Russian Exports DA1NCGas prices high- UkraineGloystein and Chestney 7-22(Henning Gloystein and Nina Chestney, Reuters, July 22 2014, da: July 31 2014, UK autumn gas prices to rise due to maintenance, Ukraine risk, http://www.reuters.com/article/2014/07/22/britain-gas-markets-idUSL6N0PW2XZ20140722,PS)British natural gas prices for delivery in late summer and autumn are set to rise in coming weeks as large-scale North Sea maintenance makes it more difficult for utilities to stock up on reserves ahead of peak demand in winter. Prices could be pushed even higher by the Ukraine crisis, which many analysts fear will result in a disruption in the supply of Russian gas destined for western Europe and flowing through Ukraine. "We do expect prices to rally in the coming weeks based on maintenance and profit-taking on recent price declines (closure of short positions)," Hans van Cleef, senior energy economist at ABN Amro, told Reuters. British natural gas prices for delivery a month ahead have almost halved this year as healthy supplies have combined with low demand due to mild weather, improving energy efficiency, increasing supplies of renewables and low population growth. Yet analysts say North Sea maintenance is likely to reverse that trend, at least in the short term. Maintenance is planned from Aug. 1-14 on the Forties pipeline system and the Central Area Transmission System (CATS)Riser Platform, both in the North Sea. The riser platform, operated by BP, feeds gas into the CATS pipeline, which carries more than 48 million cubic metres of gas a day (mcm/d) from the North Sea to Teesside in northeast England. The Forties pipeline system, also operated by BP, receives oil and gas liquids from more than 50 offshore fields and delivers gas into the St Fergus terminal in Scotland. Data from Thomson Reuters Commodities Research and Forecasts show total British North Sea gas production is expected to drop by an overall 18 mcm/d during the first two weeks of August. "The outage will constrain supply and should therefore lead to withdrawals from storage and push up prices, and it may cut back on exports to continental Europe," said Oliver Sanderson, a senior gas analyst at the Thomson Reuters' forecasting group. "I wouldn't be surprised if day-ahead prices in August pushed towards 40 pence per therm during the peak maintenance period, especially as there is a scheduled outage for Norwegian deliveries to Britain for the second half of August," he added. Current day-ahead prices and contracts for delivery in August were trading at 37.00 to 37.25 pence per therm on Tuesday. North Sea production changes often have a strong market impact, as seen in recent outages impacting the St Fergus terminal or at ConocoPhillips' J Block field.US natural gas exports collapse the Russian economyMead 12(Walter Russell Mead, Professor of Foreign Affairs and Humanities at Bard College, April 25 2012, da: July 24 2014, North American Shale Gas Gives Russia Serious Headache, http://www.the-american-interest.com/blog/2012/04/25/north-american-shale-gas-gives-russia-serious-headache/) North Americas shale gas boom is chipping away at the market for gas producers like Russia. Whats more, if the United States becomes a gas exporter, Russias customers (especially in Europe) could decide to cancel expensive contracts with Gazprom in favor of cheaper American natural gas. Heres the story from the FT: If the US starts exporting LNG to Europe and Asia, it gives [customers there] an argument to renegotiate their prices with Gazprom and Qatar, and they will do it, says Jean Abiteboul, head of Cheniere supply & marketing. Gazprom supplied 27 percent of Europes natural gas in 2011. While American gas is trading below $2 per MMBTU (million British thermal units), Gazproms prices are tied to crude oil markets, and its long-term contracts charge customers roughly $13 per MMBTU, says the FT. European customers would love to reduce their dependence on Gazprom and start to import American gas. Already Gazprom has had to make concessions to its three biggest customers, and others are increasingly dissatisfied with their contracts. Worse, from Russias point of view: evidence that western and central Europe contain substantial shale gas reserves of their own. Fracking is unpopular in thickly populated, eco-friendly Europe, but so are high gas prices. All this ought to give Russia serious heartburn. Eroding Gazproms dominance of the European energy market would be a major check on Russian economic growth and political influence. Nuclear warFilger 09(Sheldon Filger, founder of GlobalEconomicCrisis.com, May 10 2009, da: July 24 2014, Russian Economy Faces Disastrous Free Fall Contraction, http://www.huffingtonpost.com/sheldon-filger/russian-economy-faces-dis_b_201147.html)In Russia, historically, economic health and political stability are intertwined to a degree that is rarely encountered in other major industrialized economies. It was the economic stagnation of the former Soviet Union that led to its political downfall. Similarly, Medvedev and Putin, both intimately acquainted with their nation's history, are unquestionably alarmed at the prospect that Russia's economic crisis will endanger the nation's political stability, achieved at great cost after years of chaos following the demise of the Soviet Union. Already, strikes and protests are occurring among rank and file workers facing unemployment or non-payment of their salaries. Recent polling demonstrates that the once supreme popularity ratings of Putin and Medvedev are eroding rapidly. Beyond the political elites are the financial oligarchs, who have been forced to deleverage, even unloading their yachts and executive jets in a desperate attempt to raise cash. Should the Russian economy deteriorate to the point where economic collapse is not out of the question, the impact will go far beyond the obvious accelerant such an outcome would be for the Global Economic Crisis. There is a geopolitical dimension that is even more relevant then the economic context. Despite its economic vulnerabilities and perceived decline from superpower status, Russia remains one of only two nations on earth with a nuclear arsenal of sufficient scope and capability to destroy the world as we know it. For that reason, it is not only President Medvedev and Prime Minister Putin who will be lying awake at nights over the prospect that a national economic crisis can transform itself into a virulent and destabilizing social and political upheaval. It just may be possible that U.S. President Barack Obama's national security team has already briefed him about the consequences of a major economic meltdown in Russia for the peace of the world. After all, the most recent national intelligence estimates put out by the U.S. intelligence community have already concluded that the Global Economic Crisis represents the greatest national security threat to the United States, due to its facilitating political instability in the world. During the years Boris Yeltsin ruled Russia, security forces responsible for guarding the nation's nuclear arsenal went without pay for months at a time, leading to fears that desperate personnel would illicitly sell nuclear weapons to terrorist organizations. If the current economic crisis in Russia were to deteriorate much further, how secure would the Russian nuclear arsenal remain? It may be that the financial impact of the Global Economic Crisis is its least dangerous consequence.UQGas prices will increase- none of your ev assume shifting trendsLloyd 7-30(Claira Lloyd, Energy Global, July 30 2014, da: July 31 2014, Global gas market outlook, http://www.energyglobal.com/news/processing/articles/Atradius-global-gas-outlook.aspx#.U9pbFagVlD0,PS)The Atradius Gas Market Outlook has said that after decades of little of interest happening in the global natural gas market, it has been showing unprecedented dynamism over the past decade. This has reportedly lead to a divergent gas prices between world regions. However, Atradius expect this trend to reverse. The shale gas revolution in the US and strong growth in international trade of liquid fuels is expected to bring regional prices closer together. In the outlook Atradius has said that regional prices have rapidly diverged over the past 10 years. Gas prices in the US have been dropping, which is a reflection of the rapidly growing production of gas from shale beds. Gas prices in Asia however have practically tripled over the same time frame and are far the highest in the world. Atradius has said that this is because Asian gas prices are linked to the price of oil which has surged and gas consumption has grown rapidly as a result of economic development. Europes gas prices are partially linked to the price of oil, and this explains why they have doubled. However, these trends are expected to change. Winds of change Atradius expects change to firstly occur as, in the report, it says that the US will quickly become self sufficient in gas and prices will gradually clime. This is expected to be a result of the very recent shale revolution which has led to a production surge. Imports to the US have halved, despite the power sector having substituted gas for coal. These developments are, according to Atradius, likely to last and the US will start exporting LNG to Asia and Europe. Gas exports are triggered by the price difference between the regions. Secondly, Atradius expects prices to remain at current levels in Asia assuming Chinese production rises, US exports develop and the LNG cost can be contained. Demand is growing fast and has triggered a boom of LNG imports as local supplies are unable to keep up with the rise in demand. Atradius have said that the surge in demand and the high gas prices have triggered a flurry of investments in LNG facilities, particularly in Australia. Finally, Atradius expects the gas prices in Europe to eventually rise. Focus on environmental issues has led to an EU wide trading system of carbon emissions and a renewable energy policy in Germany. Perversely, the measures have reduced gas consumption in the power sector and encouraged the use of coal: a much more polluting energy source. Whereas gas production is gradually declining, demand may pick up on the back of gradually improving economic conditions. Atradius has also said that Russia, Europes main supplier, is expected to benefit, although commercial and political reasons will push European countries to diversify supplies. LNG imports, even from the US, might play a role over time.Prices rose with temperature forecastsInvesting.com 7-23(NASDAQ, Investing.com offers an extensive set of professional tools for the financial markets, July 23 2014, da: July 30 2014, Natural gas prices rise as investors price in cool snap, http://www.nasdaq.com/article/natural-gas-prices-rise-as-investors-price-in-cool-snap-cm372834,PS)Investing.com - Natural gas rose on Wednesday, coming up off 8-month lows after investors priced in unseasonably mild temperatures in the eastern half of the U.S. and bet that hotter temperatures will return and hike demand for air conditioning. On the New York Mercantile Exchange, natural gas futures for delivery in August traded at $3.796 per million British thermal units during U.S. trading, up 0.64%. The commodity hit a session high of $3.817 and a low of $3.756. The August contract settled down 2.00% on Tuesday to end at $3.772 per million British thermal units. Natural gas futures were likely to find support at $3.741 per million British thermal units, the low from Nov. 26, 2013, and resistance at $3.893, Monday's high. Natural gas prices dove in recent sessions after weather-forecasting services predicted a summertime cool snap to make its way across parts of the heavily-populated Midwest and northeastern U.S. over the coming days. In its daily weather forecast, Natgasweather.com reported that the current cool snap hasn't been significantly impressive, "but it will open the door for additional weather systems to impact the northern U.S. late this weekend and all of next week with unsettled weather and lower than normal cooling demand." Demand for natural gas tends drop when temperatures fall in the summer, as households throttle back on their air conditioners. Still, prices rose as investors bet hotter temperatures will return, as mild temperatures typical of fall are still months away for most of the U.S. Supply data remained in focus. This weekly's supply data was expected to show that natural gas storage in the U.S. rose by 95 billion cubic feet in the week ended July 18. Total U.S. natural gas storage stood at 2.129 trillion cubic feet as of last week, narrowing the deficit to the five-year average to 25.5%, down from a record 54.7% at the end of March. Injections of gas into storage have surpassed the five-year average for 13 consecutive weeks. Elsewhere on the NYMEX, light sweet crude oil futures for delivery in September were up 0.49% at $102.89 a barrel, while heating oil for August delivery were up 0.40% at $2.8656 per gallon.Prices high and will continue to rise- weather forecastsInvesting.com 7-16(NASDAQ, Investing.com offers an extensive set of professional tools for the financial markets, July 16 2014, da: July 23 2014, Natural gas rebounds as market prices in cool snap, http://www.nasdaq.com/article/natural-gas-rebounds-as-market-prices-in-cool-snap-cm370689,PS)Natural gas futures edged higher on Wednesday after investors priced in the impact below-normal temperatures making their way across the U.S. will have on demand and went long on expectations for seasonably warm temperatures to follow. On the New York Mercantile Exchange, natural gas futures for delivery in August traded at $4.131 per million British thermal units during U.S. trading, up 0.82%. The commodity hit a session high of $4.145 and a low of $4.087. The August contract settled down 1.21% on Tuesday to end at $4.097 per million British thermal units. Natural gas futures were likely to find support at $4.081 per million British thermal units, Tuesday's low, and resistance at $4.173, Monday's high. A weather system similar to the Polar Vortex from last winter has ushered in below-normal temperatures in the Midwest and eastern U.S. this week, which sent natural gas prices dipping on concerns demand for air conditioning will fall. By Wednesday, prices rose as investors turned their attention from current mercury readings to weather forecasts, which called for a return of typical summertime temperatures across the U.S. Investors also reshuffled positions ahead of Thursday's closely-watched supply report to gauge the strength of cooling demand.Prices high now and will stay that will due to structural issuesMelvin and Barber 7-22(Jasmin Melvin and Jeff Barber, Platts McGraw Hill Financial, July 22 2014, da: July 23 2014, Some US consumers may see high power prices for next several winters: report, http://www.platts.com/latest-news/electric-power/washington/some-us-consumers-may-see-high-power-prices-for-21952761,PS)Electricity consumers in the US Northeast and Mid-Atlantic regions could see higher-than-average prices for the next several winters if last winter's bitter cold is repeated until additional natural pipeline capacity into the region is brought into service, competitive energy retail supplier ConEdison Solutions said in a new report. ConEdison Solution, a unit of New York-based utility Consolidated Edison, said the polar vortexes that blasted the Northeast and Mid-Atlantic with sustained periods of brutal cold during the 2013-2014 winter led to a spike in the price generators paid for natural gas. The increase was largely due to inadequate pipeline capacity, the report said. Gas-fired power generators, forced to buy gas from the spot market to deal with shortages, paid prices that were in some cases 878% higher than the 12-month average, the report said, adding that gas prices at the the Algonquin Gas Transmission city-gates in New England hit a high of $75.48/MMBtu on January 22, compared with the 12-month average of $8.60/MMBtu. "Any proposed project to provide relief by reducing pipeline constraints will likely take years to complete, so consumers exposed to energy markets over the next few winters should expect higher-than-average prices during those months," the white paper said. "Whether prices will be higher or lower than this winter will depend on a number of factors, including the severity and duration of cold weather." Gas prices climbing as a result of US sanctionsAlmeida and Shiryaevskaya 7-17(Isis Almeida and Anna Shiryaevskaya, Bloomberg Businessweek, July 17 2014, U.K. Gas Rises to 2-Week High on New Russia Sanctions, http://www.businessweek.com/news/2014-07-17/u-dot-k-dot-gas-rises-to-2-week-high-on-new-russia-sanctions,PS)U.K. natural gas climbed to a two-week high after the U.S. and the European Union imposed the most aggressive sanctions to date on Russia and after reports that a passenger jet was shot down in eastern Ukraine. Gas in the U.K., Europes biggest market, advanced as much as 7.2 percent, the biggest gain in a month, on the ICE Futures Europe exchange in London. A Malaysia Airlines Boeing 777 jet carrying 295 people was shot down by pro-Russian rebels near Donetsk, Ukraines Interior Ministry adviser Anton Geraschenko said on his Facebook page. The EU and U.S. late yesterday extended sanctions imposed on Russia, with targeted companies including OAO Rosneft, the countrys largest oil driller, gas producer OAO Novatek and OAO Gazprombank, the nations third-largest lender. The U.S. and the EU acted after travel bans and asset freezes aimed at President Vladimir Putins inner circle failed to force Russia to meet an ultimatum to end support for separatists in Ukraines east. Russia meets about 30 percent of Europes gas needs, half of which goes through pipelines crossing Ukraine. Disputes between the two former Soviet nations disrupted supplies to the EU in 2006 and 2009 amid freezing weather. There is potentially some additional risk premium on the back of the recent sanctions being built into prices over fears of any impact this may have on Russian supplies into western Europe, which are currently reported as normal, Wingas U.K. Ltd., a wholesaler, said in a report e-mailed today. Front-month U.K. gas climbed as high as 39.72 pence a therm ($6.79 per million British thermal units) on ICE. The contract was at 39.63 pence at 4:58 p.m. in London. Dutch gas for August on the Title Transfer Facility hub rose as much as 5.9 percent to 17.10 euros ($23.13) a megawatt-hour, the highest since July 1, broker data compiled by Bloomberg showed. Meeting Delayed Putin denounced the sanctions as a reflection of an aggressive U.S. foreign policy. At a news conference in Brazil, he warned they are liable to boomerang and hurt U.S. business interests. Putin has denied fomenting the rebellion even as Russian troops have begun massing anew on Ukraines border. OAO Gazprom, Russias state-run pipeline gas monopoly, wasnt included in the sanctions. A meeting with the EUs Energy Commission was delayed to next week, Russias Energy Ministry said today. These latest U.S. sanctions will potentially be the first since the crisis started to have a direct impact on the energy sector, Trevor Sikorski, head of gas, coal and carbon at consultants Energy Aspects Ltd. in London, said by e-mail today. As neither Rosneft or Novatek can directly export gas, this will have little impact on gas supply into Europe. Normal Flows Gas supplies to the European Union have been flowing normally since Russia cut supplies to Ukraine on June 16. Slovak grid operator Eustream said it didnt record pressure reduction at the compressor station at the border with Ukraine, according to a statement on its website today. Ukraine pumped gas into storage for a fourth week since the Russian cut off in the 7-day period ended July 11, according to data from Gas Infrastructure Europe, a lobby group in Brussels. Within-day gas rose as much as 5.1 percent to 39.25 pence a therm on the National Balancing Point hub, while the day-ahead contract gained as much as 5.4 percent to 39 pence a therm, broker data showed. The nations pipelines were forecast to contain 2 percent less gas at 6 a.m. tomorrow from the same time today while demand was forecast at 175.9 million cubic meters, 2.3 percent below the seasonal norm, according to National Grid Plc, the network operator.Prices rose with the weatherMalik 7-16(Naureen S. Malik, Bloomberg, July 16 2014, da: July 31 2014, Natural Gas Rises From 6-Month Low on Outlook for Heat, http://www.businessweek.com/news/2014-07-16/natural-gas-rises-from-6-month-low-on-outlook-for-heat,PS)Natural gas futures rose from a six-month low in New York as forecasts for a surge of heat signaled increased demand for the fuel to power air conditioners. Short-lived, but potentially potent hot weather will sweep most of the lower 48 states July 21 through July 25, MDA Weather Services said today. Gas stockpiles last week probably rose by more than the five-year average for the 13th consecutive week, analyst estimates show. It does look like there is plenty of heat in the forecast, for Texas especially and parts of the Midwest, so that will surely affect demand for gas, said Ellen Stamm, global natural gas analyst at Schneider Electric in Louisville, Kentucky. In the depths of summer, when the cooling demand is so intense and production is not increasing quite as fast as it was before, theres less gas to be put into storage. Natural gas for August delivery rose 2.2 cents, or 0.5 percent, to settle at $4.119 per million British thermal units on the New York Mercantile Exchange. Volume for all futures traded was 40 percent below the 100-day average at 2:38 p.m. Prices yesterday fell to $4.097, the lowest settlement since Jan. 10. The futures are down 2.6 percent this year. Forecasts for the Northeast and Midwest turned hotter for next week compared with yesterdays projection, said MDA in Gaithersburg, Maryland. Temperatures will drop in the East from July 26 through July 30 with below-normal readings around the Great Lakes. Hot Weather The high in New York City on July 24 will reach 90 degrees Fahrenheit (32 Celsius), 6 above average, according to AccuWeather Inc. in State College, Pennsylvania. The next day, Dallass reading will be 103 degrees, 6 higher than average.Decline in supply has driven prices higherStraus 7-1(Ben Straus, US Energy Services, Ethanol Producer Magazine, July 1 2014, da: July 23 2014, Commodities: Natural gas prices high due to inventory depletion, http://www.ethanolproducer.com/articles/11205/commodities-natural-gas-prices-high-due-to-inventory-depletion,PS)So why are prices so high? In a word, Inventory. 2014 prices have risen steadily in response to the ongoing depletion of storage inventory that began in earnest as of mid-January. The U.S. storage balance in Bcf chart tells the sad tale. While inventory levels were adequate, if not robust, heading into the winter, a series of strong cold spells punctuated what can be described as a persistently colder than normal winter. By Jan. 10, inventories dipped below their lowest level over the last five years for that point in the storage cycle. It didnt get any prettier from that point until the very bottom, when storage levels reached their nadir at 822 Bcf, in late March. At the low, inventories were essentially half what they normally are, requiring a steep climb to return to normalcy. Following a bit of a slow start in April, injections into inventory have been going gang-busters, exceeding both the 5-year average level and the elevated rate observed in 2013. From May 9 through June 20, each weekly addition to storage exceeded 100 Bcf, a record rate of storage injection. Despite the improvement, forecasts still suggest that inventory levels will fall far short of the five-year average by the end of the summer, leaving the market a little tighter heading into the demanding winter season. A key item to watch over the coming months is the influence of summer heat. In April through June, demand for electricity is low relative to the months of July and August. Consequently, demand for natural gas to run power generation plants in spring and fall is lower than in the peak of summer. If July turns out to be a hot month with higher call on gas-fired generation for power production, lower volumes of natural gas will flow into storage, and the price differential between 2014 futures and 2015 futures may well widen. I/LGas industry already weak from past fluctuations- a price drop would collapse the Russia economyAron 13(Leon Aron, American Enterprise Institute, May 29 2013, The political economy of Russian oil and gas, http://www.aei.org/outlook/foreign-and-defense-policy/regional/europe/the-political-economy-of-russian-oil-and-gas/,PS)Even more than Russian oil, natural gas rents are likely to shrink significantly in the coming years. In addition to Gazproms notorious corruption and mismanagementTransparency International ranked it among the least transparent companies in the world[39] funds available for investment are reduced by the politically dictated subsidization of domestic gas prices: Gazprom sells 60 percent of its gas domestically at a loss.[40] The hope for increased profits following a 15 percent rise in the prices of heating and cooking gas as part of this years utilities reform have been dashed by Putins limiting the utilities hikes to 6 percent. This price control is estimated to further reduce Gazproms profits by more than $300 million a year.[41] Gazproms modernization and greenfield investments are also hampered by enormously expensive projects that seem motivated more by the Kremlins geostrategic ambitions than by a search for profitability. Thus, in an effort to bypass Ukraine, Gazprom completed the Nord Stream twin pipeline system under the Baltic Sea in October 2012 and launched the South Stream project, which includes a stretch under the Black Sea, in December 2012. The price tag for both projects is around $40 billion.[42] In the beginning of April of this year, Putin ordered Gazprom to revive the Yamal-Europe-2 project, which would construct yet another gas pipeline bypassing Ukraine, from the Belarusian border via Poland to Slovakia.[43] The immediate challenge to natural gas rents, however, is a sharp loss of profit because of the competition from alternative modes of production made possible by new technologies. The latter includes horizontal drilling to tap shallow but broad deposits and hydraulic fracturing (or fracking) when sand, chemicals, and water, gel, or liquefied gases are injected under great pressure into shale rock formations to extract gas and oil. As a result, over the last decade US gas imports have shrunk by 45 percent. By contrast, Gazprom has yet to start tapping these resources. Instead, the companys president, Alexei Miller, has repeatedly decried shale gas as a myth and a well planned propaganda campaign.[44] The drop in US imports has freed up large volumes of natural gas and lowered prices on the world market. In addition, LNG transported by tankers from the Middle East has increased significantly, Europes reliance on LNG has expanded, and Europes LNG infrastructure has grown. The rapidly changing supply and price structure will be further altered by a possible (or even probable) transformation of the United States from an importer to an exporter of natural gas. Among the most notable casualties of an increased supply and lower prices has been the Shtokman natural gas field in the Arctic Barents Sea, one of the worlds largest. Last August the members of the consortiumGazprom, Frances Total, and Norways Statoilquietly abandoned the project, which was to produce LNG to export to the United States, because it became unprofitable. The Shrinking European Market To make up for domestic corruption and inefficiency, Gazprom needs large profit margins in Europe, where it used to sell gas at a 66 percent profit.[45] Just to break even, the firm needs to earn $12 per thousand cubic feet. By comparison, natural gas is sold at below $3 per thousand cubic feet in the United States today.[46] Even with the liquefaction and transportation costs, widely anticipated US exports of LNG to Europe are likely to cut deeper still into Gazproms margins.[47] Meanwhile, the lower prices have forced Gazprom, which last year supplied a quarter of European gas, to renegotiate delivery prices to levels closer to those in the spot markets, where commodities are traded for cash for immediate delivery and where prices have dipped as low as half of those in Gazproms long-term contracts.[48] In addition, the Russian natural gas behemoth has begun to grant as much as a 10 percent discount on existing contracts.[49] Still, Gazprom saw its exports to Europe go down by 8 percent in 2012, to the lowest level in a decade. Meanwhile, the sales of Gazproms main competitor in Europe, Norways majority-state-owned Statoil, are up 16 percent. The disparity is largely due to Statoils more flexible pricing that brought at least half of its contracts down to the spot market level.[50] For the first time, Statoil is catching up to Gazproms diminishing sales in Europe, exporting 88 billion cubic meters of natural gas as compared to Gazproms 113 billion cubic meters.[51] In the first nine months of last year, Gazproms profits fell by 12 percent compared to the same period of last year, and operational costs increased by 18 percent.[52] Overall, between 2008 and 2012, Gazprom lost 53 percent of its market value.[53] Europe is becoming less hospitable legally and politically as well. Last year, the European Commission started an antimonopoly investigation of Gazprom, including possible price fixing. Should Gazprom be found in violation of antimonopoly lawsa very distinct possibilityit will have to open its pipelines to competitors, alter its pricing formula, in which the price of gas is linked to that of oil, and pay up to $14 billion in fines.[54] Further aggravating the situation, last September, Putin issued a decree prohibiting Gazprom from cooperating with the EU investigators. Uncertain Alternatives to Europe Gazprom has been attempting to make up for the decreasing prices and shrinking demand in Europe by increasing sales to the East, most of all China, but the prospects are uncertain at best. China already imports far cheaper gas from Turkmenistan via a recently constructed pipeline.[55] Furthermore, with the estimated largest deposits of shale gas in the world, China could well be close to self-sufficiency by the time the currently planned pipeline from Eastern Siberia materializes.[56] As a result, Russia and China have repeatedly failed to agree on the price for the putative imports.[57] Despite the uncertainty, Putin has directed Gazprom to develop for export to China the giant virgin Chayadinsk field in Yakutia in northeastern Siberia. With the construction of a pipeline to Vladivostok and a LNG plant there, the project is estimated to cost $4065 billion, likely pushing the delivery price to as high as $15 per million British thermal units (BTU), a universal energy equivalent compared to $3 per million BTU in the United States.[58] Similarly, shale gas appears to obviate any prospects for increasing Gazprom sales to Ukraine, the second-largest European consumer of Russian gas after Germany. By the time Ukraines current contract with Russia runs out in 2019, Russias southwestern neighbor, which last year bought 33 billion cubic meters of gas from Gazprom, may see its needs for Russian gas significantly, if not dramatically, reduced. At 1.2 trillion cubic meters (42 trillion cubic feet), Ukraine has Europes third-largest shale gas reserves, and this past January Kiev signed a $10 billion deal with Royal Dutch Shell to extract shale gas from a field in Eastern Ukraine. Although, as with other European shale gas prospects as a whole, the Ukrainian deposits are not likely to be developed as quickly as those in the United States, the project (which is estimated to produce between 7 billion cubic meters and 20 billion cubic meters within five years) is an important step toward reducing Ukraines energy dependence on Russia.[59] In the meantime, seeking to further lessen its dependence on Gazprom, last year Ukraine began to buy more natural gas from Germany (via Poland and Hungary) and LNG from terminals in Turkey (via Bulgaria and Romania). Kiev is also looking to triple extraction from the Black Sea to 3 billion cubic meters by 2016 and plans to build a LNG terminal to process 10 billion cubic meters from either Qatar or Azerbaijan.LNG exports crowd Russia out of the Eurasian market Bloomberg News 6/19 (Brian Wingfield, June 6th, 2014, Bloomberg News, Sempra Wins Final U.S. FERC Approval for LNG Export Plant, http://www.bloomberg.com/news/2014-06-19/sempra-wins-final-u-s-approval-for-cameron-lng-exports.html)Sempra Energy (SRE) won final U.S. approval to build an export terminal for liquefied natural gas, becoming the second such facility to win government approval. The Federal Energy Regulatory Commission voted unanimously today to let Sempras Cameron LNG project in Louisiana move forward. The company said it plans to start building the estimated $9 billion to $10 billion terminal later this year. This is a landmark project that will bring economic prosperity and create thousands of jobs in Louisiana, Sempra Chairman and Chief Executive Officer Debra Reed said in a statement. Todays approval is another important step in delivering natural gas to Americas trading partners abroad. Democrats and Republicans in Congress have pushed to expedite approval of the export terminals to send the fuel to Europe and reduce Russias energy dominance after it annexed Ukraines Crimea region. The Republican-led House Energy and Commerce Committee in April approved and sent the full House a bill that would speed Energy Department approval of LNG export applications. Cameron will position America as an energy superpower, Senate Energy and Natural Resources Committee Chairman Mary Landrieu, a Louisiana Democrat, said today in a statement. Environmental Conditions The FERC environmental staff concluded in April that Cameron wont cause major environmental damage, and recommended steps to minimize some adverse environmental impact in western Louisiana. The FERC today approved more than 75 conditions on the project to reduce potential environmental harm, according to a statement. Landrieu and Senator Mark Udall, a Colorado Democrat, yesterday introduced legislation that would require the Energy Department to issue a final decision on an export license within 45 days after the U.S. environmental review of the facility is complete. Im confident that whatever the law requires, the department will be able to accomplish, Christopher Smith, the Energy Departments principal deputy assistant secretary for fossil energy, said today at a Senate Energy and Natural Resources hearing. Cheniere Energy Inc. (LNG)s Sabine Pass export plant, now under construction in Louisiana, is the only other facility so far to win the support of both the FERC and the Energy Department. The project, also in Louisiana, is scheduled to begin exporting fuel in late 2015, according to the company. Energy Department The Energy Department determines whether it is in the public interest for a plant to ship natural gas to countries that dont have a free-trade agreement with the U.S., such as Japan or the 28 nations of the European Union. No prior approval is needed for countries that have free-trade agreements, such as Canada and Mexico. The department is reviewing 24 applications for such projects. The FERC leads U.S. environmental reviews of gas export projects. It is weighing 14 applications for proposed facilities in the U.S. I think it is a positive data point for others awaiting FERC approval, Paul Patterson, Glenrock Associates LLC, said of the Sempra decision in a telephone interview. Sempra increased to a 52-week high $105.25 after the FERC decision, then surrendered some of the gains as U.S. markets fluctuated after the Federal Reserve promised to keep interest rates low. Its closed at $104.65, up 0.5 percent, at 4 p.m. in New York. Price Moves The Cameron project won Energy Department backing in February, conditioned upon approval by the FERC. Its scheduled to begin liquefying gas in late 2017 and be fully operational by 2018, according to San Diego-based Sempra. We are pleased to have reached this important milestone successfully and to be one step closer to starting construction later this year, Sempra LNG President Octavio Simoes said in a statement. A final Energy Department permit to replace the conditional one it now has must be issued before the company can begin shipping to overseas customers, according to the company. Sempra owns 50.2 percent of the facility, which will be able to export 1.7 billion cubic feet of the fuel per day. Frances GDF Suez (GSZ) and Japans Sumitomo Mitsui Financial Group Inc. (8316) each own a 16.6 percent stake. A joint venture of Tokyo-based Mitsubishi Corp. (8058) and Nippon Yusen K.K. (9101) owns the remaining 16.6 percent. The EU gets about a third of its natural gas from Russia through a web of pipelines that cross nations including Ukraine, according to the Congressional Research Service. Shipments from most terminals probably wont begin until pretty late in the decade, Energy Secretary Ernest Moniz said at an April 23 conference in Washington.LNG exports hurt the Russian economy and weaken PutinCama 5/24 (Timothy Cama, May 24th, 2014, The Hill, Russia-China gas deal fuels U.S. export push, http://thehill.com/policy/energy-environment/207139-russia-china-gas-deal-fuels-us-export-push)Lawmakers who want the United States to export more natural gas called a 30-year, $400 billion deal for China to buy energy from Russias state-owned gas supplier a wake up call for Washington. Sen. John Hoeven (R-N.D.) said he worried the deal would strengthen Russia amid the crisis in Ukraine and urged his colleagues to approve more gas exports from the U.S. This gives Russia another option. It strengthens their hand vis--vis what they decide to do in Eastern Europe, Hoeven said. And it makes it even more imperative that we advance our legislation to allow exports of LNG (liquefied natural gas) to Europe so that they have alternative sources. The deal inked this week provided Russia with an economic lifeline and raised fears Moscow could cut off gas supplies to its neighbors to strong-arm them into supporting Putins policies. Hoeven and other lawmakers, though, say the only response is for the U.S. to boost its own LNG exports, which they say would weaken Russias energy influence while helping American allies. Chinas deal with Russian-firm Gazprom is only helping them make the case, they say. Hoeven said the Gazprom agreement shows more than ever that exports from the United States would hurt Russia. Clearly, our providing LNG to Europe and working with Europe for them to develop other sources of energy supply weakens Putins hand, he said.Cheap American gas crowds out RussiaWade 3-20(Kevin Wade, GOP candidate for the Senate in 2012 and runs a small specialty engineering business, delewareonline, March 20 2014, da: July 24 2014, Its time to start playing chess with Russia, http://www.delawareonline.com/story/opinion/contributors/2014/03/20/its-time-to-start-playing-chess-with-russia/6667121/,PS)This is our counter-move and winning move to checkmate Putins Euro-power chess. Lets sustain the peace, not by convoys of troops headed to Europe, but by convoys of natural gas shipments. Well sell natural gas at a good old-fashioned profit and at a price lower than Russias. Lets power not only this democracy but also the European democracies with American natural gas. Lets give Europe the means to escape the claws of the Russian bear. Lets deprive Putin of the wealth to build his military. Lets create tens of thousands of high-wage jobs here building three or four large ship-loading facilities. Lets take another step and put American workers to building the equivalent unloading facilities needed in Europe. Theyll agree. Lets reawaken our shipyards to build the tankers to convoy this American gas to the European ports. Commitments can be made with the European leaders and formally signed in weeks. Fast-tracking is important to them and the lives of their nations. Construction can begin by years end. Everything can be different. Peace can be built on prosperity as prosperity builds on peace. Lets use conservative common sense and make American jobs for American workers. Lets be friends to friends. Help the democracies in Europe stand firm, prosperous and independent. Teach Putin that the United States is not content playing checkers.LNG K2 Russian EconRussia relies on the EU for financial stability through the gas marketWeitz 11(Richard Weitz, senior fellow at the Hudson institute, November 2011, da August 1 2014, Can We Manage a Declining Russia?, http://www.aei.org/files/2011/12/08/-can-we-manage-a-declining-russia_152701899417.pdf, PS) Europe is an unavoidable partner. The European market consumes 90% of Russia's total gas exports and 60% of its crude oil, which make up only 25 and 15% of Europe's total demand, respectively . Russia presently does not have any viable alternative markets remotely equal in size to Europe. Dependence is a two - way phenomenon. 40% of Russian public money comes from the sale of oil and gas to Europe, and at least 75% of Russian export revenues are linked to the EU's energy market in general . Without any extant alternative markets to exploit in the near - term, Moscow requires European gas revenues to preserve its own financial solubility. Energy overshadows other concerns. Paillard believes that while the energy trade has, in the past, been part of a game of blackmail, lies and fear between Europe and Russia, its new status as a question of life or death for Russian revitalization and its importance to Europe's economic growth mean that neither side can afford to use gas supplies as leverage in other international concerns. In Paillard's estimation, Brussels and Moscow both regard issues such as human rights or the Chechen conflict as not being worth risking the energy trade over. Therefore, Russian and the European Union are inextricably bound to one another by their mutual dependence on the energy trade. Russia cannot absorb the financial consequences of interrupting the EU revenue stream, while the European Union cannot do without Russian gas supplies. Europe has few alternative suppliers, and cannot develop alternative energy sources in the near term. Russia, meanwhile, is unlikely to be able to diversify its economy or target new markets any better than it has in the past.Natural gas exports key to the Russian economyAron 13Dr. Aron is theresident Scholar and Director of Russian Studies at the American Enterprise Institute. He is the author of three books and over 300 articles and essays. From 1999 to 2014 he wrote the Russian Outlook, a quarterly essay on economic, political, social and cultural aspects of Russias post-Soviet transition (Leon Aron, May 29th, 2013, AEI, The political economy of Russian oil and gas, http://www.aei.org/outlook/foreign-and-defense-policy/regional/europe/the-political-economy-of-russian-oil-and-gas/)One of the worlds two largest oil producers and the leading provider of natural gas to Europe, Russia has increasingly used its revenues from energy exports to strengthen the Putin regime. As new, cheaper energy providers emerge and the market becomes leaner and more competitive, Russia needs to lessen its dependence on profits from these resources if it is to avoid stagnation and possibly an economic crisis. The regime needs to implement deep institutional reforms to create a better investment climate and diversify the economy, but in doing so it risks undermining the authoritarian vertical of power. Vladimir Putins commitment to oil and gas as the mainstay of Russias progress stems from a deep and abiding conviction about its importance to the nations economy. Long before he came to power, he had believed that the restructuring of the national [Russian] economy on the basis of mineral and raw material resources was a strategic factor of economic growth in the near term.[1] In an article published a year before he became president, he reiterated that Russian mineral resources would be central to the countrys economic development, security, and modernization through at least the first half of the 21st century.[2] In Putins view, the only way for Russia to achieve economic growth of 4 to 6 percent per yearthe tempo he deemed minimally necessary for Russia to reduce its lag behind the developed countrieswas via extraction, processing and exploitation of mineral raw resources. This was the key to Russias becoming a great economic power, Putin believed.[3] For Putin, oil and gas were also paramount politically as guarantors of the security and stability of the Russian state. As he put it, The countrys natural resource endowment is the most important economic and political factor in the development of social production. Furthermore, the raw material complex was the basis for the countrys military might and an essential condition for modernization of the military-industrial complex.[4] Finally, he believed the mineral extraction sector of the economy diminishes social tensions by raising the level of well-being of the Russian population.[5] Oil, Gas, and the Putin Doctrine State control or outright ownership of the oil and gas industry became a central element in the Putin Doctrine, which postulated the recovery of the states political, economic, and geostrategic assets following the antitotalitarian revolution of late 198791.[6] The state was to become again the only sovereign political and economic actor in Russia, with the private sector, civil society, and its institutions mere objects. Putin saw as nonnegotiable the states control of rent flows from the sale of mineral resources, with nonstate property rights remaining contingent.[7] Almost a decade and a half later, the authors of an influential analytical report on the composition and division of labor in the Kremlins Politburo singled out long-term natural gas contracts, and the management of the natural gas industry in general and Gazprom in particular as one of only two areas under Putins direct control.[8] (The other sector was the largest banks.) In pursuit of this agenda, the Putin regime has effected a steady accretion of the states sway over the oil industry. (Unlike oil, Russias natural gas production escaped large-scale privatization in the 1990s. As a result, the majority-state-owned Gazprom dominates the sector with 78 percent of the national output and has a pipeline and export monopoly.[9]) The key to the effective state takeover of more than half of Russian oil output was a dramatic expansion of the majority state-owned Rosneft, headed since 2010 by Putins confidant and former KGB officer Igor Sechin. Starting as a minor company that the government tried and failed to sell in 1998 because nobody wanted it, Rosneft skyrocketed in 2004 after it took over the key assets of Russias formerly largest and privately owned oil corporation, Yukos, which the Kremlin had bankrupted, broken up, and sold at rigged auctions.[10] "For Putin, oil and gas were also paramount politically as guarantors of the security and stability of the Russian state."Since Rosneft bought Russias third-largest private company, TNK-BP, for $55 billion this past March, it has become the largest publicly traded oil company in the world by output.[11] As a result, the state share of Russias oil production increased from 20 percent in the early 2000s to 56 percent today, with Rosneft accounting for 48 percent of the total.[12] The increase in the state ownership paralleled a steady rise in overall production, which reached a post-Soviet record of 10.5 million barrels per day, or 518 million tons per year, in November 2012.[13] The Rise of the Russian Petro-Gas State From less than 50 percent in the mid-1990s,[14] the share of commodities in Russian exports has grown to 70 percent today, with oil accounting for more than half of the export income.[15] Representing up to 30 percent of the countrys GDP and half of its GDP growth since 2000,[16] hydrocarbons provided at least half of the states budget revenues last year.[17] Five years ago, Russia needed oil prices of $50 to $55 a barrel to balance its budget, but Alexei Kudrin, former first deputy prime minister and finance minister, estimated the breakeven price at $117 per barrel last year.[18] Russias dependence on energy exportsand, consequently, its economys vulnerability to commodity price fluctuationwas highlighted by the 2009 world financial crisis. As oil plunged from $147 to $34 per barrel, the resource-based economy contracted by almost 8 percentthe largest drop among the G20 top industrial nations. Russia has begun to exhibit the signs of what economists call the Dutch disease, when overreliance on commodity exports depresses other sectors of the economy by starving them of investments and modernization while the increasing value of the national currency makes exports of other goods and services more expensive and thus less competitive in world markets. Natural gas is key to the Russia economyBuryk 10(Stephen Buryk, Lehigh University, Advised by Professor Menon, Campbell Prize winner, May 3 2010, da: August 2 2014, Russia's Natural Gas: The Strategy and the State Behind It, https://lsaw.lib.lehigh.edu/index.php/campbell/article/view/169/32,PS)Natural gas is not an ordinary commodity. Unlike fuel oil, fruit, vegetables, consumer electronics and many other goods that regularly trade between states, this vital economic requirement is not solid or liquid at room temperature. Although seemingly innocuous, this attribute limits the options for transporting gas to two: pipeline and liquefaction.[ii] Because of the high costs of liquefying natural gas and shipping it by specialized tankers (LNG), pipelines are the dominant way gas is transported: 93% of global gas demand was sent through this medium in 2004.[5] Gas trade is further concentrated because pipeline construction is very capital-intensive, and subject to large economies of scale and geographical constraints.[6] Concentration also exists on the supply side. Natural gas deposits are not distributed evenly across the globe; they are found only in places that have the proper geologic formations to capture the gas as it forms from organic material. This concentration of routes and supply creates market power for suppliers and transporters, leading to higher prices for a commodity that is vital to economic welfare. High prices, however, are not the only issue downstream customers must face. When economic terms like supplier and transporter are replaced with the term sovereign state, a political component is added to the equation. States do not always act in an economically "rational" manner: turning a profit may not always be their sole, or even main, motivation. They can choose to view trade simply as a means of economic enrichment in the liberal spirit, or they can easily adopt a more mercantilist view, where economic efficiency takes a back seat to considerations of political power. Thus, in gas trade, geography, and the politics of the land through which the gas passes, are just as important as discrete considerations of supply and demand. Energy security can no doubt come into question when a supplier or transporter state chooses motives other than profit, which is clearly the case in the trade of Russian gas. There are very few barriers between the Russian state and its most strategic industry; the Kremlin keeps vigilant watch over Russia's lucrative gas deposits and pipelines. In 2007, Gazprom (the Russian state-owned gas monopoly) oversaw 85% of Russia's production, and owned 100% of Russia's transit system.[7] Through these means, the government closely controls the largest gas reserves on earth 47.5 trillion cubic meters, which translates to 27-28% of the world's total. On top of having vast deposits of its own, Russia also acts as the main transportation bridge for shipping gas out of the Caspian Basin to the European continent, as illustrated in figure 1-1 (see appendix).[8] These reserves, in countries such as Iran, Turkmenistan, Azerbaijan and Kazakhstan, account for another 23% of world gas supplies.[9] The Russian government has consistently sought to constrain the trade of natural gas across Eurasia to keep its geographic monopoly and the advantages that flow from it intact. The first advantage for the Kremlin is financial. The amount of money that changes hands in natural gas and oil markets is enormous. In 2007, the World Bank estimated that 64% of Russia's export revenues were attributable to the sale of hydrocarbons.[10] This massive flow of foreign currency accounted for anywhere from 50 to 75% of Russia's budget revenues.[11] Dependent on hydrocarbon revenues to finance itself, the Kremlin is unlikely let its lifeblood be controlled by domestic or foreign actors not linked the government. By closely controlling the flow of gas out of the country, the Kremlin ensures money will continue to flow in. Motivations for control go beyond those associated with fiscal stability. It is undoubtedly of great strategic advantage to own something a neighbor desperately needs. Russia's reliance on natural gas for hard currency is mirrored by Europe's dependence on the commodity for energy. The EU depends on Russian natural gas for 23% of its total consumption.[12] This number, however, is a misleading aggregate. As figure 1-2 shows, Europe's dependence on Russian energy increases as one moves east across the continent, hitting 100% in some Central and Eastern European countries and all of the Baltic nations. Gas consumption is expected to grow by 2.1% a year from 2000 to 2030, making it the fastest growing primary fuel in Europe.[13] Because of its lack of domestic supplies, the EU must rely on external sources for its future and current energy needs, as figure 1-3 illustrates. Falling domestic production has forced the EU's reliance on imports up 40% in the ten-year span between 1996 and 2006. Russian imports currently make up 42% of the total.[14] In the case of a supply disruption of technical or political dimensions, switching between fuels for a prolonged period of time in the short term is nearly impossible natural gas has no immediate substitutes. Although alternative fuel sources like coal, oil and various "renewables" exist, it takes significant time and infrastructure development to make the conversion from one fuel source to another.[15] For the EU, Russia's highest-paying customer, dependence on natural gas is certain in the short run. The first two advantages just listed are undoubtedly appealing enough to warrant the Russian government's intervention into gas markets. However, they fall short of explaining why gas can be used as an effective tool of foreign policy, as dependence cuts both ways. Although Europe relies on the commodity for energy, the Kremlin also desperately needs the money from gas sales to finance itself. So, what allows Russia to use natural gas as an instrument of coercion? For many countries in Europe reliant on Russian gas, dependence runs deeper. Not only is it impossible for them to substitute for another fuel source, they are stuck with their supplier. In contrast, consider the example of oil, another vital primary fuel. Although the US and many other countries are highly dependent upon oil, they are able to procure it with relatively short notice from many other sources. Because oil is a liquid at room temperature, it can be easily transported by a variety of means, including pipeline, tanker, truck, and railroad car.[16] Many transportation options allow oil customers to buy the commodity from a diverse set of suppliers, who are aware that if they turn off the tap completely, another company will be happy to oblige a consumer's needs.[iii] Thus, in the case of oil, liquid international markets ensure that supply meets demands in a transaction that is mostly business, depriving supplier states the option of using the liquid commodity for coercive power in foreign policy. By contrast, the transportation of natural gas is constrained into limited set of long-haul pipelines. So instead of multiple suppliers being connected to consumers via an intricate array of transportation methods, gas consumers are tethered to their upstream suppliers by pipeline. Due to the lack of multiple buyers and sellers in market for natural gas, contracts are not short-term and based on spot prices. Gas contracts are usually long term, setting the quantity, price, and terms of exchange in advance.[17] Marshall Goldman describes the natural gas pipelines that tie Europe to Russia as an "umbilical chord", linking the economic welfare of the downstream party to the decisions of the supplier.[18] Above all others, this characteristic of the trade of natural gas makes it able to be wielded like a weapon. Limited transportation routes leads to limited supply options, which puts the bargaining power squarely in the hands of the country that holds control of both.AT: China SolvesChina cant solve- Russias still heavily dependent on the EUGalluci 7-30(Maria Galluci, International Business Times, July 30 2014, da: August 2 2014, Will Russia Cut Off Gas To Europe? Morgan Stanley Analysts Think So, http://www.ibtimes.com/will-russia-cut-gas-europe-morgan-stanley-analysts-think-so-1643354,PS)Russia could cut off Europes natural gas supplies in retaliation for the package of U.S. and European sanctions adopted on Tuesday, according to Morgan Stanley analysts. That would send energy costs soaring and leave European countries scrambling to find alternatives in time for the winter, when they need gas the most. We think that Russia could block transit of gas through Ukraine to Europe, pending settlement by [Ukrainian oil and gas company] Naftogaz of outstanding debt and might also allow a decline in oil exports, which could add a geopolitical risk premium to the oil price," analysts Jacob Nell and Alina Slyusarchuk wrote in a Tuesday research note obtained by International Business Times. Whether Russian President Vladimir Putin will actually do that depends on if he takes a pragmatic or patriotic response to the international penalties, which aim to end Russias support for separatists in Ukraine, they said. Putin now faces a stark choice between a pragmatic response supporting de-escalation in Ukraine in return for neutrality, decentralization and the lifting of sanctions or what we characterize as a patriotic response, in which Putin focuses on support to the pro-Russian separatist movement in Ukraine, Nell and Slyusarchuk wrote. The latter move would trigger a further tightening of sanctions and deepen the divide with the West. Kurt Oswald, a Middle East partner at the global consultancy A.T. Kearney, said that Europe would suffer in the short term if Russia blocked gas exports. He noted that Russias state-owned Gazprom exported 162 billion cubic meters of gas to Europe last year about one-third of Europes total gas consumption and that replacing those supplies would be difficult and costly. There is a strong dependency of Europe on the Russian gas supply he told IB Times by phone from Vienna last week. Russia is still in a quite comfortable position, short and midterm. Still, Oswald seemed less convinced than the Morgan Stanley analysts that Russia would choose this option. Russia is still dependent on the export of its resources, he explained. From that perspective, its most likely they would not cut the gas supplies to Europe. But will Putin behave completely rationally? Im not 100 percent sure. I dont see Russia turning off the taps, Michael Geary, a global Europe fellow at the Wilson Center in Washington, told IB Times on Tuesday. Reducing those [gas revenues] would be counterproductive for them.Russia relies on the EU for natural gas exportsCunningham 3-4(Nick Cunngingham, Oil Price, March 4 2014, da: August 2 2014, Russia Needs to Sell Gas More than EU Needs to Buy it, http://oilprice.com/Energy/Energy-General/Russia-Needs-to-Sell-Gas-More-than-EU-Needs-to-Buy-it.html,PS)The Russian occupation of Crimea has raised concerns about the European Unions dependence on its eastern neighbor for natural gas. The EU gets about 34% of its natural gas imports from Russia, a large portion of which transits Ukraine through a web of pipelines. For Eastern Europe, that dependence is much greater. In the brutally cold winter of 2009 Russia cut off gas supplies to Europe allegedly over a pricing dispute with Ukraine. However, it was also a lesson to Western Europe on its dependence on Russia for energy. Russia has a track record of using its natural gas supplies as a political weapon. The latest incursion into Ukraine has no doubt revived worries among European policymakers that saw what happened back in 2009. Thankfully, Vladimir Putin eased tensions on March 4, indicating that he wasnt seeking a military conflict. This allowed natural gas prices to fall back a bit after spiking by 10% the day before. But how vulnerable is Europe to the political machinations of the Kremlin? It appears that this time around the EU is in better shape. A mild winter and stagnant demand have left Europe with higher levels of inventory than in past years. According to a spokeswoman at the European Commission, the EU has 40 billion cubic meters of natural gas on hand in storage, which accounts for 10% of annual demand for the entire European Union. Those figures vary by country (Czech Republic and Slovakia have 90 days of supplies; Hungary two months; Austria six months), but as a bloc, the EU has 20% greater supplies at its disposal than it did last year. And its not just seasonal patterns that have put the EU in a better spot. Europe has been reducing its reliance on Russian gas for a while now in 2003 the EU imported 45% of its natural gas from Russia. Its now down to around one-third. Europe has been the beneficiary of the shale gas boom in the United States, even though the U.S. hasnt even really begun to export LNG. The surge in domestic production allowed LNG from other parts of the world Qatar, for example to be rerouted to Europe. (Several U.S. members of Congress have tried to exploit the Ukrainian crisis, arguing for the Obama administration to issue a blanket approval for LNG exports in order to isolate Russia. Over the short-term, that is nonsense it will take years to build the terminals, so issuing licenses for exports wont do anything to help out Europe. Over the longer-term, that may be a different story). Europe has also undergone a big effort at implementing greater energy efficiency and renewable energy. Moreover, the U.S. has exported more coal to the EU in recent years, which competes with high priced natural gas there. Thus Europe is more secure than many believe. Moreover, the EU and Russia are so interdependent that it is unlikely Russia will proactively cut off gas supplies to Europe. In fact, Russia is arguably more dependent on the EU than the other way around. Europe has other options. Russia, on the other hand, is heavily dependent on oil and gas, which account for half of the countrys total budget revenues. For Putin, cutting off gas exports to Europe would be akin to him cutting off his nose to spite his face. It would be highly counterproductive for Russian interests at a time when Europe is considering how to respond to Russian actions in Crimea, to take steps that would have a major and negative direct impact on Europe, said Laurent Ruseckas, a senior associate at IHS CERA, as reported by Politico. The economic damage of energy supply disruptions cuts both ways. Putin likes to play the role of bully, but Russia is not exactly in a strong position in terms of using energy as a political weapon. Whether or not the Ukraine crisis deepens, it is unlikely that Moscow would intentionally turn off the taps for any prolonged period of time.AT: Link UQSanctions targeted Russias oil sector but not natural gasReuters 7-29(Published on CBC, July 29 2014, da: August 2 2014, Ukraine crisis: U.S., EU, Canada announce new sanctions against Russia, http://www.cbc.ca/news/world/ukraine-crisis-u-s-eu-canada-announce-new-sanctions-against-russia-1.2721836,PS)Some member states are nervous about the risk to their own economies, and EU leaders struggled to strike a balance between inflicting pain on Russia and preventing fragile EU nations from sliding back into recession. In a letter to EU leaders last week, Van Rompuy said the proposed sanctions package "should have a strong impact on Russia's economy while keeping a moderate effect on EU economies." There was a consensus on only targeting future contracts, he said, which would leave France free to go ahead with the delivery of helicopter carrier warships it is building for Russia. Another principle was that EU measures targeting energy technology could hit Russia's oil sector but not its natural gas. Russia is the world's biggest exporter of gas and second biggest exporter of oil; Europe depends on it far more for gas, which arrives mainly by pipeline and is harder to source from elsewhere than oil that arrives mostly by ship. Probably the most high-impact measure will ban Europeans from buying new bonds or shares issued by banks owned 50 percent or more by the Russian state, which analysts say will affect their ability to finance the economy. Syndicated loans were not included "at this stage", one senior EU diplomat said, adding that European banks will not be able to purchase targeted debt anywhere in the world. "It applies to primary markets and to secondary markets, bonds and shares of targeted, well-defined, state-owned Russian banks," he said.Sanctions didnt affect gasEurActiv 7-30(EU News, July 30 2014, da: August 2 2014, Merkel: new EU sanctions against Russia were unavoidable, http://www.euractiv.com/sections/europes-east/merkel-new-eu-sanctions-against-russia-were-unavoidable-303787,PS)The measures will shut major state-owned Russian banks out of European capital markets and target the defence sector and sensitive technologies, including oil, but exclude the vital gas sector, on which Europe is heavily dependent. Some member states are nervous about the risk to their own economies, and EU leaders struggled to strike a balance between inflicting pain on Russia and preventing fragile EU nations from sliding back into recession. In a letter to EU leaders last week, European Council President Herman Van Rompuy said the proposed sanctions package "should have a strong impact on Russia's economy while keeping a moderate effect on EU economies". There was a consensus on only targeting future contracts, he said, which would leave France free to go ahead with the delivery of helicopter carrier warships is it building for Russia. Another principle was that EU measures targeting energy technology could hit Russia's oil sector but not its natural gas. Russia is the world's biggest exporter of gas and second biggest exporter of oil; Europe depends on it far more for gas, which arrives mainly by pipeline and is harder to source from elsewhere than oil that arrives mostly by ship.AT: Other Shale GasForeign shale wont affect prices BBC News 4/16 (Richard Anderson, April 16th 2014, BBC, Shale industry faces global reality check, http://www.bbc.com/news/business-26735000)As US energy costs tumble on the back of shale oil and gas, the rest of the world is gripped with envy. Just four years ago, natural gas prices in Europe were roughly comparable with those in the US; now they are three times higher. In Japan, they are five times higher. Understandably, countries around the world want a piece of the action. Governments from the UK and Poland to China and Argentina are dreaming of cheap power and, just as importantly for some, energy security. Shale, many have decided, is the answer. But can the shale gas revolution in the US really be replicated around the world? Poland was seen as the poster boy for European shale gas but, according to Stuart Elliott, managing editor at the industry information provider Platts, "the Polish experiment has been a failure to date". Enticed by seemingly abundant reserves and a government keen to kick-start production, US energy majors moved in, hoping to replicate their domestic success on foreign shores. Thirty to 40 wells were planned for 2013. To date, there is just one well producing enough gas to be economically viable. Exxon Mobil, Talisman and Marathon have all pulled out, while Chevron, Conoco Phillips and San Leon are persevering. Much of the blame has been laid at the door of the government, which got "greedy and stupid", according to Prof Paul Stevens, senior research fellow at the Chatham House think tank. A punitive tax regime and an insistence that foreign companies work with local partners did much to dampen enthusiasm, although the government has since made its regulatory regime more attractive to overseas investors. But more significant for the wider shale industry in Europe, says Prof Stevens, were comments made by Exxon's chief executive. The technology that had proved so successful in the US did not work on Polish geology, Rex Tillerson said. 'High suspicions' The UK government is another that has high hopes for shale, but only a handful of test wells have been drilled in the past four years. In the US, more than 100 wells were needed before the industry was satisfied that shale gas was viable. This inactivity is largely due to public opposition to fracking - the process of drilling for shale gas - and an 18-month moratorium on drilling following concerns about earth tremors. How fracking recovers natural gas from shale "Suspicions are high so the regulatory regime needs to be very robust," says John Williams, senior principal at Poyry Management Consulting. "Everything needs to be gold-plated - any slip-ups and it's game over. This is why we haven't really moved forward." And opposition will not go away. Concerns about water contamination, earthquakes and disruption to rural communities have captured the public imagination, but experts suggest we may be worrying about the wrong things. "The argument that fracking damages the water supply doesn't stack up, and any disruption would be fairly short-lived," says Prof Stevens. Concerns about earthquakes were always something of a red herring. "The legitimate concerns," says Prof Stevens, "are 'What do we do with the waste water - there are nasty heavy metals and radioactivity [deep under ground]?' There is also the question of fugitive methane - we simply don't know how much leakage there is." He also points out that while shale gas may be less polluting than coal and oil, it is still a fossil fuel. "If we have any hope of hitting our two-degree [climate change] target, burning gas is not the way. "Diverting investment from renewables is also a genuine concern". Fracking protest in France Anti-fracking protests have taken place in several countries around the world And opposition is not confined to the UK. Protests have taken place around the world, with activists from more than 20 countries signing up to Global Frackdown day last year. France has banned fracking, while moratoriums have been put in place in Germany, Romania and Bulgaria. Basic research But public opposition, partly because Europe is more densely populated than the US, where people are far more familiar with oil and gas operations, is just one of many factors holding back shale development. For a start, environmental regulation is far stronger in Europe. There has also been relatively little government investment in research and development outside America. The US government ploughed millions of dollars into basic scientific research in the early 1980s, while the European Commission wants the industry itself to make these investments in R&D. This is by no means a given. After all, the US shale industry did not appear overnight, but has developed over the past 25 years. Property rights are also key, says Prof Stevens. In the US, homeowners usually own the minerals under their land, so they can agree a price and hand over the rights to an energy company. In Europe, the state tends to own the minerals, and no-one is going to let an energy company rip up their land without a fight. Add to this questions about the suitability of the geology in many countries and the lack of infrastructure and pipelines, and it is clear that the barriers to a shale revolution outside the US are considerable and numerous. There are also questions about the ultimate impact of shale on energy prices in Europe, which operates an integrated market across the continent. Forecasts by Poyry suggest wholesale gas prices might be between 6% and 14% lower over the period 2020-50, while electricity prices might be between 3% and 8% cheaper. The impact on household spending would be lower, as the wholesale price is just one component of energy bills. These figures suggest the impact of shale on energy prices in Europe would be far less significant than in the US. Ambitious targets One country where the prospects for shale do look brighter is China. "Gas demand is set to rocket and they are looking to spend billions on shale," says Mr Elliott. The government plans to produce about one-third of the current US shale gas capacity by 2020. Shale gas test well in India India drilled its first shale gas test well last November Experts view this target as ambitious to say the least, but the country has the right geology, a cheap labour market, far fewer regulatory obstacles and, so far, relatively little public opposition. The main issue is water. Much of China's shale reserves are located in the north west of the country, which is extremely arid. This is a "major sticking point", says Mr Elliott. And despite the government's grand plans, so far all China's efforts to exploit its abundant shale resources have come to nothing. In fact, while there are thousands of shale wells in the US, there are only a handful producing commercial quantities of gas in the whole of the rest of the world. Mr Williams thinks it will be eight to 10 years before China is producing a significant amount of shale energy, let alone enough to affect the overall price of gas. And this in a country where there are relatively few barriers to entry. For the rest of the world, then, any significant shale production within this timescale seems wholly unrealistic. "You can forget about the next five to 10 years," says Prof Stevens. "Fifteen to 20 is a possibility". Those governments looking to shale as a quick fix for high energy prices and security of supply may, then, have unrealistic expectations. Shale may not be the saviour that many hope it to be.Turns RelationsLNG destroys US-Russia relationsAllison and Blackwill 11(Graham Allison and Robert D. Blackwill, director of the Belfer Center for Science and Intnational Affairs at Harvards Kennedy School and senior fellow for the US foreign policy at the Council on Foreign Relations, October 2011, da: August 1 2014, Russia and US National Interests Why Should Americans Care, http://belfercenter.ksg.harvard.edu/files/Russia-and-US-NI_final-web.pdf, PS)Americans often tend to focus on either Russias strengths or its weaknesses without seeking an integrated understanding of the real Russia. This is problematic, because it leads to dangerous assumptions about Russias motives and conduct. For example, those who focus on Moscows strengths frequently see an assertive and dangerous rival without recognizing Russias profound insecurity. Conversely, those who concentrate on Russias shortcomings see a defeated power ill-prepared to resist American pressure or preferences. While these descriptions are clearly caricatures, views like those described above can produce damaging misjudgments. Russia is grappling with the contradictions between imperial nostalgia, on the one hand, and the dramatic decline in its power after the Soviet collapse, on the other. The Russian governments failure to present a credible plan to reverse Russias decline or to develop a successful foreign policy strategy that strengthens the countrys international role makes this only more difficult and contributes to a sense of insecurity. Nevertheless, the United States has the opportunity to manage its relations with an evolving Russia in a manner that advances Americas vital national interests. The stakes are high. Russia is more than sufficiently powerful to create a host of costlyand even devastatingproblems for the United States if Russian leaders believe that Washington has a hostile, or casual, disregard for Russian national interests and priorities. This is true even though most in Russias elite recognize that todays Russia is not sufficiently strong to challenge American global leadership without the support of other major powers.Turns WarmingLNG increasing warming- turns the advantageRomm 12(Joe Romm, PhD from MIT and fellow at American Progress, June 18 2012, da: August 1 2014, Exporting Liquefied Natural Gas (LNG) Is Bad For The Climate, http://thinkprogress.org/climate/2012/06/18/500954/exporting-liquefied-natural-gas-lng-is-bad-for-the-climate/,PS)The surge in U.S. production of shale gas is creating a surge in permit requests to build liquefied natural gas (LNG) terminals. Thats because the glut of U.S. gas has dropped domestic prices sharply below global price levels. But if avoiding catastrophic climate change is your goal, then spending huge sums on even conventional natural gas infrastructure is not the answer, as a recent International Energy Agency report made clear: The specic emissions from a gas-red power plant will be higher than average global CO2 intensity in electricity generation by 2025, raising questions around the long-term viability of some gas infrastructure investment if climate change objectives are to be met. And liquefying natural gas is an energy intensive and leaky process. When you factor in shipping overseas, you get an energy penalty of 20% or more. The extra greenhouse gas emissions can equal 30% or more of combustion emissions, according to a 2009 Reference Report by the Joint Research Centreof the European Commission, Liquefied Natural Gas for Europe Some Important Issues for Consideration. Such extra emissions all but eliminate whatever small, short-term benefit there might be of building billion-dollar export terminals and other LNG infrastructure, which in any case will last many decades, long after the electric grid will not benefit from replacing coal with gas. Furthermore, the U.S. Energy Information Administration concluded in a 2012 report on natural gas exports done for DOEs Office of Fossil Energy that such exports would also increase domestic greenhouse gas emissions: [W]hen also accounting for emissions related to natural gas used in the liquefaction process, additional exports increase CO2 levels under all cases and export scenarios, particularly in the earlier years of the projection period. Asserting any net benefit for the importer requires assuming the new gas replaces only coal and isnt used for, say, natural gas vehicles, which are worse for the climate or that it doesnt replace new renewables. If even a modest fraction of the imported LNG displaces renewables, it renders the entire expenditure for LNG counterproductive from day one. Remember, a major new 2012 Proceedings of the National Academy of Sciences study on technology warming potentials (TWPs) found that a big switch from coal to gas would only reduce TWP by about 25% over the first three decades (see Natural Gas Is A Bridge To Nowhere Absent A Carbon Price AND Strong Standards To Reduce Methane Leakage). And that is based on EPAs latest estimate of the amount of CH4 released because of leaks and venting in the natural gas network between production wells and the local distribution network of 2.4%. Many experts believe the leakage rate is higher than 2.4%, particularly for shale gas. Also, recent air sampling by NOAA over Colorado found 4% methane leakage, more than double industry claims. A different 2012 study by climatologist Ken Caldeira and tech guru Nathan Myhrvold finds basically no benefit in the switch whatsoever see You Cant Slow Projected Warming With Gas, You Need Rapid and Massive Deployment of Zero-Carbon Power. So spending vast sums of money to export natural gas from this country is a bad idea for the climate. A new paper published last week by Brookings Hamilton Project, A Strategy for U.S. Natural Gas Exports, asserts a different conclusion, primarily because it ignores all of the issues discussed above. Indeed, the paper rather amazingly asserts Natural gas, though, has the same climate consequences whether it is burned in the United States, Europe, or Asia, which would be true for exported U.S. gas only if we could use magic to take the U.S. shale gas and put it into European or Asian gas-fired power plants. In the real world, it takes a massive amount of energy and greenhouse gas emissions to get gas from here to those markets, as is well known in the climate policy arena. No bridge to renewablesOreskes 7-28(Naomi Oreskes, Professor of the history of science and affiliated professor of earth and planetary sciences at Harvard, Huffington Post, July 28 2014, da: July 30 2014, Wishful Thinking About Natural Gas, http://www.huffingtonpost.com/naomi-oreskes/natural-gas-emissions-climate-change_b_5626466.html,PS)In a perfect world, people would use gas to replace more polluting coal or oil. Unfortunately, the argument for gas rests on just that assumption: that the world works perfectly. You dont need to be a scientist, however, to know just how flawed that assumption is. In fact, economists have long argued that a paradox of energy efficiency is this: if people save energy through efficiency and their energy bills start to fall, they may begin to use more energy in other ways. So while their bills stay the same, usage may actually rise. (Its like going to a sale and instead of saving money, buying more things because of the lower price tags.) In this way, consumers can actually end up using more energy overall and so emissions continue to rise. To ensure that natural gas use doesnt follow such a path, youve got to do something. You could introduce a law, like AB32, the California emissions control law, or put in place the pending EPA carbon rule just introduced by the Obama administration that mandates emissions reductions. Or you could introduce a hefty carbon tax to create a strong financial incentive for people to choose non-carbon based fuels. But laws like AB32 are at present few and far between, the fossil fuel industry and its political and ideological allies are fighting the EPA carbon rule tooth and nail, and only a handful of political leaders are prepared to stand up in public and argue for a new tax. Meanwhile, global fossil fuel production and consumption are rising. A recent article by the business editor of the British Telegraph describes a frenzy of fossil fuel production that may be leading to a new financial bubble. The huge increase in natural gas production is, in reality, helping to keep the price of such energy lower, discouraging efficiency and making it more difficult for renewables to compete. And this raises the most worrisome issue of all. Embedded in all positive claims for gas is an essential assumption: that it replaces other more polluting fuels. But what if it also turns out to replace the panoply of alternative energies, including solar, wind, hydro, and nuclear? In Canada, where shale-gas development is well advanced, only a small fraction of electricity is generated from coal; most comes from hydropower or nuclear power. In the U.S., competition from cheap gas was recently cited by the owners of the Vermont Yankee Nuclear power plant as a factor in their decision to close down. And while the evidence may be somewhat anecdotal, various reports suggest that cheap gas has delayed or halted some renewable power projects. It stands to reason that if people believe natural gas is a green alternative, they will chose it over more expensive renewables.