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Gazprom lays bare West’s vulnerability

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Royal-Dutch Shell is teaming up with Gazprom on several projects despite Western sanctions on Russia.

Screen Shot 2015-06-18 at 22.09.48The expanded partnerships fly in the face of European and American sanctions which ban joint ventures with Russian energy companies.

23 June 2015

Europe’s efforts to reduce dependence on the Russian energy have been dealt a new blow after reports that the Anglo-Dutch energy behemoth Shell was teaming up with Gazprom on several projects. 

Shell as well as Germany’s E.ON and Austria’s OMV Group signed a memorandum with Gazprom last week to build two new Nord Stream gas pipelines under the Baltic Sea to Germany. They hope to ship 55 billion cubic meters of gas to Europe each year.

Shell and Gazprom also signed an agreement of strategic cooperation which will cover a vast area, including asset swaps.

The expanded partnerships fly in the face of European and American sanctions which ban joint ventures with Russian energy companies.

They signal fissures in the anti-Russia alliance which have already been exposed by Germany’s objections to the widening of sanctions on Moscow.

Shell CEO Ben van Beurden cited natural gas an integral part of the European energy mix and Gazprom an important part of the energy matrix.  

His assertion comes while European officials seek to diversify away from Russia for gas supplies and Iran is being frequently cited as a possible replacement.

But Western sanctions on Tehran make the country a hard choice. Tehran, meanwhile, has made it clear that its priority for now is to transfer its gas to the immediate markets.

Standing out in the new convoluted landscape is American companies’ absence from the lucrative trade with Russia. US firms have already lost the ground to their European rivals because of Washington’s sanctions.

Western sanctions on Iran and Russia have adversely affected US and European companies’ fortunes. They have also given a precious chance to Asian entities to move in and fill the vacuum.

Moreover, a new economic bloc independent of the West is taking shape with the leadership of Russia, China and Iran.

US and European firms seem to be ahead of their governments in taking heed. There is no better testimony to that than the new Gazprom-Shell partnership.


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