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This Week in Energy: What Does Russia Really Want?

This Week in Energy: What Does Russia Really Want?

As Ukraine continues the downward descent into violent crisis this week, Russian President Vladimir Putin continues to baffle the world’s leaders. On 7 May, Putin spoke publicly about Ukraine, leaving everyone guessing at his intentions in urging pro-Russian separatists in Ukraine’s east to postpone referendums they were planning to hold this weekend.

There is a purposeful confusion coming out of Moscow, as Putin openly supported upcoming presidential elections in Ukraine to be held on 25 May, while the Russian foreign minister has harshly criticized the elections. There is no foreign leader today who can go to mental bat with Putin.

On Thursday, Oilprice.com’s special guest contributor, Ukraine oil and gas expert Robert Bensh, gave a televised interview to CNBC, stating: “Throughout the crisis, Russia has sought to mask its intentions and has been engaged in a sophisticated PR campaign, often saying one thing while doing and preparing for another.”

So what does Russia really want? According to Bensh, Moscow wants—and needs—control of the pipeline system. “[…]If you have control of the pipeline system and you are able to bring your product into Europe, you have a compliant Europe, you have a compliant Ukraine. And this is what Putin is going after.”

Elsewhere, we are keeping a close eye on Turkey, and Prime Minister Recep Tayyip Erdogan, who is busy convincing foreign investors that the unexpected victory of his Justice and Development Party (AKP) in March local elections, spells certain stability.

However authoritarian his moves have been—and make no mistake, they are—there may possibly be an element of stability to be found in this. It may not last forever, but for now, Erdogan has cemented his authority. It is unfortunate that he has had to do this by removing personal freedoms.

But we’re also paying attention to the approaching anniversary of the Gezi Park protests, when things really started to go bad for Erdogan. That anniversary is on 31 May, and it will take place against the backdrop of the trials of 255 people involved in the protests last year, during which at least eight people were killed and more than 8,000 injured.

Related Article: Russia Claims Ukraine’s Black Sea Oil And Gas Bounty

The defendants face vague charges of violating demonstration laws, injuring civil servants and damaging property. They could face up to 12 years in prison if convicted. This would be a good time for Erdogan to throw the protesters a fig leaf.

Investors aren’t entirely convinced, but Turkey remains optimistic that they will be. As Bloomberg reports: “The country’s current-account deficit has risen to almost 8 percent of gross domestic product -- bad enough to earn Turkey a place among Morgan Stanley’s Fragile Five, the bank’s moniker for the emerging-markets countries whose economies are most vulnerable to higher world interest rates.”

The agency also notes that “from May 30 through the end of February, foreign investors sold $500 million more in Turkish stocks and $2.8 billion more in Turkish bonds than they purchased, according to data from Turkey’s central bank.”

From an energy perspective, however, investors should be attracted at least by the countries potential to become the key oil and gas hub linking Europe and the Middle East, for which getting their first—when things aren’t in place yet—is key to getting their at all. The only question is whether Erdogan means stability or instability. Western investors need some more assurances and a clear demonstration of legitimate longevity.

This week’s Oil & Energy Insider is a must read for energy investors. Find out more about how you can start a 30 day free trial here.

James Stafford
Editor, Oilprice.com




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