Gazprom makes its move: Get ready for profits in the energy “Great Game”
Today's Financial News - Posted January 1, 2009
Russia’s natural gas monopoly Gazprom (OGZPY) has shut off Ukraine’s natural gas. This is only the prelude for a strategic power play that will reshape the power blocs in Europe… and create incredible profits for nimble investors!
by J. Christoph Amberger
Baltimore — (TFN): It may be a holiday, but global power politics rarely take a day off.
Neither does your TFN team. So let me get down to business!
As Europeans and Americans cure New Year’s Eve hangovers, Russia has created a fresh new skull-splitter for European energy consumers and the incoming American administration.
Right on schedule this morning, Russian energy monopoly Gazprom (OTC:OGZPY) cut off supplies of natural gas to Ukraine after a payment deadline expired.
There had been plenty of warning: Gazprom had been threatening exactly this move for months. First, because Ukraine was in arrears with payments for November and December gas deliveries… and then again last week because Kiev had not signed off on a new contract that would raise the natural gas price by a minimum of 40%. (It initially was more than double the price from 2008!)
And then, TFN issued a quite detailed forecast of just this event over six weeks ago!
You and I know, of course, that this is not about natural gas. Ukraine could pay off its entire bill and sign the new contract—and it would still be at odds with Russia! Because natural gas is merely a weapon in the Kremlin’s foreign policy arsenal.
A foreign policy that aims at re-establishing Russian hegemony in the areas that once made up the Soviet Union and the Warsaw Pact.
Don’t look at Gazprom as a private company. For all intents and purposes, it is Russia’s Capitalist foreign-policiy arm… as well as the single most important contributor to Russia’s ambitious budget. A budget that more than ever depends on maximum revenues from natural gas!
But cloaking the monopoly in the guise of an independent company has its benefits. Parading Gazprom as a corporation who orients pricing policy on the free market (and therefore “cannot afford to subsidize Ukraine”) and customer service (”securing supplies for our very best customers”), the Kremlin has created a Teflon coating for ramming its imperialist foreign policy down the throat of the free world.
And in Europe, except for a few notable exceptions, they’re saying “open wide”!
Monopolist “Great Game”
According to CNN, Gazprom has “reassured the rest of Europe that its natural gas supply, which runs through Ukraine, will not be affected by the dispute with Kiev.” It has increased the deliveries to the rest of the continent.
But the natural gas pipeline runs through Ukraine. Ukraine could simply interrupt the flow of gas and cause deliveries… and cash flow to Russia!… to break down overnight. There could be an “accident” that would damage the pipeline… a fire or explosion, for example. Or Kiev could quote maintenance issues or safety concerns.
“Gazprom will continue supplying gas for its consumers in Europe at full volume,” Gazprom’s CEO Alexey Miller, said. “We have an effective transit contract.”
The only way to guarantee supplies is by force!
If the transit contract is breached or the flow is interrupted, Gazprom has the ways and means to enforce its resumption. The company maintains a Kremlin-sponsored private army of mercenaries recruited from Russian special forces. They have tanks, armored personnel carriers and helicopters… and are eager to show off Russian force to a turncoat republic.
And like in previous invasions, Russian forces are not beyond taking action wearing foreign uniforms. Be it just those of the Gazprom kontraktniki…
Of course, beyond contract enforment and security, there’s the issue of theft that opens another door…
Reasons to be cheerful…
There’s the distinct possibility that Ukraine may help itself to transit gas destined for Germany or Hungary. Currently, domestic natural gas needs are met by gas from underground storage facilities. At noon today, the temperature in Kiev was 25 degrees Fahrenheit (-4 degrees Celsius). Not too cold for the region… but give it another three weeks and Ukrainians may literally be freezing to death.
Russian Prime Minister Vladimir Putin has already injected himself into the conflict. He has explicitly warned Ukraine against diverting gas intended for Europe, threatening “quite serious consequences for the transit country itself”.
Of course, that has been the point of the exercise all along: Bring Ukraine back under the direct control of the Kremlin. Not because bankrupt and dependent Ukraine is much of a trophy… but because it controls the natural gas pipeline that, after the collapse of oil prices, is responsible for the bulk of foreign revenues flows AND political leverage on Western Europe.
For Russia, this is a win-win situation: Europe relies on Russia for its natural gas needs. Ukrainian interference will result in negative public opinion in EU countries—not against Russia but against Ukraine. After all, unnoticed by most Americans, comfortable Europeans now consider Russian dominance preferable to American-style freedom!
And America cannot reasonably intercede because Russia holds all the publicity aces as a “defender of free markets,” “champion of customer service,” and “warrantor of European energy supplies.”
Set-up for a coup?
Internally, Ukrainian President Viktor Yushchenko, who has antagonized Putin by his efforts to join NATO, become a member of the EU, and his support of Georgia in its August war with Russia, is in the weakest position of his career. His Prime Minister, the photogenic Yulia Tymoshenko is a bitter political rival… and supports Russia’s position in the country’s gas and foreign policy.
Political scenarios for the next three weeks could include that Yushchenko is forced to resign, re-alinging the country with Russia under Tymoshenko. Or there could be public unrest during which the pro-Russian party could call on the Big Brother to the East for help.
Big Brother will be happy to assist… much like the Red Army was eager to “follow” the call for assistance made under the 1978 “Treaty of Friendship, Cooperation and Good Neighborliness” with Afghanistan.
In any case… Russia’s move has created an incredible investment opportunity.
In our earlier coverage, we had extended our deadline to act to January 2. And it looks like we were right on the money!
We have identified three energy companies that will profit directly from this energy crisis.
How do we know? Well, let me put it this way: They SOARED the last time Russia pulled this dirty trick… in 2006 and in 2008. And this time, with more at stake for Russia and easier pickings for Putin, they stand to make a mint off the conflict… and for investors who are positioned for Phase 2 in this showdown. We’re expecting to double, maybe even triple our money on at least one of the three in the coming six months.
Maybe you’d like to refresh your memory just what these companies do? Here’s the link to our initial report! In it, you will also learn how members of our premium services got their early warning… and detailed instructions how to take action on this recommendation.
Next Article: Taking profits from the coal industry
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January 7th, 2009 at 5:54 pm
How can a small individual from Canada hope to make any money, when the investment is so far away. It is hard enought o break even using existing American and Canadian companies to invest in?
In the past, I personally have lost money on investments in the Orient as the investment simply dissapeared off the charts and No one knew anything about it. ” ONCE BITTEN- TWICE SHY ” **Noel**