Valdai Club

The rise in energy prices last year, exacerbated by military activity in Ukraine and the sanctions war of the so-called "collective West" against Russia, brought the world back to the 1970s, when stagflation raged, first inside the UK and subsequently throughout the global economy.

The Europeans know their interests: the more sources and supply routes, the better. Therefore, they have consistently advocated both Nord Stream 2 and LNG supplies from the United States or from the Russian Arctic. As for any attempt to artificially restrict competition and raise prices for European consumers, they will brandish environmental counter- “sanctions”, saying that US LNG is dirty, writes Valdai Club expert Alexei Grivach.

In an ideal world, energy would be an exclusively business matter. However, it acquired such a big role in today’s economy that achieving this ideal seems like a utopia. Energy supply in general and oil and gas trade in particular have always been and will always be inseparable from politics.

Due to the failure of the OPEC+ agreement to reduce oil production, prices for black gold fell by almost 30 percent to their lowest level since 2016. Saudi Arabia announced that from April it will sell oil at discounts of $6-7 and increase production by more than 10 million barrels per day. Some experts called this the beginning of price wars in the energy market. Following oil prices, exchange indices around the world spiralled. The situation is fuelled by the economic difficulties caused by the spread of coronavirus. Alexei Grivach, Deputy General Director of the National Energy Security Fund, discussed in an interview with valdaiclub.com what will happen next.

In a December 2nd conference call, the leaders of Russia and China will officially launch a new era in relations between the two countries. The largest gas exporter and the fastest growing large market in the world will be connected by a pipeline system that will link the gas fields of Eastern Siberia with Shanghai; the pipeline network will extend more than 6,000 km.

The choice of the strategic partner for marketing gas in China is indicative. Novatek has several Chinese partners in Arctic LNG projects, including CNPC and Silk Road Fund in the Yamal LNG project. China National Oil and Gas Exploration and Development Company (CNODC), a subsidiary of CNPC, and CNOOC expect to take part in the planned Arctic 2 LNG project, on which an investment decision is yet to be taken.

The transit of gas through Ukraine is too sensitive for Russia and Europe, at least ahead of the launch of Nord Stream 2. Until it is completed, the United States will continue to have the opportunity to discredit Russian gas supplies to Europe in order to promote its own LNG on the market.

2019 started out with the most important event for Russia’s energy security. Russia’s first floating regasification unit was commissioned at the port of Kaliningrad. The Marshal Vasilevsky ship named after the Soviet military leader, who led the general staff and the Koenigsberg Offensive during the 1941-1945 Great Patriotic War, can transport and store liquefied natural gas and regasify LNG to supply consumers with household-grade methane in gaseous state.

The Soviet Union was building the gas pipeline at a record pace and put it into operation on schedule. Ironically, now the US is allegedly defending this gas pipeline in Ukraine against Nord Stream 2. Reagan had to lift the sanctions unilaterally in the autumn of 1982 because, as it turned out, the Europeans were not “chicken littles.”

Over the 50 years of its existence and under almost eternal sanctions against Iran, OPEC became a club where many people meet and talk, but only Saudi Arabia has real opportunities to manipulate oil production.