Russian Oil and Gas Challenges Summary

Russia is a major player in world energy markets. It has more proven natural gas reserves than any other country, is among the top ten in proven oil reserves, is the largest exporter of natural gas, the second largest oil exporter, and the third largest energy consumer. Energy exports have been a major driver of Russia’s economic growth over the last five years, as Russian oil production has risen strongly and world oil prices have been very high. This type of growth has made the Russian economy dependent on oil and natural gas exports and vulnerable to fluctuations in oil prices. The Russian government has moved to take control of the country’s energy supplies. It broke up the previously large energy company Yukos and acquired its main oil production subsidiary. In Central Europe, Russian firms with close links to the Russian government have used leverage to buy energy companies to gain control over energy supply. In East Asia, Russia is contemplating a pipeline destination that would allow it to decide to whom its oil gets sold. Also, Russia briefly cut off gas supply to Ukraine because the latter did not agree to greatly increase what it pays for the gas. Russia restored supply after other European countries, which were affected