscow's cozy relationship with Iran as well as its support of embattled Venezuelan President Nicolás Maduro.
Consequently, a bipartisan group of senators introduced a bill last week that seeks to impose stiff new sanctions on Russia over still simmering allegations of election meddling in addition to continued aggression against Ukraine. CNBC said last week that the threat of more sanctions was the latest congressional effort to push President Trump to ratchet up Washington's response to Moscow, something the president has been hesitant to do. Russia for its part, already bruised both financially and geopolitically from five years of American sanctions, is downplaying the threat of more sanctions. Related: Where Will Putin Build His Next Gas Pipeline?
"I did not warn, I just said that this is senseless, nothing else. I said that the goal of this move is unclear. If they did not understand that the sanctions are not working, I feel sorry for them," Russian Foreign Minister Sergey Lavrov said in an interview last week. However, feeling sorry for the U.S. or not, the threat of more American sanctions has some in the Russian energy sector on edge.
Russian energy sector on edge
Russian Finance Minister Anton Siluanov said that the bill introducing new sanctions against Russia aims to sabotage the country's Arctic LNG 2 project, but Moscow will launch the project even if it has to do it on its own. Moscow-based media outlet RT said the bill would also target Russia's foreign debt, banking sphere and energy sector, and LNG projects abroad, including the massive Arctic LNG 2 project developed by Russian natural gas producer Novatek. French oil major Total has recently joined the project, while Chinese investors also show strong interest in it. In late December, Japan's Mitsui & Co. also entered talks with Novatek over participation in the project.
Siluanov said that if the U.S. proceeds with the punitive measures, it's unclear how foreign partners may react, but that "business interests will prevail." He said Russia can turn the project into reality on its own. "In any case we will implement this Arctic LNG project because we have the resources." He added that Russia may consider using public funds due to the growing capacity of Russia's sovereign wealth fund, which is to surpass 7 percent of GDP this year.
The Arctic LNG 2 project, with an estimated price tag of US$35 billion, will be built in Northern Siberia and is expected to start operations in 2022-2023. At full capacity, it will produce 19.8 million tons of LNG per year. Two weeks ago, Novatek announced that its Yamal LNG project, it first in the Arctic, had shipped 10 million tons of LNG since its first train opened on December 5, 2017.
By Tim Daiss for Oilprice.com
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Comments
The evidence that US sanctions against Russia have failed is manifest.
• Russia is now the world’s energy superpower.
• The Russian economy grew by 2.3% in 2018 despite the sanctions.
• The diversification programme since the imposition of the first US sanctions in 2014 has
enabled Russia to reduce its budget’s dependence on oil and gas imports from 68% in
2014 to under 40% in 2018. The Russian economy can live now with an oil price of $40 a
barrel or less.
• Nord Stream 2 and the Turk Stream gas pipelines which will carry Russian gas supplies to
the EU under the Baltic and the Black Seas are unstoppable. When completed by the end
of this year, Russia’s dominance in the EU gas market will be unassailable.
• Russia currently wields immense influence on the global oil market and prices by virtue of
being the world’s largest producer of crude oil and also through its association with OPEC.
• Russia’s sovereign wealth fund is to surpass 7% of GDP this year. So Russia can, in effect,
finance the Arctic LNG2 project on its own. The Arctic LNG 2 project with an estimated
price tag of US$35 billion is expected to start operations in 2022-2023. At full capacity, it
will produce 19.8 million tons of LNG per year.
• US sanctions have consolidated the Russia-China strategic partnership financially and
economically.
• Russia has supported the crude oil futures contract in Shanghai (the petro-yuan) from the
first day of its of launch with the sole purpose of undermining the petrodollar’s hold on the
global oil market and also the US financial system.
• Russia and China have been instrumental in undermining US sanctions on Iran. They will
try to undermine US sanctions on Venezuela.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London