If you’ve been following my blog, you’ll know that I’ve been knee-deep in researching the energy ties in Central Asia. This area has become a hot bed for investment and news is swirling around just how much natural gas is in this region.

Let me spell it out for you: Russia ships nearly two-thirds of all its natural gas production to Europe, and one Central Asian country, Turkmenistan, helps fulfill its contracts.

But if Central Asia countries start making deals with Europe over Russia, Russia will be left out in the cold.

I don’t think that’ll happen though. You see, Russia’s got a contingency plan. It just met with Iran and Qatar to firm up an energy deal.

First let me explain the tug of war…

The Caspian Sea energy nations met last Friday in Azerbaijan. At the top of the list for discussion was the signing of a declaration to limit Russia’s monopoly over export routes to Western Europe. Now, results showed that there are some countries unwilling to sign the declaration, but the fact that a declaration was even up for discussion is promising for some.

This is big news particularly for the European Union.

For years now, the EU has imported 40% of its natural gas from Russia. These imports make up 25% of the EU’s total natural gas consumption. Those are extremely high numbers and the European Commission wants to do something about it.

“This is a problem we must address. We must shield European citizens from the risk that external suppliers cannot honor their commitments,” EU Commission President Jose Manuel Barosso told reporters from RussiaToday.

We all know that Russia is more than willing to turn of the tap. With Russia as the single largest supplier of imported gas, the EU is seeking diversity in its energy imports. RussiaToday notes that this will be accomplished a number of ways, from opening up a new North Sea offshore grid to new projects in the Mediterranean.

So where does that leave Russia?

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Right now, copper spot prices are an anemic $1.65 per pound. That’s an amazing drop from above $4 back in June.

And yet, one Chilean copper mine is actually expanding.

The mine is called Dona Ines de Collahuasi. It’s Chile’s third largest copper mine and is located in an historical copper mining area. Back in 1880, a large, high-grade copper and silver vein was found. It’s one of the world’s largest copper resources.

Right now, the mine produces roughly 440,000 tons of copper a year.

But the mine has just approved a $64 million project that will increase annual output by 30,000 tons. And that’s just the first expansion.

At the end of the first quarter of 2009, a $750 million expansion plan will boost production to 650,000 tons a year. After that expansion is complete, the mine intends to increase production to a full one million tons of copper a year by 2014.

That’s an astounding move.

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Late October, Brazil and Argentina announced that their governments would buy up private assets in financial markets.

Brazil’s plan would allow its state-controlled banks (Banco do Brasil and Caixa Economica Federal) to buy stakes in private financial institutions. Argentine President Cristina Fernandez de Kirchner announced that the government would take over the $30 billion private pension fund.

These announcements pushed Latin American markets well into the red, but they also knocked Spain’s Ibex index off 184 points, or 2%.

That should come as no surprise. Spain and Latin America have many economic ties, and some Spanish companies do so much business across the pond that 29% of net profits come from that region.

So when news of nationalization hit last week, naturally Spanish markets shuddered… With good reason.

Just look at Bolivia and Venezuela, both controlled by heavily nationalistic leaders.

Venezuela has had three major blackouts this year. Some areas spent more than two weeks without power at a time. Bolivia continues to buy up local and international stakes in its natural gas pipeline infrastructure, but it’s been shipping less than 50% of its contracted amount of natural gas to Argentina since September.

Problems like this led to a severe power crisis last summer, and forced Argentina to buy energy from Brazil.

So the question is… Will government intervention result in protection from global markets, or will pensioner and investors alike be holding worthless papers and wondering where all their money went?

And how will markets in both Latin America and Spain respond?

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Surprising news out of Argentina today: Ternium (TX:NYSE), a steel maker with operations in Argentina and Mexico, reported a 15% rise in net income (year on year).

But here’s the thing. That 15% rise is overshadowed by the fact that its net income of $247 million is only half that from the previous quarter. The main reason for this drop? Lower net foreign exchange results.

This wierd fluctuation is seen in the company’s EBITA. This figure grew 101% year over year in the third quarter, but is down 11% from the second quarter.

Next quarter, the company expects further contraction in income, which doesn’t bode well.

These kinds of earnings reports are going to become more prevalent, I think… So long as major currencies continue to seesaw back and forth.

You see, most international exporting companies have to hedge themselve against their own currencies. But with the global mayhem shoving some denominations higher and knee-capping others, it’s obvious that some companies are going to be left holding the short end of the stick.

Argentina’s in that bracket.

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