LONDON: Over time, the Canadian dollar might prove to be a winner from the conflict in Ukraine, which has highlighted the European Union's reliance on energy supplies from Russia.
Canada is a potential provider of oil and gas to Europe from its Western provinces, and considerable investment has been made in infrastructure to get production to North America's eastern seaboard for possible transatlantic passage. If that business
develops, it can only bolster demand for the Canadian dollar.
The investment in pipeline and transport is clear.
Enbridge, Canada's biggest pipeline company, expects its new 450,000-barrel-per-day Seaway Twin pipeline to carry Canadian oil-sands crude to the US Gulf Coast in
TransCanada Corp. plans to transfer 3,000 kilometers (1,864 miles) of under-utilised natural gas mainline system to the 1.1 million barrel-per-day Energy East pipeline. That will ship crude from Alberta's oil sands to Saint John in New Brunswick, on Canada's Atlantic seaboard.
Saint John is also the home of Canada's largest oil-by-rail terminal, one of many now established on North America's eastern and Gulf shoreline.
The fact that, in April, Enbridge's US subsidiary Tidal Energy Marketing secured a US government license to export "limited quantities" of Canadian-origin oil from a US port is
encouraging. The licenses were specifically to re-export oil to Europe, the first awarded the US Commerce Department had awarded since 2008.
Of course, none of this can happen overnight. But it does suggest Canada would be part of the solution if the EU decides it needs to reduce its energy dependency on Russia.
Canada and the EU have been edging toward closer trade relations, and energy is a key component.
"We don't see the crisis in Ukraine as simply an opportunity to market Canadian products," Canadian Prime Minister Stephen Harper said in June. "But obviously weÍre deeply engaged in a discussion with our allies on how we can make sure that globally
our energy supplies are secure and stable."
In the same month, European Union policymakers were reportedly proposing to scrap a requirement to label oil from tar sands, of which Canada is the top producer, as more
polluting than other types of crude.
The European Union and Canada are set to sign a Comprehensive Economic and Trade Agreement in Ottawa on Sept. 25-26. The agreement would need to be ratified by both the EU and Canadian parliaments.
While EU lawmakers have threatened to block the pact, some over environmental concerns, a growing awareness of the implications of Europe's dependency on Russian energy supplies could well focus legislators' minds.
Canada is also aligned with Europe militarily, as a NATO member, and is said to have shown interest in participating in a new rapid reaction force to boost the alliance's defenses in response to Russian intervention in Ukraine.
In the current circumstances, closer energy ties between the European Union and Canada make sense. The Canadian dollar can only be a beneficiary of such a process.
— Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own.