Israeli-Cypriot-Lebanese Gas

With Cyprus in a financial mess, they offered their natural gas to Russia as part of the security for immediate help. In the end, Russia did not bail out the Cypriots. At the same time that Cyprus was talking to the Russians they were also talking with the European Union and it appears that perhaps the threat of Russian control of Cypriot gas helped expedite an EU rescue move.

There is, I believe, more in this for the EU than for Russia. The benefit to Russia would come more from controlling a relatively small amount of competitive natural gas at a time when they are trying to maintain the market for their own. And while they likely did not anticipate the hit that Russian bank deposits are taking, the overall cost to them does not translate into an adequate return on the investment that they would have had to make to keep Cyprus stable.

On the other hand, this has benefits for the EU if it can further expand the availability of an alternate source of supply to that from Gazprom, then they can possibly lower future projected prices for natural gas. Set against that is the history of Gazprom sitting on the sidelines waiting for an investment opportunity later in the game, and then stepping in and gaining control for a lower price. It will be interesting to see how this one plays out.

The full article is here.


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