Cold war Intrigue At New Europe Pricing

Russia and Natural Gas
2007-07-19 - Sam Hopkins
It seems like the French and British will always find something to tussle over. Out of their colonies in Africa and the Middle East, now the two European giants are fighting for favor with Russia. France is winning.
It involves intrigue worthy of Tolstoy, but with key elements unique to our age of fossil fuel scarcity.
You may remember the ghastly face of Alexander Litvinenko, the former KGB spy who, as he lay bald and weak from poisoning with highly radioactive polonium-210 in late 2006, accused Russian President Vladimir Putin of causing his death.Now, Scotland Yard think they have their man, and they want Russian national Andrei Lugovoi extradited to the UK for questioning as the main suspect. Lugovoi, also a former KGB operative, was the last person to meet with Litvinenko and, crucially, their meeting was a meal where Lugovoi could have dropped the lethal dose into his target's bangers and mash...or maybe it was borscht.Russia says "nyet," and a full diplomatic firestorm is now underway. The UK announced this Monday that it would officially expel four Russian diplomats unless Lugovoi is handed over. Russia has vowed "targeted and adequate" measures to retaliate. "We are serious people," Russian Ambassador to the UK Yuri Fedotov told the press! .
On Thursday, Russian foreign ministry officials told news agencies that they would expel four British diplomats and will stop issuing visas to British officials.
There are also new accusations that Russian agencies were behind a man sent to England to kill exiled Putin critic and millionaire Boris Berezovsky in June. The suspect in that case, who was tracked by British security services after arriving at Heathrow, was deported.
If they're serious, maybe the best poison pill Russia can slip the Brits is the one they've already been using-their control over the world's largest single-country natural gas supply. In early 2006, Soviet vestige and longtime Communist Party organ Pravda referred to Russia's "triumphant conquest of the world" through its state-controlled gas export monopoly Gazprom. The same article zeroed in on the UK as a major target for resource ransom, and not long afterwards a Siberian saga kicked into full gear.Gazprom promised 10 billion dollars in investments in each of the coming years, also using a worldwide energy supply peak scenario to institute price hikes in neighbors Ukraine (a 300% increase), and Belarus (whose prices tripled on the Druzhba ("friendship") pipeline between that country and Russia).Major UK-based energy firms Royal Dutch Shell and British Petroleum have been the hapless objects of Russian maneuvering as Gazprom ri! ses. Back in the early post-Soviet nineties, natural gas prices were low (about 1/4 of recent futures prices around $8 per million Btu) and liquid capital for investment in Russia's gas-filled but very icy northern climes was as frozen as the tundra. So the Kremlin, under transitional leader Boris Yeltsin, approached firms like BP with favorable deals so enticing that they could be justified even with a low market return in the near term.
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That picture has changed, and all foreign-run exploration projects have effectively been commandeered over the past years, including major undertakings on Sakhalin Island and in the Shtokman offshore gas field in the Barents Sea.On Sakhalin, the government cited damage to streams that were home to salmon as cause for seizure of a majority stake in a joint Gazprom-Shell exploration and production plan last December.
Yet Shell signed a cooperation agreement with Russian national oil producer Rosneft this July, confirming Shell's desire to stay in Russia under less appetizing terms, and also confirming Moscow's need to retain foreign expertise and resources.
In June of this year, the 2-trillion cubic meter Kovytka field in Siberia changed hands from BP's venture TNK-BP over to, you guessed it, Gazprom.
Despite the acrimony in London over British businesses' mauling by the Russian bear, the financial ties between Moscow stretch far beyond the fact that the two cities are tops on the list of the world's most expensive cities for expatriates. There is the listing of Gazprom itself on the London Stock Exchange, the offering of state-controlled bank VTB (the world's largest IPO this year raising $8 billion US), and the pending share float of the world's largest aluminum company, RUSAL, on London's primary exchange in the near future.
That listing is also expected to draw $8 billion, proving that Russian SOEs (state-owned enterprises) can still find favor in English eyes even if the assets being floated used to be in John Bull's very hands.
On the other side of the English Channel, the leaders of Total SA France, that country's national resource champion, are faring better with the Russians, who have looked to France with admiration since the time of Peter the Great.