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Will Ukraine’s Cold War heat up?

Will Ukraine’s Cold War heat up?

Condemnation of Russia’s annexation of Crimea by Ukraine’s northern and western neighbours has been surprisingly quiet, and once again the US has been left to do the heavy lifting in terms of playing “global sheriff”.

As I write this, US Secretary of State John Kerry is meeting his Russian counterpart Sergei Lavrov in Paris, in a bid to resolve the crisis in Ukraine.

Meanwhile, it’s been revealed the Crimean situation failed to derail a Franco-Russian shale oil deal between Total and Lukoil. And this got me thinking.

Russian gas sold into Germany, for example, costs US$10/MMBtu, while many Asian markets are currently paying more than US$14/MMBtu. Russia can tinker with its energy policy by raising prices, diverting supplies over the medium term (to China, for example), or by cutting off supplies completely.

And if you are a country with a large dependency on Russian energy and also have relatively stressed balance sheets in terms of a high Gross External Debt to GDP ratio, to what degree are you a hostage of Russia’s energy policy? One thing is for sure: most of the ten countries listed in the table below will not be aggravating the sleeping Russian bear…

 

Country

Dependence on Russian Energy Supplies (%) Gross External Debt/ GDP Ratio (%)

Slovakia

93

76

Lithuania

92

74

Poland

91

73

Bulgaria

90

94

Hungary

86

155

Finland

76

54

Czech Republic

73

50

Latvia

72

143

Estonia

69

100

Greece

40

210

AVERAGE

78

103

Source: Eurostat, BOAML, CLSA

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Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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3 Comments

  1. “Russia’s annexation of Crimea’

    well they had referendum; no better or worse than Iraq or Afghanistan.

    after fall of USSR, NATO should be disbanded not enlarged by picking former USSR member states and playing with matches until somebody fingers get burned.

    “and once again the US has been left to do the heavy lifting in terms of playing “global sheriff”.”

    I would like if you can find me sentence from US constitution where it say that US of A should be doing that.

    thanks ned.

  2. With Russia hiking the cost of gas by 40% now their agreement has expired with Ukraine, is HOG.AX worth a gamble?

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