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Divide and Conquer
Russia Finding Ways Around Western Energy Sanctions

Last week, the West laid down a new round of sanctions on Russia that included, amongst other measures, bans on the transfer of offshore and shale drilling technologies. The logic behind these bans was straightforward: Russia’s best bets for future oil and gas production lie in offshore and shale reserves, so by restricting just these sectors of Russia’s energy industry, the EU could hamstring Moscow’s future ambitions while leaving the bulk of Russia’s present production—in maturing, conventional onshore fields—untouched. In this way, the EU can tighten the screw on Russia without endangering its own energy interests in the short term (the EU relies on Russia for 30 percent of its natural gas needs).

But Russia is finding ways around these U.S.- and EU-led measures by going to other developed countries. For instance, Japan is desperate to secure steady supplies of energy imports, given its post-Fukushima drawdown of nuclear energy; it is continuing to invest in Russian projects. Bloomberg reports:

Japan won’t be keen on deeper sanctions that would curb its access to gas, oil and coal from Russia, said Will Pearson, a London-based director of Eurasia Group, an energy and natural resources consultant. “Japanese firms are very interested in accessing Russian natural resources, thanks to their proximity,” he said.

Japan buys about 65 percent of the liquefied natural gas coming from Russia’s Sakhalin-2, a 9.6 million metric ton-a-year project, according to Leigh Bolton, managing director of Holmwood Consulting Ltd., a Surrey, England-based energy consultant. Neither country will break the contracts based on sanctions, he said.

But Japan isn’t the only country keen to get at Russian oil and gas. As Business Insider reports, firms from Norway and Switzerland (neither of which are EU members) have finalized agreements with Russia:

In early August 2014, Rosneft bought a stake in one of the world’s largest oilfield contractor companies – Swiss Weatherford, RBTH learned from the press service of Rosneft…According to the agreement, the Russian side will receive eight subdivisions engaged in drilling and well repairs in Russia and Venezuela. […]

Rosneft has also signed a long-term agreement on offshore drilling with the Norwegian company North Atlantic Drilling Ltd. The transaction involves the purchase, up to the year 2022, from the Norwegian side, of six offshore rigs for offshore production, including for work in Arctic conditions.

None of these agreements will mean much for Russia’s exploration of its prodigious shale oil and gas reserves; the necessary know-how on that front lies predominantly within American companies. But these contracts will help Russia tap into its Arctic reserves and in so doing will partially circumvent last week’s sanctions. Russia’s shale future is still very much in doubt, but Moscow is demonstrating its ability to leverage its enormous oil and gas production to divide and conquer the West.

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  • lukelea

    . . . to divide and conquer the West? Please.

  • Breif2

    So if I understand correctly, Japan is cooperating with Russia, and Norway and Switzerland are making a separate peace with it…

    No comment. 🙂

    • iva

      No the article is ONLY analyzes.

  • Duperray

    Europe is not at war with Rssia, US neither! It is Obama who set himself at war with Russia!
    EU – now self-demonstrating to be under full US foreign policy control (EU top leaders are ALL ex-Goldman& Sachs top managers..) – is blindly and stupidly supporting US Ukraine policy. Sanctions always backfire and Industry is putting pressure upon these puppet politicians heading each EU state, excepts a handful of them. Sanctions are in violation of WTO rules. Slowly, european states are going backward, still luring Washington with much bla-bla, shooting stars and show business, but indeed setting easy-to-avoid sanction rules.
    Last week anti-offshore & shale drilling santions are very easy to overtake, look at them in detail.! Oil companies are expert in this political arena…Final dissuasive effect is nil.
    But long term effect is high, because newly set agreements with new suppliers exclude US suppliers for long.
    Step by step, Europe states are taking distance with Obama-the-Magnifique policy.
    Russia is so big an opportunity that it has no probem to find technological allies, its reserves are so big that even with 20-year old technology it can boost its production. You dont believe me? Do you think Saudi Arabia, Qatar and else need super-fracking technology? So?

  • Jacksonian_Libertarian

    Economic sanctions never work, and the only reason why diplomats and politicians continue to use them, is because they want to hide how weak and powerless they truly are. A much stronger and not lame response would be to donate weapons, material, and trainers to the Ukraine. An even stronger response would be to send in troops to bordering countries, and threaten to reveal what a paper tiger the Russian military has become.

    But that will never happen because the weakest President in US history Obama is never going to do anything. Obama and the weakling Europeans will next threaten to send a harshly worded communique. What a bunch of pansies, their cowardice disgusts me. Always passing the buck, and avoiding responsibility, voting present so they don’t offend anyone and can be on every side of every issue.

    Russia, China, Iran, are all laughing and sneering at America and their coward of a President. They all know that the veteran American military wouldn’t even work up a sweat kicking their ass, but they also know that Obama will never order them into battle.

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