Events of the last few days will be opening up some interesting energy investment moves.
We just need the smoke to settle, first.
It brings me back to just a few years ago, when I found myself in the middle of a political tiff between Moscow, Brussels, and Washington.
Then, the issue has centered on a move by the Obama administration to decrease European reliance on Russian natural gas by offering alternative energy sourcing.
The alternative source being considered back then was gas coming from Iraq and Kurdistan, something still being discussed today.
At the time, I was a consultant to both the Iraqi Ministry of Oil and the Kurdish Ministry of Natural Resources.
That meant I was in the middle of what were on occasion some rather rancorous negotiations.
While the EU in Brussels wanted to diversify away from relying heavily on fuel from Russia, it has also always disliked being lectured to by Washington.
Thursday morning had all those memories coming back.
Thursday, July 27, the U.S. Senate overwhelmingly passed the new Russia-Iran-North Korea sanctions bill that the House had approved on July 25.
It now moves on to President Trump.
Having passed both chambers with a veto-proof majority, it will become law whether the White House approves of it or not.
Not even bothering to wait for Trump's decision, Russian President Vladimir Putin responded by cutting the number of American diplomats allowed in Russia and seizing two U.S. properties.
Thus far, the reaction has been limited to a tit for tat, as these actions mirror those made at the end of the Obama administration against Russian personnel and property in the United States.
But this is merely round one…
Europe Doesn't Want to Rely on Russia – or the United States
Almost lost in the smoke now being generated around this next stage in foreign policy is the emergence of a familiar energy contest between the U.S. and the EU.
You see, the sanctions package passed by Congress includes a move against the Nord Stream 2 pipeline.
This is déjà vu… all over again.
Nord Stream 2 is, as the name implies, a second pipeline carrying Russian gas from Vyborg by the Finnish border, beneath the Baltic Sea, to Greifswald in northern Germany.
The first Nord Stream pipeline comprises two parallel lines and became operational some five years ago.
Given EU regulations, the current pipeline cannot utilize its full capacity. That has set the stage for some rather protracted negotiations between Brussels and Moscow on Nord Stream 2.
Even before the passage of the U.S. sanctions, there were two issues of contention.
The first involves a split in the EU itself over increasing reliance on Russian gas flow. The overarching feeling in Brussels has been that a diversification of gas sources is required.
There is a noticeable division within the European Commission (EC), the administrative arm of the EU, over whether Nord Stream 2 is even desirable.
Concerns focus on the cost, Russia's effective control, the distribution assets inside Europe, and the ever-present "too much dependence on a single source" argument.
Because of this last concern, European liquefied natural gas (LNG) terminals have been constructed and increasing commitments for LNG from both Qatar (the world's largest provider) and North Africa have been made.
The new TAPS pipeline from the Caspian into Southern Europe is underway, along with renewed emphasis on moving Kurdish gas via Turkey into Europe.
However, the crisis between Qatar on the one hand and a Saudi-led group also including the UAE, Bahrain, and Egypt has brought the security of Qatari LNG deliveries into question.
Continued instability in North Africa raises similar concerns about supplies from there.
But relying on Russia for gas can sometimes be just as bad…
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.