Thursday, May 2, 2013

Putin's Hardball Tactics Backfire?

Walter Russell Mead's article is primarily about how the U.S. shale oil boom, together with increased coal exports, have driven down energy costs in Europe--including the prices charged by Gazprom. However, there is this as well: "Putin’s hardball tactics in his near-abroad when Russia was energy top dog were instrumental in confirming him as an authoritarian bully in the minds of many Westerners. These tactics also inadvertently made Russia more vulnerable to shifts in the global energy market, with many of its main customers desperately seeking out alternative suppliers so that they would never find themselves backed into a corner again." In other words, selecting a supplier is not merely a question of price, but also factors risk of delivery disruptions. (This is why volatility in the Middle-East rattles oil markets). Cutting off delivery of natural gas increased the perception of risk.

A good deed can go a long way. It rarely pays to kick someone when they are down.

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