So what’s the latest on Eastern Europe then?
The story goes that the Ukraine and Europe’s dependency on Russian gas is what’s giving Russia its political immunity. Nobody is willing to risk seeing Russia restrict its gas supplies, so the semi-invasion of Crimea is A-ok. But if the Americans got rid of their restrictions on exporting natural gas from their booming gas fields, they could send some to Europe. That means the dependency on Russia could wane, leaving Russia without its trump card. Europe might be willing to go toe to toe with the Russians.
Of course, it would take several years to get the infrastructure in place and begin delivering meaningful amounts of gas to Europe. Not to mention the costs. However, both the Europeans and Americans are getting sick of Russia’s impunity. The Russians cut exports of gas to the Ukraine in 2006 and 2009, so the issue of gas is hardly a new one. And it’s one that could last much longer if someone doesn’t provide an alternative source of gas eventually.
The American House Energy and Commerce Committee chairman Fred Upton wants Obama to put the gas pedal to the metal ASAP: ‘The Department of Energy’s approval process for LNG exports is unnecessarily putting our allies at the mercy of Vladimir Putin.’
That’s preferable to what we usually hear from Republicans: ‘The constitution’s requirement that only congress can declare war is unnecessarily putting our allies at the mercy of Vladimir Putin,’ but it’s still not ideal. A resource comeback would be even better than a verbal or violent one. It could balance out European dependency on Russia and allow the allies to play cold war with an advantage. Obama may earn his Nobel Peace Price yet, unlike Putin, who isn’t likely to win, despite being nominated.
Of course, natural gas companies with US operations are thrilled. Selling gas at international market prices could more than double profits. Although prices would likely adjust to the surge in supply. Dan Denning, who has been onto the Australian gas story for years, reckons the Americans could restage a sort of West Berlin airlift rescue by opening up their gas market. But he’s sceptical it will work out well in a timely fashion because of the infrastructure demands.
On the ground, things are still hotting up, despite a supposed military draw down by Putin as reported in the media. The Russian Navy sunk a retired ship near a Ukrainian port to try and stop the Ukrainian Navy ships from being able to sail. And the Crimean Parliament voted to become part of Russia, telling Ukrainian soldiers stationed within its borders to go home or become Russian. Quite a few took a walk.
Geopolitical thinkers reckon the Crimea incident isn’t about Crimea. It’s about what message the West sends to anyone fighting over territorial disputes. China’s ambitions and Japan’s nationalism come to mind. So the world’s response is going to be crucial.
Let’s hope it’s nothing but hot gas.
for The Daily Reckoning Australia