Central Asia

Russia: Challenges and Energy Risks

The most important products exported by the Russian Federation are oil and petroleum products according to the World Trade Organization (WTO) statistical data. Russia also exports petroleum and petroleum products, natural gas, coal, different types of metals, wood, fertilizer, machinery and equipment. The major oil and gas companies are Tyumen Oil Company (TNK), Lukoil, Gazprom, Surgutneftegaz, NK Rosneft, Tatneft, ANK Bashneft, Novatek and Ural Energy Public Company.

For a long period of time, the Soviet Union was the largest energy resource producer in the world. In 1989, total energy production, including oil, natural gas, coal, hydroelectric power and atomic energy, accounted for around 21% of the world’s total output. Gas accounted for 38% of the total energy production in the USSR, oil accounted for 36% and coal was 20%.

Currently, a part of the European countries, such as the former communist states from Central and Eastern Europe, depend to a large extent on Russian energy imports. But the European Union is currently investing in developing energy security plans and strategies to reduce its dependence on Russian energy imports. Generally, Europe will respond to its increased energy needs with natural gas and renewable energies.

On the other hand, according to the Russian president Vladimir Putin, US and Japan companies are interested in cooperating with the oil and gas sector in Russia. Moreover, the Qatar Investment Authority (QIA) and Glencore purchased in December 2016 a 19.5% stake in the Russian company Rosneft, following an agreement worth more than $ 10 billion.

Previously, in January 2007, a Gazprom subsidiary began exploring and developing several natural gas deposits in the northwestern part of Uzbekistan. The Russian President Vladimir Putin and the former Uzbek President Islam Karimov signed an agreement that gave the subsidiary a five-year exploration license and the exclusive right to export gas. Also, in 2003, Russia and Turkmenistan signed an agreement fixing the price of gas supplies from Turkmenistan to Russia for 2003-2006 at USD 44 / 1000 cubic meters. The agreement was renewed in October 2006, raising the price to USD 100 / 1000 cubic meters.

The Organization of Petroleum Exporting Countries (OPEC) and other major oil producing countries, including Russia, have decided to cut oil production in the first half of 2017. Since the OPEC meeting in late November 2016 oil prices have risen.

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