Russia to use natural gas in its bargaining with EU

President-elect Dmitry Medvedev said upon his election that foreign policy was the domain of the president. But don't expect changes, because foreign policy depends too much on objective factors, above all lack of resources, said a Russian analyst.
Konstantin Simonov, head of Russia's National Energy Security Fund, said mankind could invest a fundamentally new fuel in the future, but there will not be an energy revolution in the next few decades.

Therefore, Russia has an ace it would be foolish not to use - its natural gas resources, the largest in the world. Russia, Iran and Qatar control as much as 55% of global proven gas reserves, according to Western estimates. The division line between energy producers and energy consumers is becoming clearer.

European politicians are naively talking about diversifying energy supplies, because Norway is the only European country with perspective gas resources, Simonov writes. It can increase gas production to 1.06 trillion cubic feet by 2015, while the EU will need 4.94 trillion cubic feet of gas more by that time.

The EU is pushing Russia back in North Africa, the analyst writes. But Libya is not as strong gas player in terms of reserves as Algeria, with which the EU has failed to come to terms on a gas alliance. Anyway, North Africa can provide only between 1.41 trillion and 1.76 trillion cu f of gas.

According to Simonov, Europe thinks liquefied natural gas (LNG) will solve its problems, but this is a highly competitive segment and new projects need huge investments. This is why Qatar cannot increase gas production endlessly. The United States, China and Japan are fighting each other on the LNG market, which means that the EU cannot hope for unlimited LNG supplies there. In short, Qatar will not play in the European game of gas patience.

Flirting with Central Asia is a dead-end game, and not because pipelines cannot be built to bypass Russia, but because the EU will not contract new gas there. The volume of the region's real gas reserves is kept secret, but BP's annual report puts them at not more than 1.7% of the world's total per regional country. And China also wants a share of Central Asian gas.
Russia has only one rival for the European market in the medium term - Iran. Therefore, the Kremlin's foreign policy will be focused on Iran, because Russia could benefit from routing Iranian gas to India and China, which would allow it to preserve its stance in the European gas market and therefore normal political dialogue with the EU.

Russia will be unable to implement new gas production projects without foreign assistance because it needs technologies, personnel and risk sharing. Europe would give us political bonuses for this. Norway would more gladly vote for participation in the Shtokman gas condensate project than for Ukraine's accession to NATO.

Source: Vedomosti (What the Russian papers say, Russian Information Agency Novosti) - April 29, 2008