Russia Eyes Crimea’s Oil and Gas Reserves

Dave here. In case you were thinking that the Great Game was obsolete or something. Needless to say the referendum passed, this was written slightly before the release of the results.

By Nick Cunningham, a Washington DC-based writer on energy and environmental issues. You can follow him on twitter at @nickcunningham1. Cross-posted at Oil Price.

According to Reuters, Crimea may nationalize oil and gas assets within its borders belonging to Ukraine, and sell them off to Russia. Crimea’s Deputy Prime Minister hinted at the possibility that it would take control of Chornomorneftegaz, a Ukrainian state-owned enterprise, and then “privatize” it by selling it to Gazprom. “After nationalisation of the company we would openly take a decision – if a large investor, like Gazprom or others emerges – to carry out (privatisation),” Deputy Prime Minister Rustam Temirgaliev said.

Crimea’s Russian-backed government has decided to hold a referendum on March 16 to secede from Ukraine. At the time of this writing, Russia’s heavy involvement in the drive for Crimean secession makes it hard to believe that Sunday’s result will be anything other than an overwhelming result in favor of breaking ties with Kiev (either greater autonomy or annexation by Russia). The next steps are much less clear, however. Secretary of State John Kerry is hoping Russia will hold off on fully annexing Crimea, leaving open the possibility of some diplomatic way of resolving the crisis.

The ongoing political standoff in Crimea has already halted Ukraine’s oil and gas ambitions. Ukraine came close to inking a deal with a consortium of international oil companies that would have led to an initial $735 million investment to drill two offshore wells. The consortium led by ExxonMobil – with stakes held by Shell, Romania’s OMV Petrom, and Ukraine’s Nadra Ukrainy – had been particularly interested in the Skifska field in the Black Sea, which holds an estimated 200 to 250 billion cubic meters of natural gas. If it can get the field up and running, Exxon hopes to eventually produce 5 billion cubic meters per year. Exxon’s consortium outbid Russian oil company Lukoil for the rights to the block.

Those plans were still in the early stages – the consortium and the Ukrainian government led by Viktor Yanukovych couldn’t agree on terms. Obviously, once Yanukovych was ousted, ExxonMobil had to put those plans on hold until further notice.

Exxon’s plans for Skifska may not have a future if Russia simply takes Ukraine’s assets. The speaker of Crimea’s parliament said on March 13 that its oilfields should be under the care of Moscow. “Russia, and Gazprom, should take care of the oil and gas production,” said Vladimir Konstantinov. The new Ukrainian government in Kiev may not have much control over the situation if Crimea’s government nationalizes Chornomorneftegaz and its assets. Ukraine had been optimistic about developing its offshore oil and gas reserves, but after Sunday’s referendum, those reserves may suddenly be in Crimean (or Russian) territory.

Exxon is in a bit of a pickle, as it has billions of dollars of investments in the Russia Arctic in a co-venture with Rosneft, its largest non-U.S. project. It is therefore staying pretty quiet about its position in Skifska, and will likely maintain a low-key position even after the referendum. Exxon likely doesn’t see much upside in getting into a tiff with Russia over the Black Sea, especially since it hadn’t even agreed on a production sharing agreement with Kiev yet. Exxon’s plans for the Russian Arctic are too important.

ExxonMobil aside, If Crimea and Russia move forward with the nationalization/privatization of Ukrainian oil and gas reserves, it will heighten the conflict between Russia on the one hand, and Ukraine and the West on the other. The U.S. has promised tougher sanctions over what it argues as an illegal annexation of Crimea. Russia’s annexation of Ukraine’s energy resources will only add fuel to the fire.

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About David Dayen

David is a contributing writer to Salon.com. He has been writing about politics since 2004. He spent three years writing for the FireDogLake News Desk; he’s also written for The New Republic, The American Prospect, The Guardian (UK), The Huffington Post, The Washington Monthly, Alternet, Democracy Journal and Pacific Standard, as well as multiple well-trafficked progressive blogs and websites. His has been a guest on MSNBC, CNN, Aljazeera, Russia Today, NPR, Pacifica Radio and Air America Radio. He has contributed to two anthology books, one about the Wisconsin labor uprising and another on the fight against the Stop Online Piracy Act in Congress. Prior to writing about politics he worked for two decades as a television producer and editor. You can follow him on Twitter at @ddayen.

75 comments

  1. different clue

    Was that Putin’s first goal? Or was that just gravy on the main goal of no NATO bases in Ukraine ever. Ever.

    1. farang

      I’d counter that his first goal was the protection of ethnic Russian civilians in Crimea after the Neocon onslaught led by Nuland and Cohen-Kerry. And the passing of laws banning Russian language by Russian-speaking Ukrainians.

      What an odious endeavor to plot to foment violence and assassinations while Russia is hosting US athletes in the Olympics and ensuring their well-being.

      The “main goal” was to target another victim of neocon “globslization” in Ukraine, subjecting the citizens to life-long DEBT ENSLAVEMENT.

      Of course, odious IS the definition Neocon.

      My wager? YATS HANGS SOON.

      1. NotTimothyGeithner

        I’m not positive Putin has a plan as much as he sees the U.S. and various western outfits as a threat to Russia and general stability. A John Kerry miscue gave the Russians an opportunity to defuse the Syria standoff.

        One of the Indian papers claimed the government officials they spoke to when pushed for their reasons to support Russia in the Crimea admitted distrust of the West was the main motivator. George Kennan’s predictions are coming true. The Western Empire now exists to justify itself and is seen as such.

      2. Tom W Harris

        “Cohen-Kerry”?

        Thanks for tipping us off that not all the bigoted filth are on the Ukrainian side.

    2. Nathanael

      My theory is that Putin’s goal was to retire to a dacha in the Crimea. In which case, his actions would actually make sense.

      Chasing after oil and gas…. just plain dumb.

  2. Jackrabbit

    We have witnessed one clusterf@#k after another – Iraq, GFC/TBTF, NSA, Fukeshima, Ukraine, climate change, etc. – and so far the response to each has been to reward the culprits, blame the victims, and baffle with bullsh!t while using OPM (Other People’s Money) to gloss it over.

    In addition to undermining our standing in the world, what the neocons have done is establish a cashcow for Russian and Ukrainian oligarchs. Russia will almost certainly extract a ‘price’ via higher gas prices to Ukraine and Europe.

      1. 1 Kings

        Am assuming that’s irony?..
        Whether a ‘d’ in front of his name or ‘r’, Obama’s policies are exactly the same.

      2. Banger

        People continually over-estimate the power of the President. Bush had to put a stop to the neocon nonsense after the 06 elections because the power-elite saw the as a liability. Obama is no neocon but the neocons have, recently come back into power within the Washington establishment so Obama has too go along with their policies–I can see him dragging his feet all the way.

        1. Gaianne

          How, or in what ways do you see Obama dragging his feet? I agree that he does not hold much personal power, but what are the signs that you see indicating he opposes or at least does not favor the neo-cons?

          –Gaianne

          1. Lafayette

            There is a common misunderstanding, even amongst Americans, regarding our tripartite system of governance – the Executive, Legislative and Judicial branches.

            The fact that there is a balance-of-power built-in to our system of governance is no accident. It was purposefully designed by our forefathers with European all-powerful monarchies in mind. They wanted none of that – including the fawning aristocrats.

            So, yes, Obama can propose spending bills, but they must (by convention) initiate in the HofR and be voted upon by both legislative branches. So, he has no real control of the budget.

            He is obliged to negotiate with the Replicant T-Party, which has steadfastly stonewalled any Stimulus Spending – which is the conventional economic artifact for exiting a recessionary period.

            So, this present mess is who’s fault? The PotUS or the knot-heads in the T-Party, who all sing off the same Hymn Sheet orchestrated by the Koch Bros and their ilk?

            Who …?

            1. Gaianne

              This is fine but irrelevant to my question. Of course the powers of the President are limited under the US Constitution, but a skilled and powerful President is not confined to making suggestions to Congress and passively hoping they will agree.

              President Johnson would have eaten the Tea Party for lunch. He was skilled at making threats and taking revenge, his personal connections and knowledge of procedures made him very difficult to oppose.

              I mean this as a mere example that a President does not have to be personally weak. Nor does bipartisanship–which Johnson certainly practiced much of the time, but used to weaken his opponents, not himself–necessarily mean abject pleading and abandoning your position in advance of the confrontation.

              All this has nothing to do with my question: What are the concrete signs that Obama opposes the neo-con position?

        2. Jackrabbit

          . . . dragging his feet all the way.

          This is not the first time that I’ve seen Obama’s relationship to the neocons described as reluctant. This line of thinking harkens back to the ’11-dimensional’ chess days and is just as fraught.

          Obama may not have begun his presidency as a neocon but as a neolib pol he was always in thrall with power. And until I see evidence otherwise, I believe that he was ‘convinced’ of the neocon point of view early into his presidency.

          At this point there is every indication that Obama is himself a neocon as he asserts that each new action: invading Libya, bombing Syria, supporting the coup in Egypt and Ukraine is ‘necessary’. His support for the neocon agenda is complemented by his domestic actions:
          – supporting NSA spying (he railed against Bush’s overreach)
          – signing statements and secret orders (he said he would stop this and that his administration would be the most transparent ever)
          – NDAA (signed on New Year’s eve – poo pooed as unimportant – then defended vigorously in court)
          – withholding documents from Congress
          – access journalism
          – trade agreements negotiated in secret
          – and more.

          1. Lafayette

            It is a sadly pathetic chapter in American history – one that depicts the willfulness of a small group of selfish individuals bent upon obtaining/retaining power in order to guaranty a status-quo that benefits them personally. (I.e., the Tax Code that limits maximum total-income taxation (earned, interest and equity derived) at only 30%, after deductions).

            Americans cannot be proud of this deeply flawed period. It shows all the gross imperfections of The Greatest Democracy on Earth – driven by greed, cupidity and the lust for power.

            Which were exactly the same conditions that provoked so, so many revolutions in the history of mankind.

          2. JTFaraday

            In keeping with what someone here recently called Obama’s role as “PR man,” O’s pick for foreign policy guru was liberal “humanitarian interventionist” Samantha Power.

            http://en.wikipedia.org/wiki/Samantha_Power

            In short, someone who would put a moral fig leaf on whatever “the neos” decide they want to do.

            There are many such “humanitarian liberals” out and about. By now one should assume that their role is the provision of moral fig leafs, however sincere they think they are, and that when push comes to shove their vain certainty in their own moral rectitude will induce them to rationalize away their participation in the very same things they piously disclaimed the day before yesterday.

            We see this all the time.

    1. Banger

      Thanks for the link–great story and well-written. Just a comment on his attitude towards Putin and his allies–all people in power are corrupt to some extent. Obama is a weak leader installed by Wall Street and other corporate forces–he can’t act like Putin and doesn’t have the power-base to overrule the deep state. If he had been more ruthless he would have had more power. The power-elite in Washington are more diverse and have competing interests. The power-elite in Russia are, to all appearances, more united and focused which allows Putin to act in bold moves. Are they more corrupt than American leaders? Depends on how you define corruption–are they more violent than American leaders? I would say the answer is no–clearly, Russia could never dream of causing death on the scale the U.S. has since Putin came to power.

    2. Vatch

      Crimea was moved from Russia to Ukraine in 1954, not 1991: Crimean Oblast. When the Soviet Union broke up, it would have made things very complicated if they had changed the borders of the 14 newly free republics. In the long run it might have been better to have changed some of the borders, but I’m not wise enough to know whether this is so.

        1. MaroonBulldog

          What exception for Kaliningrad? That territory was annexed to the R.S.F.S.R. at the end of WWII

  3. Lafayette

    The ongoing political standoff in Crimea has already halted Ukraine’s oil and gas ambitions. Ukraine came close to inking a deal with a consortium of international oil companies that would have led to an initial $735 million investment to drill two offshore wells. The consortium led by ExxonMobil

    It’s not sure what has changed.

    The Ukraine can fight for its offshore petroleum rights in an international court and at least get half of whatever oil is drilled and obtained. Or, if not, the “owner” would have one helluva a time selling the Ukraine’s oil elsewhere.

    In Libya, a renegade group in Benghazi pirated some oil, put it on a boat that escaped the port, and sought to sell it. US Navy seals just nipped that plan in the bud. Nobody is disputing, for the moment, the legality of that move since the oil will likely be resold by the Libyan government.

    Russia would have a difficult time selling Crimean oil internationally if the Ukraine took the case to court. The Crimea is not Ossetia (in Georgia). It’s a very different ball-game.

    It just may be that Putin has got in over his head …

    1. different clue

      It did end and stayed ended all through Bush Senior. It was Clinton specifically who oversaw efforts to start the Cold War up again, beginning with betraying the Reagan-Bush promise not to extend NATO eastward. Which , by the way, Reagan and Bush Senior kept.

  4. Lava

    Putin is a sneaky man. Now he will get a part of Ukrainian lands (KRYM) and nobody (UE and US) can do anything. That’s sad but it’s true.

  5. fairleft

    About that cold war, Russophobe headline… In fact Crimea is ‘eyeing’ its own oil and gas reserves. And the speaker of the Crimean legislature thinks Crimea, not Russia, likely would nationalize them and then sell them. The same speaker says that Crimea might then sell those assets to a private buyer, and he prefers Gazprom. So, finally, sitting passively at the end of the chain is a Russian company, the suggested recipient of the legislator proposed sale.

    1. Lafayette

      And the speaker of the Crimean legislature thinks Crimea, not Russia, likely would nationalize them and then sell them.

      I’ve already responded to this in a comment above.

      The Ukrainians have a good argument for rights regarding offshore drilling in Crimea before a court of International Law. If the Ukrainian claim is recognized by the court, then anybody who buys even a part of “Crimean oil” is committing a crime.

      It’s perhaps not as easy as one might think …

      1. Nathanael

        Offshore drilling in disputed territory is going to not happen.

        Offshore drilling is risky, unreliable stuff. It’s not something the military can do; it requires specialists. The specialist companies don’t want to screw around with possible military involvement. The result is that development of offshore oil resources *do not happen* in disputed territories.

  6. Banger

    So then, why didn’t the USG think about that before trying to engineer a coup against the democratically elected government of Ukraine. A government that was corrupt as the government was before and as the government will be once it gets a chance to coalesce.

    The whole thing is confusing–what is going on? Why the push for a new cold war?

    1. Synopticist

      Why didn’t the USG think about it?
      I wrote a looong comment yesterday about that, which got eaten (doh!!).

      In short, the foreign policy elite of the anglo-sphere have grown lazy and incompetent, used as they are to full spectrum dominance, and they mis-judged the situation. Their biggest desire was to hurt Putin (and it WAS about Putin, not neccesarily Russia) for his stand on Syria. Just give him some sh*t and teach him a lesson. Ukraine itself was secondary.

      They’re just not that clever anymore. The foreign office used to attract the very brightest people in the UK civil service. The State dept used to be the home of brilliant eggheads. That’s gone. Now they’re full of “soft power” PR types. They mistake great PR and media messaging for policy. Add in the neo-con hold-overs, and it’s no surprise they didn’t really think things through properly.

      1. Nathanael

        Putin is frankly lazy and incompetent too. His actions remind me of Kaiser Wilhelm’s before WWI. (So do the Bush/Obama actions.)

        This is very bad, because I’m seeing shades of WWI everywhere. The gross geopolitical incompetence is in so many “great powers”. China is the exception — it seems to be relatively competently run.

        1. JerseyJeffersonian

          Putin lazy and incompetent? In your dreams, ace. Obama and his threat-posturing, red-assed baboon, Kerry, have gotten repeatedly outmaneuvered. They have had their glaring hypocrisy thrown back in their teeth, as they so richly deserved. This is a very, very instructive moment for the world, a world that has gotten quite weary of being lectured, condescended to, muscled around, and most importantly, lied to, serially and transparently by the Exceptional Nation.

    2. Katniss Everdeen

      Why the push for a new cold war?

      That is THE question that has been bothering me too.

      Perhaps to distract from/explain/”cure” an imploding American economy that can no longer be covered up?

      Don’t most Americans believe that WW II “solved” the Great Depression?

      And war time rationing and lack looks just the same as economically-induced rationing and lack.

      Additionally, the MIC is pretty evenly spread over the entire country. Cranking that up is a “stimulus” that even the most conservative congress person could not oppose.

      1. Banger

        I think a section of the oligarchy wants war to unite the people of the U.S. And perhaps the EU. That seems to be the agenda.

      2. Vatch

        Governments often use foreign enemies (or “enemies”) to unite and distract the population. It’s quite plausible that the leaders of the U.S. government want to do this, and it’s similarly plausible that the leaders of Russia want to do this.

      3. jonboinAR

        From what I’m gathering (mostly reading here and the links I find here), the most compelling motivation is controlling energy supply.

    3. Dan Kervick

      A lot of background. But I think this was the real clincher:

      http://world.time.com/2013/09/16/russia-celebrates-a-triumph-for-putin-after-clinching-syria-deal/

      Putin threw a spanner into yet another US scheme to remake the Middle East. He completely humiliated US political leaders, officials and opinion leaders in the process. Kerry was reduced to the figure of a fumbling and ranting buffoon. Obama was exposed (again) as weak. Putin wrote an op-ed published around the globe portraying himself as a sober statesman and the US as impetuous morons.

      I didn’t watch much of the Olympics, but my impression just from following my Twitter feed was that the Olympics were used by elements in the US to launch an extremely well-coordinated and incessant propaganda offensive against Russia. And the escalation of the Ukrainian protests into a revolutionary movement were clearly timed to coincide with the Olympics when Russia’s freedom of movement was constrained.

      The fact is that US power and stature are declining, and generations of Americans who grew up in a different era can feel that viscerally and are susceptible to these kinds of frustrated temper tantrums. The same is true, in a different way, for older generations of Russians.

      1. Jim Haygood

        ‘The fact is that US power and stature are declining.’

        Yep. Turns out that maintaining wartime troop levels for 70 years to man a global garrison state hollows out the economy.

        We’re the USSR now, comrades. At least we’re meeting our grain production quotas, and the gulags are filled.

        1. different clue

          Free Trade also hollows it out by literally packing it up into crates and shipping it to overseas economic aggression platforms. If we didn’t begin our fast collapse until the advent of Free Trade, then it might be that Free Trade has collapsed us even more than feeding the MIC and all the foreign bases.

      2. Banger

        Yes, I noticed the propaganda thing from the opening ceremony which I thought was very cool and the chatterers I chief was laying it on thick. Because the American propaganda organs are so used to fooling the publics they’ve gone more blatant and fact free every year. They have done the research on the AMerican public and know that the vast majority of the Amrerican public lack all critical thinking skills.

        1. NotTimothyGeithner

          It was a better ceremony than our salute to Mormonism in 2002, but William Shaner closed the Vancouver Olympics.

      3. hunkerdown

        My impression from following Twitter and Facebook acquaintances who can’t wait to see what pacifier Upworthy seeks to shove into their mouths next was pretty much the same.

        Don’t forget the Venezuelan uprising flared up under the same cover.

      4. Nathanael

        Now, Putin has tied himself to a number of locally hated dictators — now his puppets while alienating all the other great economic powers, as well as ticking off what’s left of liberal society.

        Not real bright moves.

        Kerry comes off looking OK, because he was straightfoward about everything. Obama looks awful as usual, since Obama is copying Bush administration policy.

        I think we’re seeing Russia and the US make *similar* mistakes. The US and Russia are really very similar countries. This is kind of depressing.

        At least different mistakes are being made in Turkey and Iran. Japan is making different mistakes as well, terrible ones. China… does not seem to be making mistakes right now.

        1. JerseyJeffersonian

          Well, no. I think that President Putin has shown the “other great powers” on the rise, i.e., the other members of the BRICS, as well as other nations across the planet that they don’t have to just tug their fetlock, dig their toe in the dirt, crumple their hat in their hand, and with downcast eyes, mumble assent to whatever the US wants. It’s a new day, it really will be a multi-polar world.

          And if by “liberal society” you mean the Washington Consensus, and the sympathetic yapping of its biddable poodles in Europe and Japan, that society seems in reality to amount to nothing more than an expression of the arrogance of NeoConservatism and NeoLiberalism. Those people don’t exhibit respect for others, they demand only compliance, so who in their right mind would care about hurting their pwecious feefees?

          Kerry comes off looking okay? Pull the other one. Obama yet again stands revealed as an unimaginative, culturally and historically illiterate front man whose only skill consists in cravenly serving elites, and expediting their schemes in anticipation of tying on the feedbag – like Bill Clinton – after a job well done selling out his countrymen.

          And Russia and the US really very similar countries? OMFG. In what way, pray tell?

  7. David C Mace

    There is ONE and ONLY ONE reason Russia is annexing Crimea
    The global strategic imperative to have a viable Black Sea Fleet base and to make sure that Sevastapol does not become a U$/NATO fleet base.

    All the rest of this and man other analyses are too clever by half.

    1. Dan Kervick

      I agree with this. I think we have to look at this, in part, by analogy to how the US would respond if there were (another) anti-US revolution in Cuba. The US would make a show of force around Guantanamo to send the message to the new regime, “Don’t even think about getting your hands on Gitmo.”

      And yet Guantanamo isn’t even 1/3rd as important to the US as Sevastopol to is to Russia.

      1. vlade

        Hello???? Did you look at the map?
        Given that NATO can control black sea from Turkey very easily, both access and whatever happens there, a large Black Sea Fleet is a liability more than anything else. Against Turkey (and hence NATO) taking the fleet out of the port would be a suicide for the fleet. There’s barely 200km of north-south maneuvring space between Turkey and Crimea. Harpoon antiship missile has range more than half of that.

        It’s more prestige and history than anything else, but strategically Russia doesn’t need Sevastopol as a navy base. What Crimea IS very useful for is covering of Russias relatively exposed south (European) flank, so you’d install a number of AA installations/air bases there.
        If you’d really want to have a reasonable naval base, Novorossiysk is actually a much better choice, since it has much better logistical connections to the rest of Russia, unlike Sevastopol (which has to be supplied by sea or via Ukraine – there are plans to build a bridge over Kerch but that would be still very vulnerable). Rostov on Don would be even better except for the problem of Kerch.

        1. Dan Kervick

          I’m not talking about NATO. I’m talking about the country of Ukraine itself and any big ideas its new upstart government might have had about getting control of the Sevastopol military assets.

          1. vlade

            Sevastopol military assets are imaginary, and are more of liability than anything else. Now, if we talk about the air bases or the AA defense sites in Crimea, that’s a diffferent story altogether.

        2. Murky

          The Novorossiysk harbor is extraordinarily shallow. The harbor floor is a sloping plane with very gradual drop-off. Moreover the channel for ship entry into the harbor is also quite narrow. Rehab for a large fleet would be a colossal engineering operation. If you search the net you’ll find a few feasibility studies. Bottom line: cost prohibitive.

          1. vlade

            I know that, but I believe that for a reasonable black sea fleet (say two small frigattes and a few small craft) could be still based there rather than Sevastopol, especially with all the logistic problems of Sevastopol (if you control BS to supply Sevastopol, why do you need a fleet there in the first place, since “control” implies full air superiority). Placing a cruiser (of which BS Fleet has two at the oment) or anything like that in BS is overkill and too much risk for too little reward. You’d better off beefing up your airforce. Who are your realistic threats in BS theatre? Ukraine and Turkey. Larger fleet is a liability for a fight even with Ukraine unless you have an air superiority in which case you don’t need the fleet in the first place.

            But then Russians have two frigates in Caspian sea which again I think is an overkill..

            When you look at their Pacific fleet (a cruiser, a destroyer, and 17 subs, I ignore the “conserved” battle cruiser), they have more surface vessels in Black sea than in Pacific, which strategically just doesn’t make sense. Or why do you need bigger black sea fleet than a baltic fleet?

            Up to WW1 Sevastopol made quite a bit of sense as a base. Even in WW2 it stopped having much value as a strategic asset given that land based aircraft could control pretty much whole of black sea. It still has tons of sentimental and prestige value, but that’s a different story.

      2. Nathanael

        Both responses are insane, however. Guantanamo Bay should be abandoned by the US, the way the UK eventually abandoned its useless naval bases around the world; and a Black Sea fleet is a useless collection of sitting ducks since the Black Sea is quite thoroughly bottled up by Turkey.

        I’m not sure how to get sane government into the US *or* Russia. Russia managed to get Gorbachev, who was a wise and far-sighted man, but then there was a coup against him. The US almost elected Gore, but then the Supreme Court stole the Presidency. (What do these two men have in common? They actually take global warming seriously, for one thing.) In both cases, antidemocratic forces managed to prevent good government. I don’t know how to overcome this.

  8. E.L. Beck

    Well, the U.S. gets a double win here, as eventually Europe will have to buy our natural gas exports (and we can legitimize our need to export), and what a great bargaining chip that becomes in forcing the EU to start agreeing to the U.S. terms on the trans-atlantic trade agreement.
    Damn, who thinks these things up in D.C.? Pure (evil) genius.

    1. c1ue

      More idiocy. Converting natural gas to LNG increases costs by over 100% (at US prices). Then you have to actually get it into the appropriate pipeline systems – which requires multiyear construction of LNG terminals.
      And most importantly, why sell to Europe when it is far more profitable to sell to Asia?
      I’ll lastly note that significant LNG sales elsewhere will reduce the natural gas glut in the US – leading to higher prices for American consumers (no big deal), but more importantly to many large multi-national corporation’s operations in the US.

      1. E.L. Beck

        For being a self-appointed demigod in NC’s Commentland, you certainly have trouble seeing the forest for the trees. A move to export natural gas doesn’t have to “make sense.” Hell, in her March 31, 2014 post on ourfiniteworld.com, “The Absurdity of US Natural Gas Exports,” Gail Tverberg does a great job of arguing her point against exports, but even she recognized why these efforts are moving forward:

        “Why all of the natural gas exports, if we don’t have very much natural gas, and the shale gas portion (which is the only portion with much potential for growth) is so unprofitable? –The reason for all of the exports is to pump up the prices shale gas producers can get for their gas.– This comes partly by engineering higher US prices (by shipping an excessive portion overseas) and partly by trying to take advantage of higher prices in Europe and Japan.”

        Her emphasis, not mine.

        And right or wrong, the speculators seem to be onboard:

        http://www.businessweek.com/news/2014-03-30/record-natural-gas-need-keeps-bulls-betting-on-advances-energy

        We have legal restrictions on natural gas exports in place, and the energy companies are leaning on Congress to remove those restrictions:

        http://www.nytimes.com/2014/03/06/world/europe/us-seeks-to-reduce-ukraines-reliance-on-russia-for-natural-gas.html

        What better way to stir the we-need-natural-gas-export-restrictions-lifted pot than to find a bottleneck in the gas supply in a country that had a shaky political landscape within which we could get those restrictions removed? Blunt force to remove those restrictions would not have played well with an American public that has grown accustomed to the we-need-energy meme.

        Once those restrictions are removed, the carrot starts to look bigger for those trade agreements dangling over the Atlantic and Pacific. Intransigent opposition on either side of those ponds can quickly melt away when European and Asian political leaders are faced with a population growing cold over a harsh winter.

        1. Yves Smith

          I suggest you read up more on nat gas. We’ve and others in comments have discussed that US nat gas is absolutely not a viable fuel source for Europe. Transportation cost render it uneconomical.

          1. E.L. Beck

            Uneconomical when, now? Wait for the prices to hit the stratosphere, and explain this:

            “Russia’s military intervention in Ukraine also boosted calls to expedite U.S. natural gas exports.

            “Having more of our gas reach the market will reduce volatility and provide diversity,” Karen Harbert, president of the U.S. Chamber of Commerce’s 21st Century Energy Institute, told reporters on a conference call on March 4 — the same day Putin said Russia would cancel the price discount on natural gas it sold to Ukraine.

            Efforts by other Washington-based lobbying groups including the American Petroleum Institute to lift 1970s-era bans on the export of oil also have gained steam.

            “We’ve just had a consistent drumbeat going since the beginning of last year,” said Erik Milito, API’s director of upstream and industry operations. “We just kept doing it, and this became a more heightened debate during the whole Ukraine situation.”

            from Ukrainian Crisis Not Wasted by Washington Lobbyists: http://www.bloomberg.com/news/2014-04-11/ukrainian-crisis-not-being-allowed-to-go-to-waste-by-lobbyists.html

            And there’s nothing like a crisis to keep the momentum of foreign energy companies (including the U.S.) moving towards the Drain of Spain: Foreign Frackers Now Find Comfort in Water-Hungry Spain: http://www.bloomberg.com/news/2014-04-02/foreign-frackers-now-find-comfort-in-water-hungry-spain.html

            For those who find it unimaginable that stupidity runs rampant in the natural-gas sector: Gas Carousel Making Spain Europe’s Biggest LNG Exporter: http://www.bloomberg.com/news/2014-04-10/gas-carousel-making-spain-europe-s-biggest-lng-exporter.html

            So do you think with this kind of mentality the LNG folks will really care if they ultimately drive up the price of doing business in the U.S.? They don’t get paid to be considerate. And none of it “makes sense” now, but wait until LNG prices reach painful new highs and we’re all burning our furniture to heat our homes, despite the energy companies fracking our continent in two. Oh yes, it’s coming.

    2. different clue

      The more gas we sell, the less gas Russia gets to sell. The faster we sell our gas the sooner we run out. The slower Russia sells its gas, the more gas Russia has for later after we run out.
      Leaving Russia to become a Gas Superpower yet again, under this scenario of selling all our gas out from under our feet.

      1. c1ue

        Correct in a very long term sense.
        My point, however, was that US exports of LNG to Europe would neither hurt the Russian economy in the short term nor in the medium term because there are plenty of fossil fuel hungry consumers in East Asia – certainly nowhere near as much as the hurt applied to the EU and Eastern European economies.
        I believe the number is $160 billion – that’s how much annual fossil fuel energy sales go from Russia to the above.

  9. c1ue

    Idiotic. This writer should do a little more research before spewing out.
    ExxonMobil already bought an offshore Crimean fossil fuel concession in 2012. The issue was that Exxon Mobil failed to actually build anything for nearly 2 years. Source: http://johnhelmer.net/?p=10359
    If Russia is getting Crimean offshore fossil fuel assets, it is because of idiotic American maneuvering resulting in unforeseen consequences.
    Sound familiar?

  10. Andrew Watts

    The majority of Ukraine’s oil and natural gas fields are located in the eastern part of the country. The BBC has a useful map of fields and pipelines.

    http://www.bbc.com/news/business-26418664

    That is the real geopolitical prize up in the air. Crimea’s reserves are close to irrelevant in the grand scheme of things. Russia is merely cashing dividends on American foolishness. Putin’s approval ratings are going to hit all-time highs.

    1. Nathanael

      Putin’s approval ratings will remain low. Not that most people in Russia care one way or another about this nonsense.

      I strongly suspect that polling has become useless worldwide due to the “cellphone effect”, where only older people get surveyed by landline phonecalls — and if you try to survey younger people by cellphone, you can’t pin down their location so you get the wrong sample.

  11. gemini333

    Given the proximity of the Russia mainland to Crimea (the spit of land in Russia that extends almost to Crimea, where plans for a bridge have been expedited) I wonder if the oil/gas fields were also being worked on the Russian side.

    There was talk, about a decade ago, about huge deposits of oil and gas in the Black Sea. Later, I recall reading, that after exploration, the fields ended up being a disappointment. Maybe the new drilling and fracking technologies have changed the picture, I’m not sure.

    But given the vast reserves that Russia has outside of that area, and given the fact that a warm water port has been a huge priority for Russia for centuries, I am skeptical that these oil/gas fields were a top priority and motivating factor for Russia. My understanding is that taking on Crimea is, at least short term, an economic liability for Russia. Of course it would explain at least one of the reasons why Crimea seems to be so important to the US and the West that they’re willing to risk WWIII or a new Cold War in order to allow Ukraine to hold on to it.

  12. Brooklin Bridge

    Mike Whiteney has choice words for Obama and Kerry in an article published by Counterpunch. An excerpt:

    […] Putin, who was attending the Paralympic games in Sochi, has wisely stayed above the fray throughout the crisis brushing off the hysterical accusations and threats issued almost daily by President Obama or his vaudevillian sidekick John Kerry, the most incompetent buffoon to ever serve as US Secretary of State.[…]

    http://www.counterpunch.org/2014/03/18/obama-backs-down-on-crimea/

    1. Jackrabbit

      Ii>”Obama backs down…”

      Neolibs and neocons are ideologues that are backed by powerful interests. Ideologues don’t ‘back down’ – they change course or lie low until the next opportunity.

    2. JerseyJeffersonian

      Let it be noted that the blustering Dmytro Yarosh, Leader of Right Sector, was recently calling on Doku Umarov, supposed “1st Emir of the Caucasus Emirate and 5th President of the Chechen Republic of Ichkeria”, to come to the aid of his past brother in arms, and to strike a blow against Russia, and for Ukraine. Problem is, word has come out that Umarov has just been killed in an operation of Chechan anti-terrorist forces, so it appears that the cavalry will not be coming to the rescue after all. Oh, poot.

      That Yarosh – he really knows how to pick his allies, doesn’t he?

      P.S.: Perhaps there is a message in Umarov’s death for those who would threaten terrorist actions against Russians and Russian national interests, too. It’s a hard knock life…

      1. Nathanael

        The Russian Empire is in its last gasps. These things tend to collapse slowly.

        The US Empire is also in its last gasps.

        At the moment, the Chinese Empire seems to be growing.

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