New Technologies Could Offset Russian Gas Supply Shortage

Several U.S. lawmakers have introduced bills urging Energy Department to speed pending approvals of more than 20 projects to export U.S.-produced liquefied natural gas. Thanks to a boom in natural gas fracking, the American production is approaching a surplus position–which is why the U.S. has little fear from a possible Russian natural gas embargo.

But even if all 20 export projects were approved today, it would take years–and several very cold and dark European winters–before U.S. exports would have any meaningful impact on European supplies.

Still, with its economy weakening, Russia also can ill-afford any crimp in the supply of its biggest source of already-scarce capital.

Russia’s heavy reliance on the cash from oil and gas exports is something of an Achilles heel for the Kremlin because the Russian economy depends heavily that hard currency to buy manufactured products from Europe–and around the world.

Some 70 percent of the country’s exports are related to energy and mining, while Russia imports roughly 80 percent of manufactured goods, according to the latest figures from the World Trade Organization. About a third of those imports–everything from vehicles to computer equipment–come from Europe.

And with a relatively small manufacturing base, Russia’s economy is also highly vulnerable to canceled orders from U.S. and European customers. Some Russian companies are already feeling the chill of a drop in demand, according to Philip Uglow, chief economist at MNI, based on his firm’s survey this month of 200 large Russian companies.

“What we’ve heard from Russian companies this month is that they’re seeing a big fall in export orders,” he said. “Certainly their seeing some pain for the tension in Ukraine. They probably fear most trade or financial sanctions.”

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza