Russia's Global Squeeze on Natural Gas

This story in the Washington Post is revealing...

Russia's Gas Crunch
Looming Shortfall Poses a Tough Choice

Three months ago the Russian energy giant Gazprom forced Ukraine to pay sharply higher prices for natural gas. At the time, the story was portrayed as a political struggle for control in Kiev. But last week Gazprom announced it was tripling gas prices in Belarus, a country that is politically close to the Kremlin. Moldova has been forced to accept a doubling of prices over the next three to four years, and the other former Soviet republics are already paying market prices for Russian gas.

The truth is that these price increases are not political. Rather, they reflect worrisome economic and geological facts about Russian gas fields. The Kremlin is not simply trying to use Gazprom to reassert authority in Belarus, Ukraine or anywhere else. There are in fact deep problems with Gazprom -- problems created by its inefficient management and a looming decline in gas production.

The story goes on to point out a couple of things...

1. Gazprom (the big Russian state-owned energy agency) won't allow other companies to use its pipeline network. So even if they find gas, they can't sell it.
2. Gazprom needs cash for investment
3. Russia has artificially low prices on gas consumed within the country, and ...
4. This is all leading to a gas shortage that is going to become acute over the next few years.

Russia's looming gas crisis will affect customers in Europe, of course. And then they will be competing with North American conumers for natural gas that is produced here and abroad.

I'd like to make this point: If Russian President Putin wasn't confiscating private oil companies like Yukos in a bid to consolidate power and wealth within his circle of cronies (7 Russians control 40% of Russia's GDP) Russia probably wouldn't be this deep in the hole.

Finally, note the similarity between the consolidation of power and wealth going on in Russia and what's happening in the U.S. Pretty freakin' sad.

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