Markets are spiking because of fears Putin will use energy as a weapon
European energy markets are worried about the impact Russia's invasion of the Crimean peninsula, and the threat it poses to the rest of Ukraine, could have on the continent's supply of natural gas. But past is not always prologue -- and while Russia has used natural gas as a cudgel scores of times since the end of the Soviet Union, its ability to cow Europe by withholding energy exports is not what it used to be. In fact, Russia and gas giant Gazprom depend as much on Europe as Europe does on them.
Natural gas prices in Europe rocketed Monday as the military and diplomatic standoff in Ukraine escalated. Officials from Ukraine's gas company said Monday that there have been no physical supply disruptions since the Russian military incursion into Crimea, but gas prices jumped 10 percent in trading in the U.K. and the Netherlands, and more than 8 percent in Germany. Traders focused on a pair of simple facts: Russia's gas exports to Europe reached record highs in 2013, and about half of that was shipped through transit pipelines that crisscross Ukraine.
Worries over the fate of those natural gas supplies are certainly understandable. Russia has shown in the past twenty years how eager it is to use energy exports as a weapon, cutting off gas supplies at one time or another more than 40 times. Russian neighbors such as Belarus, Lithuania, Moldova, and Azerbaijan have all faced threats of Russian energy cutoffs as they flirted with pro-European policies in the past few years. Lithuania's prime minister accused Russia of waging "economic war" last September after Moscow threatened gas supplies and interfered with cross-border trade, apparently to punish the Baltic country for seeking closer ties with other EU countries.
Ukraine itself suffered a pair of painful gas shutoffs in 2006 and 2009 because of contract disputes with Russia, both of which affected downstream European customers. Ukraine has dramatically increased the amount of gas it is buying from Russia in recent days, but that seems motivated less by a desire to fill gas storage facilities and more by the fear that Moscow will make good on threats to jack up gas prices for Ukraine in the second quarter of this year. Moscow slashed gas prices for Ukraine in December as part of its effort to woo then-President Viktor Yanukovych away from Europe and toward Russia.
http://www.foreignpolicy.com/articles/2014/03/03/gas_attack
= new reply since forum marked as read
