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Russia: The New Energy Empire

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The Russians are becoming major exporters, and Europe find itself in a tenuous strategic alliance.

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State-owned Rosneft's CEO, Igor Sechin, a former Soviet spy and longtime ally of Russian President Vladmire Putin sealed the deal which capped a dramatic turnaround from last year when Sechin was pushed out of the chairmanship of Rosneft by former company president Dmitry Medvedev. To explain this reversal of fortune many believe Putin moved to put both the state and his personal allies in charge of the company and deduce, therefore, that Putin is the de facto head of Rosneft.

Rosneft is certainly a key industry: If it all comes to pass, the company's daily production will jump to some 4.5 million barrels per day-more than any Middle Eastern country except Saudi Arabia -- and enough to put the Russian firm neck and neck with Exxon in the race to be the world's top oil producer.

Europe

Europe is reliant on Russia for oil and gas. Gazprom (PINK:OGZPY), the Russian state gas company, supplies 34% of Europe's gas needs, and when the under-construction South Stream pipeline starts operating, that percentage will increase. Yesterday Gazprom offered the highest bid to obtain a stake in the massive Leviathan gas field off Israel's coast.

Some alarmists are saying Russia could choke off supply to raise prices, that Putin could play oil- and gas-needy nations off one another, forcing European nations to commit to long-term, high-priced contracts if they want secure supplies.

In the most extreme scenario, some envision Russia joining OPEC. If so, the oil cartel would control more than half of global oil production and most of its spare capacity.

Editor's Note: This article was written by Marin Katusa of Casey Research.

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