If you think Russia is a trustworthy supplier of crude oil and natural gas, think again. That’s especially necessary after recent reports that Russia has slashed oil supplies to German refineries, underlining concerns in Europe and around the globe.
On Aug. 24 Russia’s OAO Lukoil, the country’s second-largest oil producer, said supplies to Germany had been reduced by about one-third in July and August, but the firm refused to explain why the reduction had taken place.
Reports cited analysts who said Lukoil’s decision not to provide contract quantities of oil could be aimed at extracting higher prices from German refineries. Then again, the move could be part of Lukoil’s efforts to acquire stakes in German and European refineries.
German authorities played down the move, saying the country’s energy supplies were not in danger, as refineries could turn to other oil suppliers to make up shortfalls. Said one government spokesman: “The situation is not dramatic.”
Remember Druzhba?
He added that one main refinery-owned by Total SA, Royal Dutch Shell PLC, Ruhr Oel, and Agip SPA-recently had managed to increase supplies from the North Sea. Germany’s MWV oil industry association said Russian supplies had fallen in June and July but stressed that refinery production had not been hit.
This is hardly the first time that Europe has had concerns over Russia’s trustworthiness as a supplier. Remember last January when the International Energy Agency said European oil markets would cope with the halt of Russian oil exports via the Druzhba pipeline but still called for a quick and clear resolution to the problem?
European Union Energy Chief Andris Piebalgs said he might convene a meeting of the bloc’s Oil Supply Group to evaluate the situation (OGJ, Jan. 15, 2007, p. 42).
We don’t recall that any evaluation was ever done, but our evaluation remains that oil has given the Russian Bear its new teeth. After years of decline, the Russian economy has increased fivefold to nearly $1 trillion.
New teeth
The country is reaping the benefits of buoyant oil and gas prices. State-owned oil firm Gazprom controls much of the country’s rich energy resources and thus has the ability to influence or even intimidate customers in Europe. Gazprom lends economic teeth to Moscow’s foreign policy goals.
Does that claim somehow give meaning to the cut in Lukoil’s supplies to Germany? Let’s not forget that Putin knows Germany well, having spent years there as a spy for the former Soviet Union.
But the oil supply cut is hardly the only bit of posturing by the Russians. In another move directed at the West, two Russian Tu-95 bombers recently flew near the US military base in Guam, causing American fighters to scramble to intercept them.
While the bombers are propeller-driven, 1950s-vintage planes, they carry potent nuclear cruise missiles which could be directed at the US mainland.
