Tag Archives: geopolitics

Europe’s Gas Crunch:  The Pending Crisis Around Nordstream 2 & Ukraine Transit

My public talk in Washington, 12 June:

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Despite Berlin and Moscow’s rush to make the Nordstream 2 (NS2) pipeline construction through the Baltic Sea a fait accompli, opposition from several EU states has stalled its completion. Meanwhile, Gazprom’s transit contract with Ukraine will expire in January and Moscow has put unacceptable preconditions on negotiating a new one. Once again, Europe must brace itself for a Russian gas-supply crisis. Professor Thomas O’Donnell will discuss European states’ various interests and heightened energy anxieties, the prospects for the NS2 pipeline, and Russia’s strategy.

Speaker:  Thomas O’Donnell, 

Instructor, Hertie School of Governance, Berlin;  Title VIII Short-term Scholar, Kennan Institute — Scholar’s Research-Project Page at Kennan

RSVP Now

Wednesday, June 12, 2019
2:00pm-3:00pm  –   5th Floor Conference Room

Directions

Wilson Center
Ronald Reagan Building and
International Trade Center
One Woodrow Wilson Plaza
1300 Pennsylvania, Ave., NW
Washington, D.C. 20004   Phone: 202.691.4000    kennan@wilsoncenter.org

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Washington interviews: Energy Relations of Russia, Germany, Poland & Ukraine (Kennan Fellow)

g7-trump-merkel-round-9jun18-jezco_denzel_ger_gov_photo.jpgWhat are US experts’ and officials’ views on the increasingly conflictive energy and geostrategic relations between Russia, Germany, Poland and Ukraine? 

Greetings. I’m in Washington as a “Title VIII” fellow of the Kennan Institute in the Woodrow Wilson Center, interviewing people in think tanks and government (legislative and executive) on these topics. I’ll also give a public talk on this at Wilson on 12 June, at 2 PM (more info soon). putin_wink-round-hnewkremlinstooge-wordpress

I’m interested to hear anything readers think should be asked and of whom.  Don’t hesitate to write me at twod(at)umich.edu or my (temp) Wilson email: thomas.odonnell(at) wilsoncenter.org

A central issue: why is Germany so adamantly for Nordstream 2 despite the negative security consequences for Ukraine and despite the tremendous hit this project is causing to German soft-power not only with Poland, but with most Central and Eastern European (CEE) and Nordic states?  (Here’s my own analysis.)  How do US experts see this? Continue reading

Pipe Dream? Polish ruling complicates Nord Stream 2 pipeline for Gazprom & EU partners [My Berlin Policy Journal piece]

bpj_online_odonnell_nordstream2_cutHere’s my latest analysis in Berlin Policy Journal (German Council on Foreign Relations -DGAP).Pipe Dream? The Nord Stream 2 pipeline project is in danger of being derailed.
THOMAS W. O’DONNELL , SEPTEMBER 22, 2016 

A pipeline project to double Gazprom’s export capacity to Europe has always been controversial. A recent ruling by Poland’s competition authority could seriously undercut the support it has accrued, leaving its European backers at odds.

The proposed Nord Stream 2 pipeline project has bitterly pitted European states that back the project, including Germany, the Netherlands, Austria, and France, against project opponents, including Ukraine, Poland, and other former Soviet-bloc states. The project aims to double the capacity of the existing huge, 55-billion-cubic-meter-per-year Nord Stream 1 pipeline, running in parallel to it under the Baltic Sea from near St. Petersburg in Russia directly to Greifswald in Germany.

This dispute has exposed two very different views of Gazprom, Russia’s state-owned gas-export monopoly, and of Vladimir Putin’s Russia itself – one side sees it as a “necessary” and “reliable” energy supplier, the other a dangerous and manipulative adversary. This dispute is but one more collision inflicting lasting harm on the European Project.

Polish competition authority rejects project

The latest row involves a ruling in late July by the Polish Office of Competition and Consumer Protection (Urzed Ochrony Konkurencji i Konsumentow, or UOKiK) rejecting an application by five private western European energy firms proposing to partner with Gazprom to build and operate Nord Stream 2. The firms are Germany’s E.ON (soon to be Uniper) and Wintershall, Austria’s OMV, Anglo-Dutch Shell, and France’s Engie.

Shortly before the Polish announcement, the five companies agreed to withdraw their association proposal to avoid UOKiK initiating a legal process against them. The commission’s president, Marek Niechcial, declared categorically on August 12 that the Polish rejection was definitive, asserting “This will stop the [Nord Stream 2] deal.” The five firms have nevertheless made it clear they are seeking a strategy to work around the decision, and expect to proceed as planned. Gazprom has said the same.

So why go through this proceeding in the first place? To understand these events better, I spoke with several experts and diplomats working on these matters in Moscow, Berlin, Washington, Paris, and Warsaw.

Commercial Arguments

An often-heard line of argument is that at least some of the five companies might actually have little commercial interest in the project, but need to preserve their relationships in Russia where they have large investments in energy projects. After all, the Kremlin has a track record of taking over projects from foreign partners with whom it has fallen out. A further theme in this vein is that Nord Stream 2 is not really needed in northwestern Europe, even though the Groningen field in the Netherlands and Norway’s reserves in the North Sea are declining, because future demand in northwestern Europe is overestimated and Liquefied Natural Gas (LNG) will be available from the United States. This view led to press speculation that the five firms likely welcomed the Polish decision, allowing them a graceful exit.

However, virtually all the experts I spoke with had no doubt Nord Stream 2 would be a lucrative commercial enterprise over the long run, and that the five firms seem genuinely enthusiastic. Continue reading

“Energy independence” won’t free the USA from global oil market & geopolitics [I’m cited: CNNMoney]

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Credit: CNNMoney, 9 August 2016

Mr. Trump promises he’d use the USA’s shale-oil revolution to deliver “complete” independence from foreign oil, telling voters in May: “Imagine a world in which our foes and the oil cartels (sic) can no longer use energy as a weapon. Wouldn’t that be nice?” But, he is confusing two quite distinct things:

“Energy independence” – in the sense of the USA producing more oil than the country consumes – is indeed possible, even “tantalizingly close” as this CNNMoney article (Aug. 9, 2016, by Matt Egan) makes clear, citing myself and other experts.  For clarity, I’ll call this “net oil-exporter status.”

However, Donald Trump asks us to “imagine” he can use this net oil exporter status, to make the US independent of the global oil market and oil in geopolitics where our “foes” and “cartels” have leverage. Continue reading

What’s keeping foreign oil firms out of Iran? IRG? [CNNMoney quotes me]

iran_oil_production-sanctioneffect_17jun16

To put Iran’s recent production increases in perspective: On its own, for 37 years, Iran has struggled to produce two-thirds of its pre-revolutionary level of 6 million barrels/day. Now, domestic opposition is again limiting foreign oil companies’ participation to boost production.

Since the Obama-administration’s and Europe’s nuclear sanctions were lifted early this year (marked ‘e’ on the chart), Iran has been expanding its production and exports more rapidly than most experts had expected. Tehran has actually tripled exports since late-2015 (see point ‘f’).  But, here’s the big question: Can Iran sustain this years’ production gains?
If to, this could seriously undermine Saudi Arabia’s global oil-market share, and boost Iran’s sanctions-damaged economy to a long-awaited recovery.
The short answer: Now that foreign sanctions are finally lifted, the battle to boost Iran’s oil exports has shifted to a domestic clash over whether to allow foreign oil companies to have significant upstream involvement. This is a domestic Iranian issue with a long history.
Historical perspective
Let’s start with some historical perspective: The Iranian National Oil Company (NIOC) can only do so much on its own to boost production. After decades of sanctions, it lacks the needed technology and finance.  I told CNNMoney‘s Matt Egan, on Wednesday, that the faster Iran expands on its own, the faster production will plateau. (His CNNMoney article today quotes me .).
This was what happened after the 1980-1988 Iran-Iraq war.(‘b’ on the chart). By about 1992, production had plateaued at almost 4 million barrels/day, under 2/3 of the pre-revolutionary, late-1970’s level of roughly 6 million barrels per day. (‘a’ on chart).  The Iranian president at the time, Rafsanjani, argued to religious conservative and nationalist members of the Majilis that only foreign oil companies’ technology and investments could expand production further. However, he only won grudging approval for an offshore project due to fears that foreigners would bring their irreligious ways ashore and/or undermine the hard-won nationalization of Iran’s oil sector.
Continue reading

Wikistrat Report “Saudi Arabia & the Future of Oil” cites my views

Wikistrat - my quote on US continued interestThis Wikistrat Report on the Saudi kingdom’s “reform” plans and the future of oil is from a press webinar I did on 17 May together with Dr. Ariel Cohen (Atlantic Council, Washington) and Prof. Shaul Mishal (Middle East Division, IDC Herzliya & Tel Aviv U.).  A nicely done report on oil market and geopolitical hot topics.

30May16 note: A couple typos I had found have been fixed by Wikistrat since I initially posted this Report.  The latest version is now linked here. – T.O’D.

I’m quoted by MarketWatch: Five key issues for OPEC’s June meet

Oil ministers of Venezuela, Saudi Arabia & Qatar had agreed in February to freeze output if others did too. AFP/Getty Images

After a Wikistrat Webinar I did, MarketWatch asked me about Saudi & OPEC policy, ond US Shale. Read on here, or at MarketWactch! – Tom O’D.

5 key issues OPEC must wrestle with at its June meeting

Oil output freeze is needed to ‘create a firm price floor’: analyst

The oil market has given members of the Organization of the Petroleum Exporting Countries a reason to crack a cautious smile when they meet June 2 in Vienna.

Signs of a more stable oil market have emerged since the cartel members last held a regularly-scheduled meeting. Oil prices CLN6, +0.04% LCON6, -0.38%  have gained more than 30% so far this year. And both West Texas Intermediate, the U.S. benchmark, and Brent crude, the global benchmark, briefly traded above $50 on Thursday.

Global production is falling following a larger-than-expected weekly decline in crude supplies, according to a report from the American Petroleum Institute late Tuesday. The report comes as the number of active-drilling rigs have been in a steady state of decline and oil-company spending cuts, oil-and-gas sector bankruptcies, and recent outages in Africa and North America, have been supportive for crude prices.

“OPEC members are likely to be a little happier going into June’s meeting than they were in December,” Tom Pugh, commodities economist at Capital Economics, said in recent research note.

Oil prices have “surged by about a third since the start of the year,” he said. The “higher prices will have removed some of the pressure on [OPEC] to act to prop up prices.”

But that doesn’t mean major oil producers can sit back and relax when they get together. Oil market supply and demand haven’t fully stabilized and there a lot of factors than can, and probably will, rock OPEC’s boat.

Here’s a rundown of what analysts see as the key issues at hand and possible outcomes for the OPEC summit: Continue reading