Russia’s Quiet Natural Gas Deal With U.S.

The Russians Are Coming
by Joe Duarte, MD
Joe-Duarte.com & IntelligentForecasts.com

A quiet deal between the U.S. and Russia could change the landscape and the entire power structure in the energy markets.

Liquefied natural gas (LNG) from Russia, could be on its way to the U.S. by 2008. According to the Moscow Times, the controversial Sakhalin field could be fully operational by then, making the Murmansk port a key cog in the Russian LNG industry.

The Russian daily reported: “The legendary sea-faring route from the United States across the Atlantic to Russia's northern city of Murmansk, through which vital supplies went to the Soviet Union some 60 years ago to help the country fight in World War II, is looking to get a new breath of life. This time, however, the traffic is going to be reversed, shipping liquefied natural gas, or LNG, from Russia to energy-hungry North America.”

According to the Times, hurricane Katrina was a wake up call for Washington, leading to a new focus on negotiations. “The hurricane seems to have given new impetus to the energy dialogue between Washington and Moscow. It has also given Russia a chance to flex its muscles in its pursuit of a role as an energy superpower -- even if Russia is yet to produce its first LNG.”

The New Saudi Arabia

According to the Times, Russia’s goal is to become the world’s new energy hub, in essence the “New Saudi Arabia.”

Indeed, the fruits of the Kremlin’s war on Yukos, and the expansion of national natural gas giant Gazprom are starting to pay off. ["Russia wants to be the new Saudi Arabia in terms of global energy -- a global energy partner for consumer countries," said Chris Weafer, chief strategist at Alfa Bank, who has advised the Organization of Petroleum Exporting Countries.

Saudi Arabia has since the 1980s reaped considerable political benefits from having an energy partnership with consumer countries. "But it seems that the model that Russia is pushing is a more expensive version of that. Instead of just being a big global energy supplier shipping lots of oil ... Russia wants to be and is able to be a supplier of several types of energy ...

Read the entire article at: Financial Sense
http://www.financialsense.com/editorials/duarte/2005/1028_b.html