September 19, 2008
Gazprom faces reality
Analysis of:
Russian index shows biggest decline since 1998 | www.iht.com
This analysis is solely the work of the author. It has not been edited or endorsed by GLG.
Implications: Russian officials had boasted in spring that Gazprom would become the largest publicly traded energy company, surpassing ExxonMobil. However, Gazprom's value is down 58% since May 2008 and debt insurance now rose 1% in a single day, costing Gazprom additionally about $440 million.
Analysis: The KGB chicken are coming home to roost. Putin and his sidekick Medvedev do not understand global energy and business realities. Russia is basically dependent on oil and gas commodities and has overplayed its hand: Shell and Exxon at Sakhalin, TNK-BP, North Stream and South Stream, and of course invasion of Georgia, all actions to use oil and gas as geopolitical power tool to control the EU and muscle the US in the world.
Analysis: The KGB chicken are coming home to roost. Putin and his sidekick Medvedev do not understand global energy and business realities. Russia is basically dependent on oil and gas commodities and has overplayed its hand: Shell and Exxon at Sakhalin, TNK-BP, North Stream and South Stream, and of course invasion of Georgia, all actions to use oil and gas as geopolitical power tool to control the EU and muscle the US in the world.
As reality has set in in Russia, Gazprom would be well advised to bury their hatchets and develop together with the EU a reliable and cooperative joint company to provide NG to Europe without any provocation and underlying threats of unreasonable price increases and/or cut off of NG deliveries when geopolitically convenient. For this purpose the following has to happen:
• North Stream and South Stream are technically and economically ill conceived undersea pipeline projects in order to avoid reasonable transit fees and/or NG deliveries to the Baltic countries (Estonia, Latvia and Lithuania as well as Poland) for NG delivery to the EU. Gazprom, EON, RWE, BASF, ENI and Total should form a joint new company to provide safe and reliable NG delivery to the Baltic and EU states without any geopolitical strings attached.
• The Nabucco pipeline project should be jointly developed with Gazprom and eliminate any uneconomical duplications
• Russia should reassess their cooperation and possible integration with the EU and cooperate with the US to defeat the muslim and/or authoriatarian insurgents around the world
• Global cooperation of Russia with the G8 will smoothen the financial disturbances and provide global recovery of a well endowed world
World war II was settled due to cooperation of the West with Russia, and continued peace and prosperity can be assured by revived cooperation of Russia with the West.
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