As just about any oil & gas analyst worth his salt will tell you, and with special thanks to Stephen O'Sullivan of UFG, for the visuals, Russia's gas supply is not keeping up with demand. The very same slightly shady RosUkrenergo that was slated for the windfall profits it is earning for supplying Turkmen (primarily) gas to Ukraine, is actually petrified that it is locked in to below market supply arrangements that would leave it facing significant losses should Turkmen gas ever be sold at market prices (long sentence, sorry.)
Which has what to do with foreign policy? The story goes something like this. In the next 3-5 years or so the Kazakhs will have completed a gas pipeline to China which the Turkmens will also have access to. This is the swing production which GAZP uses to fulfill regulated domestic demand and below-market near-abroad (Ukraine) sales. If that 80BCM (bn cubic meters) per annum starts heading for China then both Ukraine and domestic Russia are going to have some pretty sharp and uncontrollable rises in domestic gas prices. That is not in GAZP's business plan which sees itself selling as much of its production as possible via its own transport systems and re-sellers to the nice Europeans who will pay $200/Mcm+ (thousand cubic meters) as opposed the great unwashed who currently pay a regulated price of $43Mcm and the near abroad who pay $90Mcm (blended price.)
Diverting exports because the locals are revolting just before an election would strike me as particularly unclever. So why force the Kazakhs, Turkmens and Uzbeks (collectively Trashcanistan) to eat shit and sell to GAZP at $50Mcm and then have the Chinese build them a big pipe so that the gas can be sold at a world market price.
Or does GAZP believe that it can bully China in to not building the pipeline by holding back on the E. Siberian pipeline - you know the one that they moved lake Baikal to avoid.
[composed and posted with ecto]
Technorati Tags: Gas, GAZP, Russia, Turkmenistan
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