US gas exports to Lithuania threatens Russian monopoly

For the first time, US export of liquefied natural gas (LNG) to Europe will be delivered to Lithuania, a shot across the bow in challenging Russia’s land-locked pipelines that supply Europe with a third of its total natural gas. The delivery will head to the Baltic country in February, transported by tanker to custom built terminals. Along with increasing amount of USexports to Europe that will top 60 million tons annually by 2019, the EU sees LNG as a solution to the Russia’s Gazprom dominance at the market. Lithuania signed the US gas deal back in March 2015 to diversify away from a Russian energy stranglehold after the Ukraine crisis. Lithuania’s energy minister had anticipated the trade to expand to Latvian, Polish and Ukrainian markets afterwards.

The European Commission also stated that it will scrutinize expansion of the Nord Stream pipeline project to Germany,part of Gazprom’s plan to boost European sales by direct access to free-traded markets. The new exports are generally expected to decrease prices due to increased competition. According to one estimate, the US LNG exports would save Europe about $20 billion a year on gas import and cost Gazprom the same. In the same line, Lithuania is at the same time using a new LNG terminal as a leverage to negotiate 25% discount on its gas from Gazprom.

Analysts are rather split over the amount of US gas that could reach Europe. But in case of massive US LNG building up in 2017-2018 along with new Australian and Qatar supply for delivery to Europe, Russia has to fight over its market share against high amount of alternative supply. This would imply decreasing spot gas price below $4 per million BTU’s, versus $5.65 now in order to prevail over US imports. Gazprom has not commented on its potential strategy yet, however price dumping against more US gas and low-priced Qatari LNG will erode its revenues in the short-to-medium term according to Russian Academy of Sciences.

Follow us on Twitter: @SteppeDispatch

News Briefs:

  • For the first time since its military operations in Syria began, the Russian government alerted the US of planned airstrikes. Russia also shifted its focus to the ISIS targets unlike previous moves of attacking opposition forces aligned against the government of Bashar al-Assad. The US and Russia reached an agreement on these matters back in October however, this was the first time of direct communication from Kremlin on incoming strikes. Russia has launched a new wave of airstrikes in the past 24 hours using cruise missiles and for the first time Tu-160 strategic bombers. Pentagon, however states that shifted focus of the Russian military action in Syria can only open collaboration with the US if Moscow finds a political solution to remove the President Assad.
  • According to The Diplomat, despite Central Asian rhetoric on terrorism threat, the region is generally unscathed in this light. At the CSTO summit in September, Asian leaders warned over increasing specter of emergencies and security threats as Russian President Vladimir Putin also followed the suit emphasizing the risk of terrorist incursions. But The Diplomat states that in fact the listing of incidents is very short. The few examples of random violence in Kyrgyzstan, Tajikistan and Turkmenistan fail to demonstrate a grand conspiracy or invasion, but more localized clashes. In the Global Terrorism Database all the Central Asian states fall into a band of countries with the “lowest impact of terrorism”.
  • A Russia-Armenia joint air defense plan shows that Russia has sought further expansion in its zone of “privileged interest” according to Jamestown. As the Armenian side clarified the future regional security incidents might involve not only Russian forces from the base in Armenia but also units belonging to Russia’s Southern Military District in the North Caucasus. The new joint air defense system aims to answer NATO containment policies according to the Moscow-based expert. However, the North Caucasian Russian air forces can only reach Armenia through the third party but no information of engagement of other regional neighbors has surfaced yet, except recent negotiations with Georgia over increased gas exports.
  • Turkmenistan plans to increase gas exports to 230 billion cubic meters by 2030 in order to meet domestic and foreign demand for natural gas and provide gas chemical complexes with raw material. For this purpose, Turkmenistan undertakes intensive development works on about 30 fields but particularly on the Galkynysh field, a project with $9.7 billion investments, a portion of which is promised for delivery on the TAPI pipeline. Several other projects for deep processing of gas and increasing export, including Turkemnistan-China pipeline amount about $20 billion. Turkmengaz also plans to launch new projects on gas chemistry and the chemical industry worth more than $30 billion.
  • Iran started dismantling nuclear equipment, disconnecting almost a quarter of its uranium-enriching centrifuges in less than a month. The reached July deal considers lifting the sanctions in exchange of Iran cutting down the number of centrifuges in operation from 19 000 to 6 100 and reducing its stockpile of uranium. Only about 5 100 centrifuges are allowed to be used for enriching uranium. In the last month Iran dismissed 4 500 centrifuges from their positions and carried out an annual inventory from all of its enrichment sites, marking the first time when none of the three enrichment plants are operating. The speed of dismantling will define whether Tehran implements the deal before parliamentary elections in February.
  • With the fear of terrorism, Uzbekistan started wide scale preemptive arrests and detainment actions across the country. During the last couple of weeks, more than 160 people were detained around capital on the suspicion of their links with the Islamic State. However, Uzbek authorities tend to cast a wide net for their security operations thus raising doubts that the detained are not linked to the IS but to the outside Islamic sect from Central Asia. Even though Uzbek law enforcement stated the detained were Salafis connected to Syria, the increasingly popular Islamic group Hizb ut-Tahrir claimed they were fellow members. Uzbekistan banned the Hizb ut-Tahrir 15 years ago saying it was an extremist group. For years Tashkent has been attempting to link the group to a violent group – the Islamic Movement of Uzbekistan, but now they are in custody on suspicion of their ties to the IS.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s