Friday, July 13, 2007
Russia's Share of the Hog
A few points in passing:
--like Freeman, Averchev noted the growing importance of domestic demand as a driver for growth. In this case, that by 2011 Russian domestic consumers will be paying world prices for energy. So Gazprom or any other producer in Russia will have no preference one way or another as to whether they are exporting energy abroad or selling it at home. So the leverage of consuming countries will continue to decrease.
--Russia is developing its energy reserves based on guaranteed markets at preferential prices. Russian companies will not develop additional capacity for the sake of simply delivering more supplies to market. Gazprom for example already has long-term supply contracts to Europe locked in place and so has guaranteed market share; it is not so desperate that it will need to sell large amounts of additional energy at any price. As commodity prices go up, and as consumers are prepared to bid more, then additional development will take place.
--Russia is awash in foreign reserves especially dollars. So some in Moscow are asking, what is our incentive to produce more energy and to sell it so we can buy more dollars and U.S. Treasury bonds?
I concluded from both presentations this week that we (the United States) need to be prepared for the loss of additional amounts of our leverage to shape global events--something I don't think we are prepared for and certainly that our politicians don't want to address. Both presentations this week also speak to the "World Without the West" debate currently occuring at NI online.
Especially with the Russian economy growing 6-7 percent a year. Russia needs her energy more than she needs useless bonds in a declining currency. Trouble is, we in the West think that the world's energy is ours, at a price we dictate. We will not adjust our thinking on this, which is why it may be a Good Thing that the US Army is mired in Iraq.
I wouldn't put it past Cheney to try a Barbarossa.