Lynne Kiesling
Hmmm … another Western-looking former Soviet satellite experiences disruptions to their natural gas supplies. This time it’s Georgia, not Ukraine, but one has to wonder if this is a coincidence. Certainly Georgia President Saakashvili sees dastardly intentions behind the incident:
Accusations by Georgian President Mikheil Saakashvili that Russia is to blame for the blasts are “hysterics” and “a bacchanalia,” Russia’s Foreign Ministry said on its Web site today. Georgia’s attitude is a “mixture of dependence, hypocrisy and licentiousness, amplified by a feeling of impunity in hopes it will find a patron for its anti-Russian line in the West.”
Saakashvili called the bombings “sabotage” by Russia, an “unstable, capricious and politically motivated blackmailer.” Russia is using price and supply threats to force Georgia to give up ownership of its pipelines, he said on his official Web site.
Is it just me, or is the rhetoric that Russia uses just very strange? Bacchanalia? Licentiousness? This type of melodrama sounds bizarre to my ear. Too emotional, not sufficiently analytical. I’m sure my IR friends will tell me that emotion is crucial to geopolitical strategy, and that I should adjust my economist radar to it.
Anyway. Gazprom officials say they found debris from an explosive device at the scene; sabotage, but who planted it? Hmmmm.
Meanwhile, in Nigeria, Nigerian rebels keep their kidnapped captives and say they’ll repeat attacks like the one perpetrated on a Shell platform.
The group attacked a Royal Dutch Shell pumping station near the port of Warri last weekend, prompting the oil giant to withdraw 330 workers.
Oil workers’ unions in Nigeria have threatened to withdraw members from the main oil-producing region unless the government moves to improve security.
The instability has led to a 10% fall in Nigeria’s oil production. The country is Africa’s leading oil exporter and the fifth-biggest source of US oil imports.
Iran continues to be a mess, with nuclear threats and, for some reason, markets actually caring about whether or not they sell their oil in dollars or euros. Speaking of which, James Hamilton has a good post debunking this particular conspiracy theory.
Is it any wonder that oil prices are high and volatile? Today they are moving back slightly from last week’s $69, but that price still reflects a substantial risk premium increase due to Iran and Nigeria instability.
Not surprisingly, gasoline prices are seeing these effects too, as well as the effects of the fuel formulation changes induced by the Energy Policy Act of 2005, which are starting to hit the refiners production processes right about now.
This too shall pass.