Penn Wealth Publishing

2018.03.25 Penn Wealth Report Vol 6 Issue 01

Issue link:

Contents of this Issue


Page 17 of 29

18 Penn Wealth rePort voluMe 6 issue 01 25 Mar 2018 Penn Wealth RePoRt Copyright 2018. All Rights Reserved. Weekly business rePort us slaMs gerMany over alloWanCe of neW russian natural gas PiPeline Several facts are certain with respect to Russia and Europe. Vladimir Putin's Achilles heel is the ability to sell Russian energy at the highest possible price—his military buildup plans live or die on energy revenue. Russia wants to either control Ukraine or destroy its economy. Putin will use energy as leverage to break European support for anti-Russian forces in the Baltic region. It is under this backdrop that a storm is brewing over a new natural gas pipeline known as Nord Stream 2. Right now, the fledgling democracy in Ukraine receives (or is due) roughly $3 bil- lion per year in transit payments for the nearly one-half of all gas flowing from Russia to Europe. To put that amount in perspec- tive, it is just shy of Ukraine's annual defense budget. A new, 760-mile-long gas pipe- line known as Nord Stream 2 would bypass Ukraine by traversing the Baltic Sea and entering Germany directly. Construction of this pipeline would fly in the face of Europe's commitment to Ukraine and existing EU sanctions on the developer of Nord Stream 2, Russia's Gazprom. As of right now, only one European country (not counting Russia) supports the construction of this pipeline, which could be ready in 2019: Germany. And Germany risks alienating its closest allies and angering developing Eastern European countries like Poland and Slovakia by its continued support. The chief US State Department official for the region, A. Wess Mitchell, had some harsh words for Germany's support of the proj- ect, expressing hope that a new coalition government (with a very weakened Merkel) would scrap the plans. Mitchell also praised Denmark for passing a law blocking pipelines from traversing its waters which are deemed a threat to the country's security. Proponents of Nord Stream 2 argue that Denmark cannot stop the project, as it previously allowed the original Nord Stream pipeline to be built. Strategically, Nord Stream 2 would double Russia's export capacity to Europe at a time when the European Commission is looking to diversify away Putin's power over the con- tinent's energy needs (Russia now supplies one-third of all gas used in Europe). This also comes at a time when the United States is finally exporting liquefied natural gas to the continent. In the end, it will probably be Merkel's weakened position in Germany that dooms the project. The chancellor has been forced to form a coalition with a number of dispa- rate political groups, including the Greens, which vehemently oppose the pipeline on environmental grounds. Green Party lead- ers have stated that Germany must not use a new pipeline as a crutch to slow the adop- tion of renewable resources, especially as Germany completely phases out its use of nuclear power. Merkel's disastrous showing in the 24 September national elections may end up being the best strategic gift Europe has received in years from a security stand- point—and Putin's worst nightmare. the iea ConfirMs it: us shale ProduC- ers are oPeC's biggest threat The Paris-based (i.e. not a US shill) International Energy Agency has confirmed what we, as Americans, had hoped was true: the US energy renaissance, specifically shale production, will continue to be a nightmare for OPEC. Ever since the Yom Kippur War in 1973, it has been the goal of (nearly) every US administration to make America an energy- independent nation. Today, we can truly say that goal has been achieved. In its latest monthly report, the IEA stated that the re-ramping up of US shale produc- tion will make OPEC "not quite so happy" in 2018. The agency sees an increase of 1.6 million barrels per day in 2018 by non-OPEC nations, completely undermining the organi- zation's plan to raise oil prices by cutting their members' production levels. This follows their failed attempt to push US shale producers to the brink of extinction by increasing produc- tion in 2016. Sweet revenge. For a taste of what hell OPEC put the US consumer through in the early 1970s, mem- bers can click the link to read the story of The First Great American Oil Crisis. euroPe energy CoMModities The Nord Stream 2 belies the EU's stated strategy of reducing its dependence on Russian natural gas. Photo courtesy: Gazprom US gas lines in the early 1970s

Articles in this issue

Archives of this issue

view archives of Penn Wealth Publishing - 2018.03.25 Penn Wealth Report Vol 6 Issue 01