Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Polonium, Politics and $100 Crude Oil

Politics / Crude Oil Aug 03, 2007 - 08:05 AM GMT

By: Adrian_Ash

Politics

"...If you fear that we're only a couple of headlines away from $100 oil, be careful how you buy into Russia's huge energy reserves..."

A RISK CONSULTANCY firm based in Canary Wharf 's gleaming financial district emails us here at BullionVault to ask:

"We are keen if possible to get a view from you on the recent heat between the UK and Russian governments.


"Is this likely to make  London a less attractive place for Russian companies to list their equity? Is the City suddenly going to go up in arms and demand further regulation? Or will it just be business as usual?"

Regular readers of the View from the Vault might guess we have no answers. They might also wonder why-in-the-hell anyone would ask us! But they'll also know we shall attempt a reply regardless. Yes, it's eight months since we last studied the hazards of Russian equities listing on the London market, right around the time that Polonium 210 poisoned a dissident Russian spy in a West End sushi bar.

Nor can we begin to guess how the LSE or City watchdog, the Financial Services Authority, might feel about becoming bit-players in Whitehall 's latest comedy of errors. Chasing down the Russian spy accused of poisoning Alexander Litvinenko in Central London would surely require an extradition treaty, not a tightening of stock-market rules.

And besides, as John Kampfner notes in The Guardian, "If the UK and Russia did have an extradition treaty, what would happen to Boris Berezovsky, a one-time top Kremlin figure-turned-dissident whom Putin regards as his public enemy No.1? Berezovsky and other oligarchs now live here [in London ] in opulence, thanks to our absurdly generous tax laws."

But still, we can't help wondering: Do Russian companies – most especially the gas, oil and mining companies who make up 80% of the Russian stock market – actually need to raise cash by listing on Western exchanges?

If you haven't bought into Gazprom yet, you might not get chance to buy Russia in London for much longer, perhaps. As Marc Faber has observed, what finally destroyed the Soviet Union at the end of the '80s wasn't so much the victory of Western capitalism but the collapse of global oil prices to $10 per barrel. Now oil looks firm above $60 if not $70, and "we're only a headline of significance away from $100 oil," reckons John Kilduff, an analyst in New York for Man Financial.

Little wonder then that President Putin's belligerence looks like the swagger of a man who just can't lose...so long as energy stays expensive. As it is, Russia 's forex reserves now stand at No.3 behind China and Japan , and Europe needs Russian energy flows far more than Russia needs European cash in return. Or so it would seem for the foreseeable future. And as for Western companies investing in Russian resources directly, Shell's loss of its Sakhalin project...foreign gold miners' ongoing problems with Moscow 's Environmental Agency licenses...and now the expulsion of Britain 's trade ambassador...would suggest that capex from overseas simply isn't wanted or needed.

Foreign investment dollars are being actively scorned. Yet British companies still want in! Will they never learn? "Last month, following months of pressure from the Russian authorities, BP's 50%-owned joint venture TNK-BP was forced to sell its stake in the vast Kovykta gas field to Gazprom, the [Russian] state-controlled gas company, at a bargain price," reports Ed Crooks in the Financial Times . "But BP still sees great potential in investing in Russia , and hopes for further development of joint ventures with Gazprom and other Russian companies."

BP on Tuesday reported a 16% drop in earnings between April and June. Its No.1 competitor for British stock market cash, Shell Plc, said today it grew its earnings by 18% during the same period. No wonder then that BP needs to deal with whomever it can – and at what looks like any price in terms of risk – to catch up.

"As part of the Kovykta deal," Crooks goes on in his FT report, "BP, TNK-BP and Gazprom agreed to set up a global joint venture worth at least $3bn that could develop projects inside and outside Russia . Tony Hayward, BP's new chief executive, talked about what he described as the growth of 'reciprocity', which he said meant 'the development of not just foreign investment into Russia , but investment by Russian companies overseas'."

In other words, Russian companies are not only willing to grab control Western-owned assets in the Motherland at bargain prices, forced through by the Russian courts. They're also willing to put up their own money for joint-venture development of oil and gas projects outside Russia , too. Buying BP Plc, in other words, might just give you exposure to Russian business practices across the world.

"Deals with Russia could involve Gazprom taking stakes in BP assets worldwide, including projects in liquefied natural gas," says Crooks, "which is one of the Russian company's ambitions for expansion."

If more Russian firms did choose to follow Gazprom's example and list here in London , then at least UK investors might hope to enjoy some domestic legal protections. But why would a nationalist and recidivist Kremlin want to encourage that? Letting the wealth produced by Russia's natural resources slip overseas could easily be presented by the pro-Putin Nashi youth movement as Robber Baron Capitalism Mark II. The more profitable action – and the more politically useful – would be to seize new energy reserves. Such as, say, in the Arctic Circle ...?

" Moscow has dispatched a submarine under the North Pole that is expected to arrive on Sunday to plant a titanium flag on the seabed," reports Australia 's Herald Sun . "The mission is part of a race to assert rights over the area, which is rich in energy reserves."

Now throw in the two Tu95 "Bear" bomber planes that dared to near British airspace last Tuesday...the suspension of Russian visas to British citizens...the Kremlin's permission for Gazprom to build a private army of security and defense staff...and the comments in The People's Daily, China's leading newspaper, that "Britain and China are in a 'controlled' crisis."

Crude oil is trading back at a new 11-month high. Above $70 throughout July, it's starting to look awful expensive for British diplomacy...let alone investors and consumers.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2007

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in