Russian Nat Gas Game Theory

The question many are asking this morning is what is the iron-first of Putin thinking? With his "military exercise" over, does he believe it enough to have shown the world his potential for disruption? We suspect another reason may have been weighing on his mind. As we noted previously, Europe accounts for around a third of Gazprom's total gas sales, and around half of Russia's total budget revenue comes from oil and gas... and whatever Putin's geo-political ambitions, we suspect he did not want to jeopardize that source of revenue - no matter how much sabre-rattling and Gazprom-fear-mongering. As the following chart shows, Europe should be sighing a huge relief this morning - but remain cognizant that this, we suspect, is far from over.

And here's some helpful advice from the EU...

So - follow the money... US to IMF; IMF to Ukraine; Ukraine to Russia; Russia buys US Treasuries again?

Or the EU looks at this chart...

Source: @ReutersGMF

and that's why this happens...

Remember, as we noted in detail here - Russia receives around $100 million per day from Europe for Natural Gas

And these are the nations (via Morgan Stanley) who are the most dependent on that flow of natural gas...


But while we noted the dependencies last night, it is worth noting that thanks to a warmer than expected winter in Europe, EU states have significant gas stocks...


The game is only just beginning...just as explained in great detail here.

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