Tensions between Russia and other major world powers just went into overdrive.
As I mentioned on Tuesday, Russia’s ability to survive independently makes it essentially impervious. Well, the country is beginning to prove it.
In response to recent sanctions, Russia announced that it has banned all dairy, meat, fruit, vegetable, and fish imports from the United States, European Union, Canada, Australia, and Norway.
This puts the EU in an even tighter spot than before.
Do they dare apply even harsher sanctions and face an energy supply disaster?
The answer could ultimately lead to a massive windfall for one energy player in the area.
Europe’s Hypocritical Stance on Russia
During the summer months, the dependence on Russian energy isn’t a pressing issue.
Winter is coming, however… And countries like Austria and Turkey import 60% of their gas from Russia.
Check out the chart below to see just how precarious the situation is for Europe.
Now, the story gets a bit more complex when you consider that Russia is in the midst of building major gas pipelines to Europe.
The South Stream project will run under the Black Sea through the exclusive economic zones of Russia, Turkey, and Bulgaria. The onshore pipeline will cross Bulgaria, Serbia, Hungary, and Slovenia – with final destinations like Austria and Italy.
On July 24, Turkey signed off on the Environmental Impact Study for the project (as it pertains to Turkish territory), with the first pipe-laying vessel to commence operations in 2015.
So, let’s get this straight…
While the EU is pondering sanctions, countries in the region are signing billion-dollar deals with Russia to build the pipelines.
If it seems strange to you that the same people who want to punish Russia are also shelling out big bucks to import more gas from the Kremlin, you’re not alone.
You’d think that the Russian invasion of Ukraine and the downing of the Malaysian jet would be enough to torpedo the project. But that just isn’t the case.
Now, even though it seems like Europe can’t pick a side right now, that doesn’t mean you can’t…
Time to Place Your Bets on Russia’s Future
The biggest winner of the deal is none other than Russian energy giant Gazprom (OGZPY). The company has seen its share price decimated in recent months, falling 10% since the downing of the jet.
Investors are writing the company off based on the news headlines. Yet behind the scenes, the company is continuing its strategic mission to export natural gas out of Russia to energy-dependent countries in Europe.
So if you want to bet on a Russian rebound, look no further than Gazprom.
On the other hand, if you want to bet against the Russian sphere of energy influence, then a better bet might be Noble Energy (NBL).
The company is developing huge fields off the coast of Israel. Along with LNG, these gas supplies will ultimately make their way to Europe.
In other words, Noble could seriously help lessen Europe’s dependence on Russian natural gas.
Granted, there isn’t enough natural gas to eliminate the dependence entirely, but there is an adequate amount to make a sizeable dent. This would at least force the Russians to behave (politically and militarily).
The only way to impact the Russians is to hit them where it hurts – and that’s in the energy market, which supports about 70% of the country’s economy.
The question is whether or not the Europeans are willing to spend a lot more in the short term to teach the Russians a lesson.
However, based on recent events, it appears the Europeans are more worried about their economic costs than their moral standing.
And “the chase” continues,