Gazprom, Iran and EU Energy

Well just in case the Iranian situation wasn’t difficult enough in and of itself (or here), there are always some around who will seek to take short-term benefit from the temporary embarassment of others. So this week, as June delivery oil prices spiked up around the 74 dollar a barrel mark, it became just a little bit clearer who might be doing what.

Earlier in the week it was China, with Hu Jintao’s visit to Washington in the headlines, who was making the running:

China’s close relationship with Iran’s defence industry will come under the spotlight when Hu Jintao arrives in Washington on Thursday, with at least one major state-owned conglomerate sending a delegation to lobby for the lifting of sanctions against Chinese companies allegedly involved in weapons proliferation….

the visitors include representatives from China North Industries Corporation – Norinco – a company singled out in 2003 for the most punitive US sanctions against a Chinese entity for its alleged aid to Iran’s ballistic missile programme.

All exports by Norinco and its subsidiaries to the US – believed to run into hundreds of millions of dollars – were banned. ….Norinco’s status highlights what American officials describe as a difficult balancing act in penalising Chinese companies for helping Iran’s military industry, while seeking Beijing’s support for internThe tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.ational sanctions aimed at curbing the Islamic republic’s nuclear programme.

Yesterday, it was Russia’s Gazprom who, determined not to be left out of the act, warned EU member states against blocking its ambitions to expand in Europe, threatening it could shift gas supplies to North America or China.

The FT cites Gazprom representatives as saying “attempts to limit Gazprom’s activities in the European market and politicise questions of gas supply would not meet with good results” and explains that:

The comment followed the Financial Times revelation that the UK government had considered changing merger rules to block a potential Gazprom takeover of Centrica, Britain’s biggest gas supplier.

Ferran Tarradellas Espu-ny, a Commission spokesman, said Gazprom’s threat underscored the EU’s “need to diversify both the origin of our supplies and our supply routes”.

Earlier this year Gazprom sparked an international crisis when it briefly cut supplies to the EU in a dispute with Ukraine.

The FT also quotes France’s industry minister François Loos, as saying that “there was no concrete reason for the most recent sharp rise in the oil price”. This is balderdash. The looming issue with Iran looks like it could turn extremely serious at some point, secondary players like Russia and China are, as I am suggesting, already positioning themselves to try and take some pickings, supply conditions are anyway extremely tight, and the hurricane season in the Gulf of Mexico has yet to get underway. I think it is clear that the EU has a major energy supply problem, that our most vulnerable economies (like Italy, or Portugal) could be knocked flat out by a sudden sharp hike in prices (or restriction in supply), and that makes us vulnerable to blackmail from a variety of quarters (something of which the secondary players are already all too well aware) . Methinks that our collective response here falls well short of what is required.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

5 thoughts on “Gazprom, Iran and EU Energy

  1. I don’t think we should get too worried about the latest Gazprom statement, or at least not more worried than we already are by them!

    Let’s face it: even if they might not manage to buy up companies in EU countries, they have most of the gas firms in Germany, Austria, Hungary etc. very much in their sphere of influence as it is. Gazporm’s profits are massive, the price of gas in Europe is high and demand is rising.

    Further, shipping gas to the USA would need investment in LNG facilities – costly and they take a long time to build.

    The threats to Europe in terms of energy supply are very real and for sure are not going to go away… I think Italy might actually be a bit better placed in the medium term – for gas they are at least investing in plenty of LNG terminals and that will reduce dependence on Russia.

    There has been plenty of good will to try to develop a better EU energy policy, but I am still far from convinced that the good will might turn into decent and positive action.

  2. By the way who is worried. Your good will surely develop a better EU energy policy and will turn into positive action.
    Hope for best!!!!

  3. By the way who is worried. Your good will surely develop a better EU energy policy and will turn into positive action.
    Hope for best!!!!

  4. Methinks that our collective response here falls well short of what is required.

    As always, you don’t tell us *what* the collective response should be. Enlighten, please?

  5. That is the big problem. If he knew the answer he would have written the story differently.

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