Why Hasn't The U.S. Gone After Gazprom?
Submitted by Tyler Durden on 05/06/2014 21:29 -0400
Submitted by John Daly via OilPrice.com,
Amidst the deepening war of words over Moscow’s annexation of Crimea, U.S. President Barack Obama on April 28 added more Russian individuals and companies to a sanctions list that already included influential members of Russian President Vladimir Putin’s inner circle and Bank Rossiya, which has close ties to the Russian leadership. The new list freezes the assets of Igor Sechin, head of Russia's major oil company, Rosneft, six other individuals and 17 companies.
Significantly, the new U.S. list does not include Alexei Miller, CEO of the Russian natural gas state monopoly, Gazprom.
Although the European Union has imposed its own tough sanctions on 48 Russian individuals, Gazprom is arguably where daylight exists between the Obama administration and the EU on the issue of penalizing Moscow for its actions in Ukraine.
The numbers make it clear why. Russia is the EU’s third-biggest trading partner, after the U.S. and China; in 2012, bilateral EU-Russian trade amounted to almost $370 billion. The same year, U.S. trade with Russia amounted to just $26 billion.
More than half of Russia's exports go to Europe, and 45 percent of its imports come from Europe, according to the EU EUROSTAT agency. Out of 485 billion cubic meters of gas consumed by the EU annually, Russia supplies about 160 billion cubic meters, or almost one-third the total volume.
Germany, the EU’s economic powerhouse, has been explicit about the costs for the German economy from increased sanctions. Anton Börner, the president of Germany’s main trade group, BGA, warnedthat more than 6,000 German businesses with $105 billion of turnover are interlinked with Russia and stand to lose if sanctions are ratcheted up.
U.S. Representative Lois Frankel (D-FL), who recently visited Ukraine with a Congressional delegation, has offered the likeliest official explanation for why the White House left Gazprom and CEO Miller untouched in the most recent round of sanctions.
In an April 28 appearance on MSNBC, Frankel said, "I think our president is taking a cautious approach warranted because our European allies are...trade partners with Russia, they depend on Russia's energy. And so we have [to] be careful because sanctions against Russia also have the good probability of hurting our allies.”
Other members of Congress have shown less willingness to accommodate the EU’s delicate economic position. In recent days, senior members of the U.S. Senate have increased their calls for the White House to move against Gazprom. Carl Levin (D -MI), John McCain (R-AZ) and Bob Corker (R-TN)want Obama to use an executive order that allows him to punish broad sectors of the Russian economy in response to Russia’s actions in Crimea.
The lawmakers’ statements on the issue have been widely covered in the Ukrainian and Russian press.
In an April 12 letter to Obama, Corker, a ranking member of the Senate Foreign Relations Committee, said, “Unless Russia ends its destabilization of eastern Ukraine and drastically reduces troop levels on the Ukrainian border immediately, further sanctions against strategic sectors of the Russian economy, particularly targeting Gazprom and additional important financial institutions, should be imposed within days.”
After the latest round of U.S. sanctions this week, Corker repeated that call in a joint statement with Senator Kelly Ayotte (R-NH), the ranking member of the Senate Armed Services Readiness Subcommittee, in which he said, “Until Putin feels the real pain of sanctions targeting entities like Gazprom, which the Kremlin uses to coerce Ukraine and other neighbors, as well as some significant financial institutions, I don’t think diplomacy will change Russian behavior and de-escalate this crisis.”
During an April 25 visit to the Ukrainian capital, Kiev, Levin told reporters, “The existing authority is sufficient to take very strong sanctioning action against Russian banks that have correspondent accounts in the United States. The authority exists. It should be used, and that includes Gazprom.”
McCain advocated in an April 25 press release, “The United States needs to expand sanctions to major Russian banks, energy companies, and sectors of its economy, such as the arms industry, which serve as instruments of Putin’s foreign policy. NATO needs to move toward a robust and persistent military presence in central Europe and the Baltic countries, including increased missile defense capabilities. We need a transatlantic energy strategy to break Europe’s dependence on Russian oil and gas,” which would include sanctions against Gazprom, according to his office.
McCain recently suggested he has a broader agenda in mind when he said, “The strategy of the U.S. for saving Ukraine must be built in opposition to Russia's gas strategy, as this will be the end of Putin and his empire."
Given Gazprom’s centrality to the Russian economy, it’s unlikely that Putin won’t react if and when the company comes in for Western sanctions. In preparation for that possibility, Gazprom’s subsidiary, Gazprombank, Russia’s third largest, last month transferred nearly $7 billion to the Central Bank of the Russian Federation.
Gazprom has already warned that further Western sanctions could disrupt gas exports to Europe.
And Russian Natural Resources Minister Sergei Donskoi has made it explicit that there will be consequences for Western energy firms that comply with sanctions. Speaking on April 24 to journalists in Russia’s far eastern city of Birobidzhan, Donskoi said, "It is obvious that they won't return in the near future if they sever investment agreements with us, I mean there are consequences as well. Russia is one of the most promising countries in terms of hydrocarbons production. If some contracts are severed here, then, colleagues, you lose a serious lump of your future pie."
Donskoi also expressed the certainty that if Western firms leave Russia, other foreign energy companies would take their place.
That kind of threatening rhetoric will only make it harder for U.S. officials to sell an already nervous Brussels on the idea of more sanctions, if it comes to that, and on targeting Gazprom, in particular.
And The First Thing Ukraine Will Buy With IMF Money Is...
New talks on Ukraine doubtful unless opposition takes part – Lavrov
Published time: May 06, 2014 11:21
Edited time: May 06, 2014 12:07
Edited time: May 06, 2014 12:07
Russia’s foreign minister has expressed his doubts over international talks on Ukraine, saying all forces in the country should be present at the negotiating table.
"Once again gathering in the same format, when the opposition to the current regime in Ukraine is absent from the negotiating table, this will hardly change anything. It’s possible [to continue on this path] of course, but we will just go around in a circle and once again speak about how everything that we’ve agreed on needs to be implemented," Lavrov said.
Speaking during a news conference on the second day of the ministerial meeting of the 47 nations of the Council of Europe in Vienna, Lavrov remained hopeful that national dialogue was the way forward in Ukraine.
“We are convinced that there is a way out of the crisis. It can be found exclusively on the basis of a national dialogue," - he said.
According to Lavrov, that dialogue should be conducted between the western and eastern regions of the country.
In regards to the Ukrainian Presidential election, which is scheduled for May 25, Lavrov said it would be “unusual” to hold a poll when the regime in Kiev was conducing military operations in the southeast of the country.
“Carrying out an election in a situation, when the army is being used against parts of the population – that is sufficiently unusual. This isn’t Afghanistan, where a war is going on, and nonetheless, elections were held,” he said.
Lavrov said that the absence of violence would be one of the criteria by which Russia judges the legitimacy of the presidential election, as well as the upcoming referenda in Donetsk and Lugansk.
Speaking on the possibility of holding new negotiations in an international format regarding the ongoing Ukrainian crisis, Lavrov said he had arranged a meeting with his German counterpart Frank-Walter Steinmeier on Tuesday.
Meanwhile, the chairman of the Organisation for Security and Cooperation in Europe (OSCE) and Swiss President Didier Burkhalter is scheduled to visit Russia on Wednesday.
New subs, warships, SAMs, troops to be deployed in Crimea
Published time: May 06, 2014 09:21
The Russian Defense Ministry is planning to deploy additional forces in Crimea as part of beefing up the Black Sea fleet under a $2.5 billion program. The need for new deployment emerged after the formerly Ukrainian peninsula joined Russia.
“Before year’s end we will form new units of air defense and marine troops at the sites of our fleet’s deployment,” Defense Minister Sergey Shoigu said Tuesday. “The fleet will receive new submarines and surface ships of new generation this year. This requires our attention.”
The minister stressed that the Navy beef-up program for the Black Sea fleet was extended due to Crimea, the fleet’s base, becoming part of Russia in March. The ministry plans to spend more than $2.4 billion for the purpose by 2020.
The announcement of deployment plans comes after Russia voiced concerns of the build-up of NATO forces in Eastern Europe and the Black Sea. The alliance deployed aircraft and warships as well as ground troops, saying it was needed to instill confidence in its members like Poland, Romania and the Baltic states.
NATO’s moves come in response to the ongoing political crisis in Ukraine and the allegations that Russia is preparing to invade its eastern neighbor. Moscow sees the military build-up close to its borders as provocative.