In what was perhaps the most anticipated edition yet, Russian president Vladimir Putin delivered. His increasingly colloquial speech brought several quotable moments as he tackled questions on Russia’s collapsing economy, Crimea, the West, and his love life in the annual yearend press conference. But how much can we extract from the three-hour event that may provide insight on global energy markets in 2015? Quite a lot in fact.
“What is happening with the economy is not the price paid for Crimea”
The weakened economy was brought up early and often and the ruble’s up and down volatility was evident throughout Wednesday’s conference – intraday swings peaked at plus 2 and minus 5 percent against the dollar. Delving very little into specifics Putin largely passed the buck, citing a lethargic central bank and ‘illegitimate and illegal’ Western sanctions as the root causes for the economic downturn. In a moment of frankness, he affirmed the woes are here to stay – two years by his estimation.
“Our economy will get diversified and oil prices will go back up”
Still, Putin remains confident in his country’s energy industry as a vehicle for change. As such, his renewed pledge for economic diversification fell on tired ears. It’s clear his plan consists of little more than a waiting game and – though likely slip ups in Libya and Venezuela may grant it some validation – it will be a difficult wait. Putin dodged insinuations of corruption and instead commended his pal, and Rosneft head, Igor Sechin for his efficient management of the world’s largest oil company. For what it’s worth, ongoing projects are soldiering on and Russian oil output is projected to remain unchanged into 2015.
“The East is developing faster than the rest of the world.”
Russia will go down with the ship before ceding market share – especially in Asia, where Putin reaffirmed the pivot is real. Saudi Arabia and North America will have to keep pumping as Putin plans to uphold his end in this game of brinksmanship. The European Union will not have to worry about gas shortages, but Putin aims to ensure deliveries remain on his terms. US LNG hopes for a big piece of the pie also hang in the balance as Russian projects continue to move forward.
“China is our biggest economic and business partner – we will start the gasification of the Far East.”
With more to say on Asia, Putin answered questions on the blockbuster gas deal with China as well as the recent developments on South Stream. Beginning with Turkey, it appears Russia will forge ahead with its expansion of the Blue Stream pipeline. The new project aims to nearly quadruple current capacity and deliver 50 billion cubic meters (bcm) to the Turkish-Greek border, where the construction of a hub “depends entirely on the willingness of [Russia’s] European partners.”
Back to China, Putin defended the profitability of the new gas deals, which could see China source approximately 17 percent of its gas from Russia by 2020. According to the President, both sides proffered discounts is what was both an ideological and common sense transaction. Moreover, the Far East gasification will see Russia up its LNG volumes to the Asia-Pacific markets. Russia and Japan have been working closely to develop the Vladivostock LNG project, which seeks to deliver upwards of 7 bcm by 2018.
“The Bashneft case has nothing to do with a revision of privatization.”
Embattled oligarch and former Bashneft head Vladimir Yevtushenko can breathe a sigh of relief as it appears he hasn’t lost all favor with the President. Still, Putin’s comments did little to ease fears regarding the renationalization of privately held assets. Western majors are by and large locked out under the current sanctions, but they will tread carefully in future endeavors.
“It would be better without [the situation in Ukraine], but it happened.”
Despite his current situation, Putin’s 2014 presser was anything but somber and apologetic. His past suggests he doesn’t need to be if oil cooperates.
First published at www.oilprice.com