Best of the Week
Most Popular
1.UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - Nadeem_Walayat
2.Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - James_Quinn
3.UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - Nadeem_Walayat
4.Billionaire Investors Backing A Marijuana Boom In 2017 - OilPrice_Com
5.Emerging Markets & Basic Materials Stocks Breaking Out Together - Rambus_Chartology
6.Global Currency Reserve At Risk - Jim_Willie_CB
7.Gold and Silver: Your Stomach Is Probably Wrenching Right Now - The_Gold_Report
8.Warning: The Fed Is Preparing to Crash the Financial System Again - Graham_Summers
9.Basic Materials and Commodities Analysis and Trend Forecasts - Rambus_Chartology
10.Discover Why A Major American Revolution Is Brewing - Harry_Dent
Last 7 days
EIA Weekly Report and Crude Oil - 19th Aug 17
4 Insights for Adjusting Your Portfolio in a Rate-hike Environment - 19th Aug 17
Gold Direction Indicator - 19th Aug 17
Historical Inevitability and Gold and Silver Ownership - 19th Aug 17
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17
The Next Tech Crash Could Delay Your Retirement by a Decade - 15th Aug 17
Gold and Silver Precious Metals Nearing Breakout - 15th Aug 17
North Korea Showdown: Pivotal Market Turning Point - 15th Aug 17
Tech Stocks DOT COM Bubble Do-Over? - 14th Aug 17
Deep State Conspiracy or Chaos - 14th Aug 17
From the Trans-Atlantic Axis and the Trans-Asian Axis - 14th Aug 17
Stock Market Intermediate Correction Underway - 14th Aug 17
The Islamic State Jihadi Pivot to Asia - 13th Aug 17
Potential Pivots Upcoming for Stocks and Gold - 13th Aug 17
North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - 12th Aug 17
Gold Stocks Coiled Spring - 12th Aug 17
Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - 12th Aug 17
How to Alton Towers Half Price Discount Entry 2017 and 2018, Any Time, No Pre-Booking! - 12th Aug 17
Top 3 Technical Trading Tools Part 2: Relative Strength Index (RSI) - 11th Aug 17
What Makes Women Better Investors - 11th Aug 17
Crude Oil Price Precious Metals Link in August - 11th Aug 17
Influencer Marketing Predictions All Businesses Should Take Into Account - 11th Aug 17
Really Bad Ideas - Government Debt Isn’t Actually Debt - 10th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Four Maps That Show How Russia Could Strike Back Against US Sanctions

Politics / Russia Aug 05, 2017 - 04:02 PM GMT

By: John_Mauldin

Politics

BY GEORGE FRIEDMAN, XANDER SNYDER, EKATERINA ZOLOTOVA : The US Congress has passed new sanctions targeting Russia’s energy companies.

Recognizing that a vital sector in its economy has even less chance of relief than it once had, Russia has retaliated. It has reduced the number of diplomats it has in the US and has seized property used in Russia by US diplomats.

Energy sales are an important source of revenue in Russia. But it’s more than that. For Russia, energy is also an instrument of geopolitical power. They give Moscow considerable influence over the countries dependent on Russian energy exports.


If Russia retaliates further against the US, its energy supplies—especially those it sends to Europe—may be its best option to do so.

A Look at Europe’s Dependence on Russian Energy

The European Union imports 53% of the energy it consumes.

This includes 90% of its crude oil and 66% of its natural gas—a higher percentage than most other regions of the world, including North America, East Asia (but not Japan), and South Asia. All told, energy accounts for 20% of all EU imports.

However, some countries rely more on energy imports than others (see the map below).

Most European countries import more than 30% of the energy they consume. Norway provides roughly 35% of these imports, while Russia provides roughly 40%.

Germany, which boasts the largest economy in the EU, imports more than 60% of the energy it consumes, and France, which boasts the third-largest economy, imports about 45%.

Some Eastern European countries are even more dependent on foreign energy.

Hungary, Austria, and Slovakia import approximately 60–65% of their energy needs. Bulgaria, the Czech Republic, and Romania, however, import less (37%, 32%, and 17%, respectively). In the Baltics, Lithuania imports roughly 75% of the energy it consumes. Latvia imports 45% and Estonia imports 9%.

Most of this energy comes from Russia.

In fact, Russia provides more than 70% of the oil and natural gas used in Bulgaria, Latvia, Lithuania, Hungary, Slovakia, and Finland. It provides 62% of the natural gas and 56% of the oil used in the Czech Republic, and 53% of the natural gas and 90% of the oil used in Poland.

Russia’s Biggest Leverage Against the West

Cultivating this dependency is a conscious move on behalf of Russia.

Russia’s core security imperative is to maintain a buffer space between it and Western Europe that would help it repel any invasion.

Russia is not as powerful as it used to be, but it has developed economic leverage that allows it to exert pressure over countries that could pose a danger to it by threatening their energy security.

Aware of potential ramifications, these countries started to diversify their energy sources. Poland and Lithuania have begun to import liquefied natural gas from the United States.

Multiple Interests That Don’t Align

France and Germany—leaders of the European Union—illustrate how Russian energy can shape foreign policy.

France may rely heavily on foreign energy, but most of its oil and natural gas comes from Algeria, Qatar, Saudi Arabia, and Libya—not Russia. France can therefore afford to be more aggressive and supportive of sanctions against Russia.

Not so with Germany, which receives 57% of its natural gas and 35% of its crude oil from Russia. Berlin must therefore tread lightly between its primary security benefactor, the US, and its primary source of energy, Russia.

This is one reason Germany has been such an outspoken critic of the recent US sanctions, which penalizes businesses in any country that collaborate or participate in joint ventures with Russian energy firms.

Germany supports the construction of Nord Stream 2, a pipeline that would run through the Baltic Sea, bypassing Ukraine—the transit state through which Germany currently receives much of its energy imports. 

The pipeline would help to safeguard German energy needs, since it would allow Russia to punish Ukraine by withholding shipments of natural gas without punishing countries such as Germany further downstream.

But there is only so much Russia can do. Its geopolitical interests in Ukraine, for example, align with Germany’s energy interests. Germany would benefit from Nord Stream 2 by getting a new natural gas route, and Russia would benefit by gaining more leverage over Ukraine.

But Washington wouldn’t want Moscow to halt energy flows through Ukraine at its leisure. The US needs to try to manage the Ukraine situation in a way that prevents a greater general German-Russian alignment.

Plus, Russia cannot bully the United States with its energy exports. Washington doesn’t need them. But Russia could influence US allies if it chose to retaliate more than it already has.

Since the US is far more powerful than Russia, divide and conquer may be Moscow’s best bet.

Grab George Friedman's Exclusive eBook, The World Explained in Maps

The World Explained in Maps reveals the panorama of geopolitical landscapes influencing today's governments and global financial systems. Don't miss this chance to prepare for the year ahead with the straight facts about every major country’s and region's current geopolitical climate. You won't find political rhetoric or media hype here.

The World Explained in Maps is an essential guide for every investor as 2017 takes shape. Get your copy now—free!

John Mauldin Archive

© 2005-2017 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

Catching a Falling Financial Knife