The contours of Russia’s energy exports are defensible | Seen


OPEC and Russia last week stood up to the Biden administration’s efforts to curb rising oil production from the world’s largest producers in the face of rising global energy prices.

Russian hawks have cried foul, drawing parallels with gas exports from Russia, where it is argued that the Kremlin is withholding supplies to the European market as leverage for the approval of its massive new gas pipeline, Nord Stream 2.

Either way, the hawks are wrong and the facts say otherwise.

Price increases were to be expected

First, the structural challenges of the energy market, not Russia or OPEC, have caused prices to skyrocket since last summer as economies recover from the pandemic.

Most important of these challenges is the ever-growing number of sovereign consumers who shy away from long-term stable energy contracts in favor of real-time pricing.

It’s a strategy that works well when prices are low, as they have been, but can be disastrous when prices rise.

Indeed, smart currency is rarely on the spot markets in the long term, especially in commodities, and especially when the levers of production are pulled by consortia or swing producers, as is the case for energy. .

Indeed, Russia is the biggest supplier of swing to the European energy market. As such, he has been a rational and balanced market maker throughout the pandemic.

For example, when COVID-19 first took hold, Russia made methodical reductions in supply that gave the most rapidly deteriorating Asian energy producers a market to which they could sell. their oversupply, thus ensuring a certain stability in the industry at large.

It is also almost certainly true that Russia could have taken advantage of those chaotic early days of COVID when demand plummeted to execute market growth plans through price war strategies etc. options that he clearly did not pursue.

Energy maneuvers are quite reasonable

Moreover, and ultimately most important, Russia’s energy maneuvers are in line with international trade standards.

Specifically, Gazprom, the state-owned giant responsible for Russia’s pipeline gas exports, has met and continues to meet its contractual obligations with Western European countries, and indeed increased its net exports by nearly 20% in year-over-year.

This is no small feat against the backdrop of the collapse in demand triggered by the pandemic last year, which was made worse by an unusually warm winter. This forced Gazprom into negative margin positions and led to a production reduction of almost 10 percent for the year.

As Russia enters what appears to be a much darker winter than last year, with broad inflationary pressures leading to rapid interest rate hikes and the pandemic hitting Russian urban and industrial centers, it looks simplistic. or even outright false, to frame the actions of the Russian energy sector. , an essential contributor to its GDP, as something other than those of a reasonable actor operating in a dynamic and difficult environment.

Tom Robertson is the CEO of Continental Currency Exchange, Canada’s largest foreign currency retailer, and a partner at IDF, a strategic risk consultancy.

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