Russia's alternative pipeline route, bypassing EU's proposed Nabucco pipeline, one step closer.

[Dover]

Duelling Pipelines


Slovenia Signs Up to South Stream
16 November 2009


Prime Minister Vladimir Putin won Slovenia’s approval Saturday for the South Stream pipeline, undermining European Union efforts to reduce dependency on Russian gas and clearing the way for the project to start.

The seal of approval is the latest victory for the Kremlin as it seeks to counter the long-delayed Nabucco pipeline, which is backed by the EU to curb its energy dependency on Russia by pumping gas from the Caspian and the Middle East.

Slovenia’s approval brings the South Stream pipeline a step closer to being built, though its backers — Gazprom and Italy’s Eni — still have to raise billions of dollars to finance the project.

“We have now signed deals with all the European partners needed for this project to be completed,” Putin told reporters at his Novo-Ogaryovo residence outside Moscow after signing the cooperation deal with his Slovenian counterpart, Borut Pahor.

..snip..

Slovenia joins Bulgaria, Serbia, Hungary and Greece as a partner in the onshore section of South Stream. The 900-kilometer pipe, due to deliver gas by the end of 2015 and being built in partnership by Gazprom and Eni, will run under the Black Sea to the Balkans, where it will split into northern and southern routes.

With a capacity of 63 billion cubic meters per year, the pipeline is expected to cost between 19 billion and 24 billion euros ($28 billion to $36 billion). It is due to become operational in 2015.

“Thanks to Slovenia’s participation, Russian natural gas will reach the Italian border, the main target market for the project,” a Russian government source, who requested anonymity, told reporters.

cont'd

http://www.themoscowtimes.com/business/article/slovenia-signs-up-to-south-stream/389484.html


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Windfall From Iranian Fray

To the surprise of many, the Russian government last month decided against supporting sanctions on Iran. But despite President Dmitry Medvedev’s posturing, Russia’s current opposition should not be so surprising.

Russia’s opposition stems partly from a simple calculation: It has an immense amount of money to make if the tension regarding Iran continues and a substantial amount to lose if a rapprochement occurs. In light of Russia’s recent realization that its financial resources do have their limit, analysts should expect economic considerations to play a larger role in foreign policy going forward.

One factor above all influences Russia’s near-term stability: the price of oil. The financial crisis has caused a significant contraction of the country’s economy, and the state’s preferred countermeasures have not come cheaply. Over the past year, the Central Bank has spent roughly $200 billion defending the ruble. The government has provided $50 billion to support companies with large external borrowings, as well as $40 billion to its banking sector. Throughout the first nine months of this year, the government has run a budget deficit of approximately $100 billion, or 11 percent of its gross domestic product excluding oil and gas revenue. In short, the government has been burning through its cash at an alarming rate. Its reserves have fallen from their peak of about $600 billion in 2008 to $433.9 billion today. In the event of significant further economic difficulties over the next two years, the government could find itself lacking ammunition if it continues spending at its current rate. As a demonstration of its desire to increase its resources, the government recently announced its first long-term bond auction since 2000.

Meanwhile, the consistently high price of oil has buoyed the economy...

..snip..

While there have been several geopolitical events affecting the price of oil, the Iranian nuclear impasse has been a significant contributor to the commodity’s dramatic price swings. Every time a new incident erupts, Russia reaps the reward of the increased oil price. The upside is even higher for Russia if tensions were to result in an actual conflict and Iranian officials were to make good on their pledges to block the Strait of Hormuz. Whether or not this could be accomplished is subject to debate, but any effort to block the strait would certainly cause a dramatic spike in the oil price. A 2006 Standard & Poor’s analysis of a potential closing of the strait forecasted oil rising to $250 per barrel, netting Russia a windfall upward of $400 billion. This is not to imply that Russia would actively attempt to precipitate a conflict, but there is very little downside for it if one occurs.

The Kremlin thus faces the following decision matrix: Assuming the Iranian situation influences the oil price upward by a conservative estimate of roughly $3 or $4 a year, Russia stands to gain $6 billion to $8 billion, not to mention any benefits to the price of natural gas and the maintenance of its gas supply monopoly to Europe. A thaw between Iran and the West stands to increase the downward pressure on the price of oil, in addition to any lost revenue if Iran becomes a significant gas supplier to Europe. Given this calculation, Russia’s position regarding sanctions seems much more logical. ..cont'd

http://www.themoscowtimes.com/opinion/article/windfall-from-iranian-fray/389482.html