Could Russia Protecting Kremlin Allies In The Ukraine Affect Oil Prices and Natural Gas Prices?
- Strategeriest
- Jul 12, 2021
- 2 min read
Good afternoon,
I do not think so and am generally interested to understand their motive behind the recent naval action near the Russia/Ukraine border in Crimea. Obviously having a warm water port in Crimea is beneficial to them militarily, but they have already achieved that objective.
If anyone knows of any good, trusted resources regarding the region that can help me better understand the conflict, please send me an email at sales@unreformedandbroker.com . I find the topic interesting and profitable.
How I understand the dynamics of oil and natural gas prices as they relate to the Middle East is Military actions that affect the Gulf Aden or the Suez Canal, have immediate price repercussions as they affect short term supply and demand. Military actions affecting the below detailed infrastructure affect long term trends in the asset class.
If one looks at the oil and gas prices in Europe compared other countries that produce oil and natural gas, there is significant arbitrage opportunity if an oil pipeline or natural gas pipeline from the middle east is constructed into Europe. Four notable options have been proposed in the past decade, and significant military operations over the past twenty years seem to have been fought in key areas that affect these proposals.
Example: The battles of Ramadi and Falluja occurred between two major oil pipelines. Holding control over these areas in a time of peace would have allowed for a diversion of Iraq’s main oil pipeline to be diverted into Syria which, if Syria was stable would have decreased oil prices long term and the Iranian Rial would have increased in value.
A key part of war is often limiting opponents’ financial resources. This makes it is tough to determine if these battles are causation or correlations regarding these natural gas and oil pipeline plans. The four proposed plans are below.
As Russia already controls most of the supply of natural gas into Europe, allowing them pricing power, I do not see them splitting the profits with Iran. So, I doubt they are considering taking Romania as well as the Ukraine for financial gain.
Turkey has been in financial turmoil over the past few years. My best guess is that if a pipeline is negotiated from the Middle East into Europe, it will go through Turkey as an influx of capital could help the country’s economy as the Greek’s do not seem to mind being poor. To be fair, I would be happy living with limited resources on a Greek Island as well if I could fish for sustenance, which an oil pipeline would inhibit.
But who knows? It seems to be a stalemate in the region for now.
Warmest Regards,
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