In the ever-turning world of oil, natural gas and geopolitics, it seems that Russia keeps coming up short – in spite of being the world’s leading oil producer and Europe’s top natural gas supplier.
Even more troubling for Moscow is that much of its recent problems come from the U.S., which has hit the country’s oil and gas industry hard.
The U.S. and its Western partners first levied sanctions against Russia, including its energy sector, over Russia’s 2014 annexation of Crimea, tightening restrictions on major Russian state banks and corporations, including blacklisting dozens of Russian officials, oil and gas industry executives and energy firms.
Russian banks and Russian energy giant Gazprom’s ability to secure long term funding in U.S. dollars have also largely been blocked since sanctions were first enacted. Adding more pain, the U.S. and EU also banned exports of services and technology to Russian state oil firms engaged in Arctic and deep-water and unconventional oil and gas exploration and production.
Due to sanctions and the inability for Russian energy companies to obtain funding in U.S. dollars, Russia often has to turn elsewhere for backing, including costlier Chinese funding. Moreover, sanctions have been renewed by both the Obama and now the Trump administration, further complicating Russia’s energy project ambitions.
However, when Trump renewed sanctions last year it was a reluctant act, mostly driven by political expediency and mounting pressure from both Democrats and Republications. At the time, the president was still hoping for better relations with Russia, amid his campaign rhethrotic of warming ties with Vladimir Putin.
Fresh sanctions (again)
Now, all of this has been turned on its head. Not only will previous sanctions likely remain in place for the foreseeable future, but the Trump administration on Thursday levied fresh sanctions against Russia over its alleged meddling in the 2016 U.S. presidential election – an embarrassing form of admission for the president given that Russia had apparently worked behind the scenes to help him win the White House, ironically in hopes of better ties with Washington. Related: U.S. Shale Drillers To Become Profitable For The First Time
“In enacting the sanctions, the administration is finally meeting a congressional mandate to impose measures punishing Moscow for its cyber intrusion,” a CNN report said on Thursday. “The delay had led to questions over President Donald Trump's willingness to punish Moscow. The new measures, however delayed, amount to the most stringent punishment yet by Trump for Russia's election interference.”
The Trump administration also disclosed a Russian attempt to penetrate the U.S. energy grid and said the new sanctions (including against Russia’s Internet Research Agency and individuals indicted last month by special counsel Robert Mueller) would punish actors for their participation in other major cyberattacks.
In a geopolitical tit-for-tat, Moscow said it will respond to sanctions by expanding its own "blacklist" of Americans. Russia will use "the principle of parity" as it responds, Russian Deputy Foreign Minister Sergei Ryabkov said on Friday.
Now, it seems that Russia doesn’t want any of this to impede its liquefied natural gas (LNG) export ambitions. Russian LNG exporter Novatek PJSC said on Friday that Russia’s political tensions with Europe and the U.S. should not be a reason to denounce the nation’s energy supplies, which are just as essential for the global market as anyone else’s supplies.
“We don’t understand why cargoes now have a DNA attached to them,” Mark Gyetvay, Chief Financial Officer for Novatek, said in a Bloomberg television interview on Friday in London. “Why all of a sudden we got to this point when there is good and bad gas,” with “good gas coming from everywhere else and bad gas coming out of Russia,” he said.
“We’ve been vilified for delivering gas to the market.”
Gyetvay’s comments also comes amid growing tension with the U.K. and many of its European allies over a nerve agent attack on British soil, which prompted the U.K. to retaliate by expelling Russian diplomats and seeking alternatives to Russian gas, including LNG produced by Novatek.
However, with Washington’s sanctions and a rift with the U.K. notwithstanding, Russia would still have a long way to go before achieving Vladimir Putin’s stated goal of being “the top” global LNG exporter.
The three countries now at the top of the LNG exporting hierarchy Qatar, Australia and an emerging U.S. simply have too much of a head start in project development, liquefaction capacity, and funding options to name a few advantages, for Russia to seriously contend any time soon for the top spot.
Now, as Putin and company continue to play an increasingly aggressive geopolitical role, those ambitions are even further out of reach. And this is something, that for some reason, Moscow can’t seem to comprehend.
By Tim Daiss for Oilprice.com
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