As President Vladimir Putin tries to restore Russia as a major
player in the Middle East, Saudi Arabia is starting to attack on
Russia's traditional stomping ground by supplying lower-priced crude oil
to Poland.
At a recent investment forum, Igor Sechin, chief
executive of Rosneft, Russia's biggest oil company, complained about the
Saudis' entry into the Polish market. "They're dumping actively," he said.
Other Russian oil executives are worried, too. "Isn't this move a first
step toward a redivision of Western markets?" Nikolai Rubchenkov, an
executive at Tatneft, said at
an oil roundtable Thursday. "Shouldn't the government's energy strategy
contain some measures to safeguard Russia's interests in its existing
Western markets?"
European traders and refiners confirm
that Saudi Arabia has been offering its oil at significant discounts,
making it more attractive than Russian crude. And, even though most
eastern European refineries are now technologically dependent on the
Russian crude mix, Russia's oilmen are right to be worried.
In the
1970s, Saudi Arabia sent half of its oil to Europe, but then the Soviet
Union built export pipelines from its abundant West Siberian oil
fields, and the Saudis switched to Asian markets, where demand was
growing and better prices could be had. The Saudi share of the European
crude market kept dropping; in
2009, it reached a nadir of 5.9 percent. Russia's share peaked at 34.8
percent in 2011. In recent years, Saudi Arabia slowly increased its
presence, reaching a 8.6 percent share in 2013, but it had never tried
its luck in Poland.
Like most of central and eastern Europe, Poland has long been a client of Russian oil companies. Last year, about three-quarters
of its fuel imports came from Russia, with the rest from Kazakhstan and
European countries. Poland, however, is at the center of efforts to
reduce the European Union's dependence on Russian energy. Since Putin
annexed Crimea from Ukraine last year, Poland, Ukraine's neighbor, has
increased military expenditures and other efforts to shore up its
security. It's working with its smaller neighbors, too. On Thursday, it announced an agreement with
Lithuania, Latvia and Estonia to build a natural gas pipeline to and
from the Baltic States, ensuring their future independence from Russian
gas supplies.
In this context, a new and reliable supplier is a
godsend. As for the Saudis, they need to expand outside Asia where
demand is falling.
The Kremlin and Russian oilmen have long
sensed Europe's appetite for energy diversification and have sought new
markets. Until the 2000s, almost all Russian oil exports were to Europe.
By last year, that share had shrunk to less than two-thirds:
In the Asian markets, Russia became a serious competitor to the
Saudis. In May, Russian crude supplies to China even temporarily surpassed
those of Saudi Arabia. Now that the Saudis are involved in a ruthless
price war for market share -- not just with U.S. shale oil producers but
with all suppliers who are not members of the Organization of Petroleum
Exporting countries -- they are moving into Russia's traditional
market.
This could turn into a more active shoving match between
the world's two biggest oil exporters, which already are at odds over
the Syrian conflict. So far, OPEC and the International Energy Agency
predict modest demand expansion next year, but if the Chinese economy
continues performing worse than expected, that market may become too
small for the Russians and the Saudis. Both economies are oil-dependent
and retaining market share is a matter of survival.
Oil
competition is a dangerous undercurrent in Putin's Middle Eastern
policy. The Russian leader hopes that when its ally Iran re-enters the
global oil and gas market, Russia will somehow share in the profits,
perhaps through new pipelines across Syria. He also wants to stop the
Saudis from establishing export routes in Syria. Now that Russian energy
supremacy in Europe also is at stake, Putin's determination to resolve
the Syrian conflict on his terms can only grow.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story: Leonid Bershidsky at lbershidsky@bloomberg.net
To contact the editor responsible for this story: Max Berley at mberley@bloomberg.net
end quote from:
No comments:
Post a Comment