[MOCKBA]

The kicker is that government enterprizes like Gasprom, RosNeft and UES (or the only way to do business in Russia) are running things into the ground. It is quite pathetic actually - last winter they were shutting down gas to Ukraine and this winter they would be buying electricity from Ukraine.

Read the comments to this post http://www.theoildrum.com/story/2006/11/8/1323/43606

[shakespear1]

The guys running these oil companies think that they are running military units. Sad news is that Oil fields should be run by engineers.

I know the problem from first hand.

[KevO]

from the UK Intelligence service Jane's website -

"Is Russia a threat? "

Maintaining a consistent, reliable supply is the EU's main concern in the field of energy security. Declining domestic production of natural gas therefore means that imported gas will play an increasingly important role in the EU's energy mix. By 2030, the EU estimates that 80 per cent of European gas demand will be met by non-EU sources. Of this supply, Russia is seen as being the main source. Gazprom already accounts for approximately 25 per cent of EU gas demand.

Given this supply dependence, the European Commission (EC) and individual member states, particularly new entrants from the former communist east, tend to view Russia in general, and the Putin administration particularly, with growing concern. In particular, the perception of the use of natural gas supplies as a political tool in Moscow's relations with its neighbours has created anxiety in European governments. The 2 November announcement by Gazprom to increase the price of gas supplies to Georgia is just the latest example of this trend. The experience in January, when Russia temporarily stopped gas supplies to Ukraine adversely affecting some European countries, also still lingers in the EU's collective mind.

However, it is questionable whether Russia is really a threat to European gas supplies in the future.

(unless they work with China)

HERE

[gg3]

If they don't start building nuclear & wind all over Western Europe right now, as in next year or better yet last year, there will come a time when they don't have other energy sources with which to bootstrap themselves into nuclear & wind.

I see Russia and China becoming dual hegemons in the very near future.

At least we've got realists back in the government here in the US now. In fact the Washington Times today was complaining about how the new SecDef is "a realist." So there is a chance for us after all.

[shakespear1]

Yes, the time is NOW to start to prepare for the Georgia Scenario.

That means efficiency increases in energy usage (auditing energy usage in industry etc. ), wind, nuclear, solar etc. should be on the table NOW.

[EnergyUnlimited]

Yes, they will be in black for some time.
There is oil, gas, platinum & palladium, rockets, nuke technology, nukes themself and plenty of prostitutes to sell.

Russians can take a lot, far more than most of us suspect.
Average Russian will do as good as top western survivalist, should really tough time come.

[Petrodollar]

Just an fyi article that I read today re Russia's currency and its emerging "petrocurrency status."

http://news.yahoo.com/s/afp/20070506/bs ... 0506032053

$this->bbcode_second_pass_quote('', '[')b]The Russian ruble's success story: from untouchable to desirable

May 5, 2007

MOSCOW (AFP) - In just 10 years, the Russian ruble has undergone such a remarkable transformation that its popularity now threatens the country's blossoming exporters, analysts say.

[Gerben]

Good post. A remark.

$this->bbcode_second_pass_quote('', 'T')oday, Russia has a healthy budget surplus and the third-highest currency reserves in the world -- worth 360 million dollars.

[halcyon]

Russia's M2 money supply apparently grew 45% in 2006:

http://www.dailyreckoning.com.au/buy-gold/2007/02/13/

That's a big potential monetary inflation, but if you are exporting your currency, then you are also exporting the inflation?

[MrBill]

petrodollar wrote:
$this->bbcode_second_pass_quote('', 'J')ust an fyi article that I read today re Russia's currency and its emerging "petrocurrency status."

[Petrodollar]

MrBill:
$this->bbcode_second_pass_quote('', 'H')uh? I was not aware of any transactions outside of Russia being settled in rubles? I am sure Russia does not sell oil to China or any of its other neighbors in rubles either?

[Petrodollar]

The real issue at stake is the dollar slowly but irrevocably losing its reserve currency status - and the ruble is playing a role in these macro trends - despite your attempts to ignore the mounting evidence or change the subject away from the core facts and trends. Here's an article that I recommend in its entirety:

$this->bbcode_second_pass_quote('', '[')b]CAN THE "AXIS THE OIL" TOPPLE THE US DOLLAR?
by Gary Dorsch
Editor, Global Money Trends Magazine
May 1, 2007

[halcyon]

$this->bbcode_second_pass_quote('Petrodollar', 'S')audi's reserves are completely irrelevant to this discussion about the Russian currency.

[MrBill]

Halycon, I am a little tied up right now, but I wanted to answer your questions before I go back to Petrodollar.

Basically, whereas Russia's proven oil reserves are quite small compared to its production, which rivals SA's, and exports, which are the 2nd highest in the world off the top of my head (as I said, I am quite busy) Russia's proven oilfield reserves will be depleted before too long. Long before Sa's or even Canada's oilsands unless they find a whole lot more in Siberia and/or the Berring Sea. This make wholesale switching of oil price discovery to the RTS (Russian bourse) less likely.


On the other hand, Russia does have a lot of natural gas. However, natural gas is mostly traded in long-term contracts and shipped via pipelines to end users. It is not as fungible as oil exports are. Different dynamics. But export prominence in natural gas is not a proxy for establishing a benchmark for Urals oil. They are non-likes. Ditto for timber or aluminum for that matter.

As I said earlier there are many problems with trading oil in Russia, not that it cannot be done. Yes, you can trade oil in RUB or USD on the RTS for settlement purposes, however it is not a physically settled contract, but a contract for differences. Physical settlement as well as true price discovery is very hard in Russia due to the near monopoly over production and export by the state-backed or state-owned oil companies and the monopoly on oil export by pipeline by Transneft and by railcar by the state-owned railway. It is not a free market.

Therefore you cannot have true price discovery in a small market dominated by a few large state owned or backed players with near monopoly on exports. That is the difference between knowing how a market trades in reality as opposed to reading headlines and accepting them at face value. of course, things can and do change, so one has to be careful to keep up with actual circumstances in a country.

As to the articles posted refering to cross border use of Russian rubles or Chinese yuan for trade I think the article is clearly refering to small sundry amounts used by suitcase traders for payment. Even then China is just now in 2007/2008 lifting currency controls on the convertability of the yuan and Chinese ability to hold offshore investments and bank accounts. Not in 2005 as infered by the article posted here.

Ditto for the ruble. Convertability for the ruble only started in mid-2006 and is by no means fully implemented. I have Russian ruble accounts at Promsvyazbank and that is in Moscow. Their branch in Cyprus does not offer us a ruble account, yet. I do not know of any international bank outside of Russia that is even offering ruble accounts, yet? I do know many international banks that are already trading many EEMEA currencies like the TRL that still CANNOT trade rubles, yet. So Mr. Clarke's information may be better than mine, but I really doubt it.

Up to now the two ways to hedge Russian ruble risk was either to trade futures on the CME, or to trade non-deliverable futures (NDFs), which are bi-lateral cross currency forward agreements between two counterparts subject to counterpart risk and credit limits that are not fungible with other trades. This is important and not a trivial matter. This practically eliminates the possibility of a private individual or a small to medium enterprise from entering into such an NDF.

As far as I know we are just now starting to trade USD/RUB spot and forward in the Interbank market. However, the number of counterparts that we can deal with is extremely limited. No where near as liquid as EUR, JPY, CAD, AUD, etc.

Plus China, like Russia, is sterilizing their export receipts by building up foreign exchange reserves in foreign currency while printing yuan (or ruble in the case of Russia). This added money supply has to flow somewhere, so it pushes up domestic asset price inflation. One reason why apartments in Moscow or property in Shanghai is so expensive all of a sudden.

So, of course, China would like to use some of these export receipts in US dollars to pay for energy imports as opposed to buying US treasuries. They would not pay for Russian oil in rubles. I would challenge Mr. Clarke to prove otherwise?

This creates a currency mismatch for Russia by the way. They export crude in US dollars (nat gas in euros) for example, but then need to buy euros to pay for any excess imports from the EU. While at the same time they still have to diversify their foreign exchange reserves. Plus keep interest rates high enough to keep domestic inflation under wraps from all that extra money supply. You can guess that non-resource exports and manufacturing suffer from an appreciating ruble against the US dollar, and as costs as measured in rubles converted to US dollars increase in Russia.

And there is certainly a grave misunderstanding by many, including Mr. Clark I assume, that the US dollar foreign exchange reserves held by oil producers and Asian central banks are falling. They are not. As central banks and state investment firms diversify away from the US dollar they tend to buy euros and Sterling. This only shifts the percentage or portion of US dollars in their reserves. But as all reserves are growing due to global imblances the total amount of US dollars in their reserves is increasing as well as the total amount of Sterling and euros.

As to his assertion that I hate the euro and love the US dollar, well nothing could be further from the truth. The truth is I do not care. I have lived in Europe for 15-years and get paid in US dollars. I have most of my savings in the form of property, stocks, bonds and currency in euros in any case as well as Sterling and Canadian dollars. However, I am long US dollars because I have to convert out of the dollar every month. So, of course, I try to market time it. I would not be much a forex trader if I had a bias that clouded my objective judgment on these matters.

Ditto for Russia. I work for the senior management of one of the largest Russian oil companies. I have all Russian colleagues here. We argue about this stuff all the time. They have all lived, worked and studied in Russia. So have I. So it is not that I like or dislike Russia. I just see it as it is and not how I suppose it is by reading the newspaper. Big difference. You cannot trade effectively in a market until you understand its weaknesses as well as its competitive advantages. At least not successfully over time. And I have been in this market for a very long time. If it wasn't Russia then it would be in Shanghai or Dubai most likely! ; - )

[FreakOil]

$this->bbcode_second_pass_quote('', 'B')RUSSELS -- The world should rethink its emphasis on unfettered economic growth and boost efforts to create environmentally friendly sources of fuel, said a draft statement by the Industry and Energy Ministry ahead of a Group of Eight summit.

The statement, drafted for a meeting of several United Nations energy ministers, urges G8 governments not to let economic growth take precedence over fighting poverty and securing energy supplies.

"The traditional industrial development model, aimed at unrestricted economic growth, requires serious adjustment," the statement said.

Governments should consider "specific features of the increasingly interdependent world economy, the exhaustibility of world resources and the aggravation of humanitarian problems, nowadays closely linked to energy problems," it said.

[Ayame]

Somone actually criticizing growth in itself is a breath of fresh air.

[Doly]

WOW!! This looks like somebody is getting the plot!

[Gazzatrone]

"The world should rethink its emphasis on unfettered economic growth and boost efforts to create environmentally friendly sources of fuel"

I smell a massive push for Bio-fuel development.

[Ferretlover]

U.S. urges Russia not to hinder foreign investment Wed Jul 18, 2007 By Conor Sweeney
MOSCOW (Reuters) - A U.S. official urged Russia on Wednesday not to shut the door to foreign investors, saying one draft of a law being mulled by Russia's parliament could hinder investment in 37 industrial sectors on strategic grounds. Russian legislators have so far spent more than two years trying to agree on what they will define as strategic, although the Kremlin has moved to expand state control to the aviation, defense and energy sectors.
Foreign energy firms have already been forced to hand over control of major oil and gas projects, and some fear similar policies could affect other sectors too. "When it comes to the strategic sector law, under some drafts, it would review 37 sectors," said Reuben Jeffery, the newly appointed U.S. Under Secretary of State for Economic, Energy and Agricultural Affairs. … entire article at: http://www.reuters.com/article/reutersE ... 8720070718

[dissident]

After all the bleating how Russia had a "poor investment climate" and would miss out on all that mythical western cash, the story flips into complaints about lack of access to Russia's economy. The west should give up the delusion that the world is its oyster. Russia's right to do what it pleases with its economy supercedes any interests the west may have.