pipeline politics

Eastern Mediterranean gas: A new diplomatic opportunity?

Source: http://www.aljazeera.com/indepth/opinion/2014/04/eastern-mediterranean-gas-new-d-201441073115698731.html

>Recent gas finds offshore Cyprus and Israel have led to suggestions that Eastern Mediterranean gas could supply Europe via Turkey along the so-called Southern Gas Corridor, e.g., through the Trans-Anatolian Pipeline (TANAP). Assuming that the various challenges to this proposal can be overcome, it could inject a positive dynamic into the troubled Turkey-EU relations by enhancing Turkey’s role as a transit country for European gas supplies and thereby helping the EU reduce its dependence on Russian gas.

This is a particularly huge deal due to recent indications that Russia might curtail its shipment of natural gas to Ukraine over debts held by the nation which are long overdue. My next post will go into further detail.

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%16 of the EU’s gas flows through Ukraine [1]. Russian President Vladimir Putin has urged European leaders to quickly help Ukraine settle its gas debt to Russia, or possibly face a shutdown of Russian natural gas supplies flowing though Ukrainian pipelines to the continent [2].

Russian energy giant Gazprom will be compelled to switch over to prepaid gas deliveries to Ukraine or completely cut off natural gas supplies [3], should the country further violate its terms of payment, Russian President Vladimir Putin wrote Thursday in an open letter to 18 European leaders.

Turkey has been trying to get on the EU’s good side for decades. They continue to seek membership with NATO and they want to be considered a member of the European Union. Turkey has also taken a military-backed stand against Assad in Syria. I wrote a blog post several months ago titled Syria: The Economics of Intervention, in it was outlined one possible interest motivating Russian and American interventionism in Syria: energy [4]. My next post will contain an excerpt from that entry.

1. http://fuelfix.com/blog/2014/03/14/study-16-percent-of-europes-gas-flows-through-ukraine/
2. http://www.aljazeera.com/news/europe/2014/04/putin-ukraine-gas-debt-could-affect-europe-2014410172010575368.html
3. http://en.ria.ru/russia/20140410/189148364/Putin-Says-Further-Violations-by-Ukraine-Will-Compel-Russia-to.html
4. http://priceofliberty.tumblr.com/post/60108819566/syria-the-economics-of-intervention

Pipelines are not merely for transporting critical resources such as oil and gas; they serve as powerful political tools which grant the host country immense leverage over the affairs of business and politics relating to the transportation of that energy. Each country a pipeline passes through gains an enormous standing as the middle man in the flow of these resources.

Yet without proper access to the market, a pipeline alone is not enough to bestow this invaluable bargaining chip. A pipe must reach a port in order for the resources to actually ship world wide and reach their intended markets. The Caspian Basin is one of the few non-OPEC sources of oil and natural gas, and there is a lot of it. The world’s second largest oil reserves are in Turkmenistan and the surrounding regions of the Caspian Basin [5]. Afghanistan acts as the bridge between Turkmenistan and Pakistan’s Indian Ocean ports. The Taliban has consistently denied US oil companies a contract to build an oil and natural gas pipeline across Afghanistan (a decade of war can do that), granting it instead to the Bridas Oil Corp. of Argentina, who shares a border with Brazil, an emerging member of the BRIC (Brazil, Russia, India, China) economic bloc [6].

5. http://www.eia.gov/countries/cab.cfm?fips=TX
6. https://en.wikipedia.org/wiki/BRIC


The political and cultural standoff between the United States and Russia didn’t begin in Syria, and it won’t end with Ukraine. Russia is about to break the petrodollar. They are the largest oil producing country in the world and they recently reached an agreement with Iran (the fourth largest) to begin selling oil and gas in Russian Rubles [7]. The BRIC nations are supporting this move, and a number of them (like China [8] and India [9]) have made other similar agreements. Russia and North Korea also agreed to settle payments in Rubles in a new trade pact [10].

If this actually happens the US will certainly lose its position as the world’s reserve currency and the US economy will tank all the sooner, especially when you combine this with the recent revelations that Wall Street is rigged [11]. But a rigged market is still a market of some kind, right? Just two days ago Goldman Sachs warned of an economic ‘dip’ within the next year [12]. However, it seems like JPMorgan couldn’t wait that long as their revenues dropped sharply from their own estimates [13].

7. http://www.reuters.com/article/2014/04/02/iran-russia-oil-idUSL5N0MN4UT20140402
8. http://rt.com/business/china-russia-gas-deals-467/
9. http://www.zerohedge.com/news/2014-03-25/first-russia-locks-china-holy-grail-gas-deal-now-rosneft-prepares-mega-deal-india
10. http://en.ria.ru/business/20140328/188842736/Russia-North-Korea-Agree-to-Settle-Payments-in-Rubles-in-Trade.html
11. http://www.npr.org/2014/04/01/297686724/on-a-rigged-wall-street-milliseconds-make-all-the-difference
12. http://www.zerohedge.com/news/2014-04-09/goldman-warns-67-odds-10-market-decline-next-year
13. http://www.forbes.com/sites/halahtouryalai/2014/04/11/jpmorgan-chase-misses-estimates-as-revenue-and-profit-drop/


Corrupt financiers like Stephen Cohen are finally being prosecuted and convicted [14]. When the foremost international finance and banking establishments such as JP Morgan, Deutsch Bank, Citigroup, and the Royal Bank of Scotland are implicated in not one, but two international multi-trillion dollar fraud, embezzlement, and corruption charges…
[15][16]
is it any wonder that high-profile banking executives begin to drop like flies? You’re either killing yourself because you’re afraid or you feel you have nothing left to live for…. or you’re being targeted and you are found with multiple ‘self-inflicted’ nailgun wounds.

The socio-economic and political playing field is shifting dramatically as the United States continues to desperately cling on to the vestiges of its international stranglehold. It’s no wonder Federal agents are occupying Clark County, Nevada. With the price of beef is skyrocketing [17] (due to experiencing a massive cattle shortage [18]) the United States is doing what any reasonable authoritative government would do before an impending economic downturn: nationalize resources.

So what does this all have to do with Ukraine? The top general of NATO suggested yesterday that he may send American troops to Eastern European members of the military alliance [19]. After recent NATO imagery revealed a massive Russian military buildup along the Ukrainian border [20], it is safe to say the NATO intervention wasn’t a suggestion — it’s a foregone conclusion.

[Final post, remaining sources to follow]
14. http://www.marketwatch.com/story/judge-accepts-guilty-plea-in-sac-insider-trading-case-2014-04-10?siteid=rss&rss=1
15. http://www.aljazeera.com/news/europe/2014/02/uk-bankers-charged-rate-fixing-scandal-2014217124246148104.html
16. http://www.usatoday.com/story/money/business/2014/04/05/foreign-exchange-investigations-expand/7252681/
17. http://www.latimes.com/business/la-fi-beef-prices-20140406,0,2966247.story#axzz2yOoTUjta
18. http://wnep.com/2014/02/10/cattle-shortage-causing-spike-in-beef-prices/
19. http://hosted.ap.org/dynamic/stories/E/EU_NATO_UKRAINE?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-04-09-16-37-34
20. http://priceofliberty.tumblr.com/post/82384831498/nato-images-reveal-russian-forces-on-ukraine-border