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Benzinga Radio: Who Will Win the Battle for Germany's Energy Gap?

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I spoke with Peter Zeihan, Vice President of Analysis at the global intelligence company STRATFOR, regarding Germany's ban of nuclear power plants which was instituted last week. Besides presenting a major opportunity for several of the world's largest energy suppliers (the specifics of which are discussed below and in the podcast), Germany's newfound lack of energy sovereignty has some very interesting geopolitical implications.

There are now several factions vying for the German energy market. France, Europe's most prominent supporter of nuclear power, has increased power production in its existing reactors to send to Germany, and has plans to construct several more. The French are eager to do this because they need Germany to see them as valuable. Zeihan: “The French fear is that, should the Germans get so powerful economically that they don't feel that they need France anymore, they will start going in their own direction politically and militarily and that has always ended badly for the French.” It will take time for France to increase its nuclear power capacity, however, and that opens up a window that can be taken advantage of by other energy interests in the region.

With its hefty coal reserves, Poland is in a position to do just that. New coal-fired power plants are cheap and can constructed very quickly which makes Polish coal a viable short-term option for Germany, despite its environmental drawbacks. Poland's newly-discovered natural gas reserves could play a role in the region's energy market as well. The Saudi oil minister Ali Naimi visited the country last week, referring to shale gas reserves in Poland as an “energy game-changer.”

But the real dealbreaker in this situation is Russia, which has just finished construction of a massive natural gas pipeline called Nordstream. Nordstream cuts across the Baltic Sea, ending in the German city of Griefswald. With the ability to move 55 billion cubic meters of natural gas per year, Nordstream could potentially fill over half of Germany's energy gap – a conclusion that the Russians will be willing to throw their weight around to ensure. Zeihan:

“Russia's goal here is simply to get a partnership with the Germans, because if you can have the Germans and the Russians reading from the same book, a lot of the problems that the Russians are facing disappear. Germany is already the largest investor in Russia, Germany has traditionally been the counterweight in Europe that destroys Russian plans, and if you have the Germans and the Russians cooperating, it limits the Americans' ability to penetrate, it neutralizes Poland, it takes France off the table and makes all of continental Europe neutral vs. potentially anti-Russian.”

In other words, Russia is making a major play for power with Nordstream, one that could change the larger political dynamic in Europe significantly. What are the Americans going to do about it? According to Zeihan, the US will likely back energy interests in Poland and France in order to make them more attractive to German interests.

While you're watching France, Poland, Russia, and the various other factions with vested interests compete for Germany's energy market, you might as well capitalize on the situation by making some relevant energy investments. Zeihan mentions France's dominant power company Électricité de France (EDF), and Ariba as companies to watch, along with Chesapeake energy and Exxon-Mobil which are already penetrating Poland's natural gas reserves. Check out my interview with Andreas Franke of Platts for discussion of other companies that stand to benefit from Germany's nuclear ban. Download the full interview with Peter Zeihan below to get the all the details of our discussion.

STRATFOR's Germany page

Be sure to check out the audio of the interview in its entirety: Who Will Win the Battle for Germany's Energy Gap?

Subscribe to the Benzinga Strategies podcast feed in iTunes: Benzinga Strategies

Follow us on Twitter: @lukelavanway @benzingaradio @benzinga

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