In the almost five months since Russian “protectors” appeared in Crimea, conventional wisdom, sometimes from Moscow/Londongrad PR companies, sometimes from their opposites on the US right, continues to propose a view of Europe powerless in the crises due to a dependence on Russian natural gas.
That may have been the case in 2009, but this time it’s different. What’s especially interesting is that it’s different for reasons mostly unrelated to the shale revolution, still contained in North America and not exporting any molecules to anywhere else until 2015/16.
Energy dependency goes both ways. While 130 Billion Cubic Meters of Russian gas flows out of the pipes to the EU each year, dollars and euros flow out the other end. The pipeline system that flows from deepest Russia is often very leaky not only in methane, making European shale attractive from a CO2 angle, but also in dollars. At a price of about $390 per thousand cubic meters 130 BCM results in an astounding billion dollars a week coming out of the pipe the other end. Just as with methane, money leaks out all over the place as anyone who has visited either GUM in Moscow or Harrods in London sees every day. At a billion dollars a week, the money Gazprom pays to Ketchum PR for only one example, is a drop in the bucket.
Readers of ThinkRussia.com could be forgiven for believing BMX biking, advances in nanotechnology, and the opening of a Russian pancake house in New York are the biggest headlines from the ex-Soviet state.
What’s missing from the English-language site, aimed at foreign investors, is anything on the violence in Ukraine, Russian President Vladimir Putin testing his military’s combat readiness, or his government’s crackdown on the press.
ThinkRussia.com is run by Ketchum Inc., a New York-based public relations firm that has been helping Putin’s government burnish its image since 2006. The unit of ad giant Omnicom Group (OMC:US) Inc. received more than $10 million from the Russian government and OAO Gazprom (OGZD), the state-controlled natural gas exporter, in the year through November 2013, U.S. government data show
A key part of the narrative is to paint Russia as reliable partner, which is certainly true, but the subtext being the EU needs Russia too. UK libel laws prohibit pointing out the money trail, but I don’t think there’s any secret Russian financed anti fracking movement as the secretary-general of NATO recently pointed out. It’s much more subtle than that and follows more traditional, if circuitous, routes, to journalists, politicians, academics, City PR and Westminster think tanks who promote the doubting Thomas school of shale so attractive to those who don’t want to upset any golden green apple carts.
Back in April, shortly after I wrote that nominations had closed for European Shale Gas Man of the Year due to Putin’s commanding lead, I pointed out some realities about how dependent (or not) we are in 2014/15 on Russian gas supplies. So much is happening in world energy that the idea that Europe is locked in a dysfunctional relationship with Russia over gas and money, also needs to be updated.
Over the past couple of months, prices have continued to crash getting to the point where many LNG export project managers are getting nervous. UK day ahead prices are now in the area of 35 pence per therm/ $6MMBTU/ $235 per thousand cubic meters. A storage overhang from last winter’s reduced heating demand, replacement of gas with renewables and the exporting of European heavy industry to Asia and a sudden surge of global LNG capacity are the key drivers. Winter prices are higher of course at 56p for January gas, but that’s still a 15% drop year on year.