Putin Will Pay Sanctions with Crimea’s Gas Rights

Putin can’t wait for his next target.
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This week saw escalating rounds of ceremonial sanctions by the U.S. and European Union (EU) against Russia over its annexation of the Crimea, followed by escalating ceremonial sanctions by Russia against the U.S. and EU. But as President Obama looked petulant, Russian President Vladimir Putin had a huge Cheshire-Cat grin as he welcomed two million residents of the Crimea and their massive off-shore natural gas rights into Mother Russia.

As Putin was formally signing legislation passed by the Russian Duma to absorb Crimea, Barack Obama used his pen to sign Executive Orders sanctioning SMP and Russia Bank from accepting Visa and MasterCard transactions. Obama chose SMP because it is controlled by Boris and Arkady Rotenbergs, Putin’s judo sparring partners and owners of a company that is a major supplier to Russia’s Gazprom, the world’s biggest gas exporter. Putin intends to have Gazprom develop the off-shore gas reserves of Chornomornaftohaz and Ukrtransgaz, two firms nationalized earlier this week by the Crimean parliament. By having Russia acquire Crimea, Putin gained control of about 70% of Ukraine’s Black Sea off-shore oil and gas drilling rights.

ExxonMobil Corporation was intent on breaking Gazprom’s dominance in supplying over 50% to 100% of the natural gas usage for 18 countries in Europe, including Germany and the Ukraine. In 2012, ExxonMobile discovered the Domino Field in neighboring Romania, whose gas reserves are so large that the nation expects to soon become a natural gas exporter. ExxonMobile Corporation quickly licensed from Ukraine the rights to drill in the Skifska tract off-shore from the Crimean Peninsula and partnered with Royal Dutch Shell Plc to spend $735 million drilling two wells about 50 miles off Crimea’s southwestern coast. ExxonMobil also signed a $10 billion liquid natural gas (LNG) deal with the nation of Qatar to supply Europe.



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