Russia Continuing To Strengthen Grip On Europe’s Energy Supplies

Posted on 30. Jun, 2009 by Ross in Europe

Three more deals made by Russian state-controlled gas and oil titan Gazprom heated up the race for Russia to tie up strategic supplies before Europe is able to diversify it’s supply, continuing the threat of energy shortages and supply cut-offs.

The acquisition of UK-listed oil producer Sibir Energy PLC was perhaps the key domestic move, giving Gazprom complete control over the Moscow OIl Refinery which was formerly joint-owned by the two companies. It also gives the company entry into the massive Salym oil field, which Sibir owned in a joint venture with Royal Dutch Shell and is adjacent to another Gazprom operation.

Gazprom also signed a deal with Azerbaijan to import 500 million cubic metres of gas in order to pipe more to Europe, with import volumes from the Caspian-bound nation expected to rise later on. It also claims this week to have been promised priority in purchasing gas from the Shakh Deniz Caspian Sea field. This field is seen as a key source of gas for Europe’s Nabucco pipeline, which when complete will entirely circumvent Russia and represents the EU’s main hope to weaken the political stranglehold which Russia has on Western nations as a result of their dependence on Russian gas.

Continuing disputes with the Ukraine periodically upset the flow of gas into the West, leaving Eastern European countries with severe energy shortages. Poland is the latest of the countries worst affected by the disputes to secure alternative sources of gas, announcing this week a new $550 million contract with Qatargas to supply 1.5 billion cubic meters of gas per year over the next 20 years.

Weaning themselves off Russian gas is also one of the key motivations for Europe’s drive towards more renewables and energy efficiency, complementing the political need to act on climate change. That script is something which Russia is all too happy to ignore: after announcing his country’s intention to increase carbon dioxide emissions by 30% over the next decade, President Medvedev then travelled to Nigeria to help secure oil deals for Gazprom whilst the rest of the world sat down in Mexico to discuss the forthcoming Copenhagen conference on climate change.

Image of Azerbaijan oil field by Robert Thompson @ Flickr