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22 March 2014

Press review 22-03-2014 - The gas play

As the crisis in Ukraine rages on, the West slowly recognises it has the weaker hand in the game of force with Russia. Half of all the gas burned in Germany comes from Russia and every member state east of Germany is even more dependent; some depend 100% on Russian gas. There is no way to replace these gas flows in the short or mid term. It requires the deployment of plenty of infrastructure: pipelines, LNG terminals and especially LNG tankers, at least a doubling of the current world fleet. All of it seems very far, especially with the prevailing anti-investment policies. And even with the infrastructure in place, reliable suppliers must be found.

Thus to harsh words follow puny actions against Russia, to the bemusement of the Kremlin. In spite of the pressures from the US and the UK, Europe will continue to do all it can to maintain business as usual with Russia. The intents of "political isolation" are not much more than rhetoric, in a world where the West weights less and less.

Deutsche Wella
Oettinger: 'No need to worry about gas'
Bernd Riegert, 20-03-2014

How dependent is the EU at this point on Russian gas supplies? Would Europe go cold and dark if Russia were to cut us off from its supplies?

No need to worry. Our gas repositories are very big and they are full, theoretically enabling us to cover our needs over weeks to come. Within the EU, gas can be transported across borders and in all kinds of directions. We have grown much less dependent than ever before. We are involved in a permanent dialogue with our Russian partners. The Russians want to supply us, and we will pay. That's why we are mutually dependent. At this point, both Russia and the EU are inclined to keep the gas issue out of the current political crisis, and to ensure it is not caught up in the current politicization of business relations.

Does that mean that possible sanctions should not touch upon gas supplies, because both sides would suffer too much from such measures?

Gas supplies are certainly not suitable as a political instrument.
In second tier news outlets the concern from eastern European states is slowly emerging. Europe is in no position to be belligerent, not even menacing, towards Russia.
McClatchy DC
Europe fears its dependency on Russian natural gas as U.S, EU sanctions near
Kit Gillet, 16-03-2014

With the Crimea crisis souring relations between Russia and the European Union, many European nations are increasingly concerned about their heavy reliance on Russia for natural gas.

Many European countries get a significant part -- and in some cases all -- of their natural gas, a key source of energy, from Russia, and fear that as relations deteriorate over Ukraine, it could be just a matter of time before the supply is affected, either through disruptions to the supply routes that run through Ukraine or, as is considered more likely, the result of political moves from Moscow.

With the results of Sunday’s referendum unsurprisingly endorsing by an overwhelming margin Russia’s annexation of Crimea, the EU and the United States are expected to announce the first round of sanctions on Monday.
It seems unlikely for any hypothetical sanctions to have a relevant impact on Russia's economy. Its gas, petroleum and coal will surely find other costumers in an energy thirsty world. And as some note, such actions may even backfire with further losses of economic might from the West.
As the EU prepares for sanctions, Russia threatens to put oil on a gold standard
Kenneth Schortgen Jr, 13-03-2014

First it was the United States, which threatened Russia with economic sanctions and even a removal from the G-8 over their intervention in Ukraine and the Crimea. And now, on March 13, Europe appears to have finally gotten on board as well as the EU officially voted to impose their own form of sanctions on the Eur-Asian Superpower for the first time since the Cold War.

However, like with the Syrian crisis of last September, Russia is quickly retaliating with their own economic threats, and one major action that they could undertake as a response is to discard the Petro-Dollar and demand physical gold as payment for energy purchases in both oil and natural gas.

Just as the Iranians did under U.S. sanctions just a few years ago.
Throughout the past weeks more details have emerged on the events that brought down the Yanukovytch government. The direct involvement of the US government seems now evident, and the identity those that perpetrated the killings in Maiden square remain covered in a haze of doubts.
Mainstream US Media Is Lost in Ukraine
Robert Parry, 16-03-2014

However, according to an intercepted phone conversation between Estonia’s Foreign Minister Urmas Paet and European Union foreign affairs chief Catherine Ashton, Paet reported on a conversation that he had with a doctor in Kiev who said the sniper fire that killed protesters was the same that killed police officers.

As reported by the UK Guardian, “During the conversation, Paet quoted a woman named Olga – who the Russian media identified her as Olga Bogomolets, a doctor – blaming snipers from the opposition shooting the protesters.”

Paet said, “What was quite disturbing, this same Olga told that, well, all the evidence shows that people who were killed by snipers from both sides, among policemen and people from the streets, that they were the same snipers killing people from both sides.
Following some interesting thoughts on the motivations of the US government for the toppling of Yanukovytch (if you do not mind the weak English).
Golem XIV
Ukraine – some thoughts on who is playing for what.

And of course the Pentagon’s pleasure is Europe’s pain. Europe is split on Ukraine. Germany is not happy to anger Russia. Merkel has conspicuously spent at least as much time on the phone with Putin as with Obama. Being the European terminus of the Nord Stream gas pipeline into Europe means Germany has along term intersts in being friendly with Russia. And Germany has historically always looked East in its foreign policy. While France has historically always looked South and Britain always West. On top of which France has, since Syria, become America’s new best War-buddy. The reasons for which I wrote about in Syria – Cui Bono.

So by provoking a “f*ck the EU” split in Ukraine America weakens any pesky European solidarity. Nothing like dividing your allies against each other to maintain control over them. Not only does a split in Ukraine cause welcome frcition between the two pillars of the European project, Berlin and Paris, it is also marvelously mischievous because if there is one thing the EU is very sensitive and woried about at the moment it is separatist movements. The EU does not like the idea of its constituent nations begining to break apart into even more bickering and all-too-democratic factions. Centralization of decision making is what Brussels wants not nationalist democracies. Spain fears anything that gives legitimacy to Catalonian separatism. The EU and the Conservative Government in Westminster have made it very clear they are neither of them happy about Scotland away from the UK and France is nervous about a possible Belgian break up.
With the Ukraine story taking up the front pages, information on the Iraq war has almost disappeared. In the field ISIL continues to gain territory and has unleashed a series of attacks targeting Shiia security forces and military.
The Daily Star
27 killed across Iraq as militants seize village
Marwan Ibrahim, 21-03-2014

Militants seized a village in north Iraq on Friday as attacks nationwide killed 27 people, including at least 10 policemen, amid a surge in bloodshed ahead of parliamentary elections.

[...] Clashes first erupted early Friday in the Sarha region of Salaheddin province, between anti-government fighters and police manning checkpoints.

There was also an explosion at a bridge in the area, Abdul said.

Shortly afterwards, a suicide bomber set off a fuel tanker rigged with explosives near an army base where senior police and military officers were meeting, killing 11 people and wounding five others.
The war is clearly spreading, with the ISIL projecting its military power in most of the country. Elections will supposedly be held in a month, in complete disregard of reality.
The New York Times
Iraq Hit by Wave of Bombings and Attacks
Durais Adnan, 21-03-2014

Jafar al-Jibory, a security analyst and an army officer during the Saddam Hussein era, placed blame for the attacks on militants with the Islamic State of Iraq and Syria, a powerful jihadist group once affiliated with Al Qaeda that is also fighting in Syria. Al Qaeda broke with the group in February.

“These are the acts of ISIS,” Mr. Jibory said. “They have taken the battle from Anbar Province into other provinces. They are showing that they can be in any spot they want in Iraq. They are much stronger than they were in 2006-7, as they have new tactics and well-trained fighters.” He said the militants were also taking advantage of the fact that officials in Iraq are busy preparing for elections in April.
Some deeper thoughts in an expected outlet worth reading. While it tries to end on a positive note, it does not shy away from hypothesising a break of Iraq.
The Economist
As bad as it gets

It is unclear whether Mr Maliki and his generals will contain, let alone defeat, the Sunni rebellion. What is certain is that Iraq’s fractious components are increasingly minded to ignore the writ of the central government; some seek autonomy, if not secession. Oil-rich Nineveh province surrounding Mosul is just one of them.

Tensions between Mr Maliki and the government of Iraq’s autonomous Kurdish region are as bad as ever. A row recently erupted over his decision to withhold federal budget payments to punish the Kurds for striking separate deals with foreign oil companies to export oil through Turkey.

The Kurds’ three main parties are acrimoniously struggling to form a regional government almost six months after provincial elections. But they are united by a shared fear that a strong Iraqi government may again threaten them and their autonomy. “This election is not about the budget,” says Fuad Hussein, chief of staff to Masoud Barzani, the Kurds’ president. “It is about the culture behind cutting the budget. The next election will either save Iraq or push it into disintegration.”
Another petroleum exporting country I try to follow closely is Libya. The episode with a tanker from North Korea that made the news is once more exposing the deep political deadlock the country has fell in to.
Libya oil port crisis

The oil port crisis gripping central Libya, where militias affiliated with the federalists from Cyrenaica seeking greater autonomy for their region have blockaded the country’s major oil exporting ports, escalated dangerously during the past two weeks. The militias allowed an oil tanker flying a North Korean flag but operated by an Egyptian-based company into Al-Sadra Port where it was loaded with around 234,000 barrels of crude. Central authorities in Tripoli charged that the so-called Political Bureau of Cyrenaica had sold this oil without their approval and that the shipment was illegal.

With the tanker’s entrance into Sadra tensions between central authorities and Cyrenaican federalists spiked more sharply than ever. Officials in Tripoli threatened to sink the tanker if it left the port before having fulfilled its obligations under law, and the speaker of the General National Council (GNC), Nouri Abu Sahmain, issued a decree to “liberate” the oil ports by force if the federalists fail to heed government orders to lift the blockade of the ports which has been in effect since June 2013.
An underground piece of news that gives a lot to think about. South Africa seems to be reaching a dead end with its mining industry as high ore grades deplete. This article just refers platinum, but the story is similar with other metals.
South African Mines Too Deep, Root Of The Platinum Strikes Issue
Alex Létourneau, 19-03-2014

Mining strikes between South Africa’s platinum giants and workers is fast approaching two months and there appears to be little movement from either side towards a resolution.

Bruce Shapiro, president of MineAfrica Inc. and Edward Sterck, vice president, research analyst at BMO Capital Markets, both see the current state of the actual mines as a key issue.

“What I think is really at the root of the problem is the structure of the existing platinum mines,” said Shapiro. “They’re very deep, they’re very difficult to work, very labor intensive and very costly.”
The scrapping of the UK's coal power park has been popping up in the news for many years, with someone questioning the country's energy policy once in a while. When emission regulations where enacted by the EU at the turn of the century, the UK government opted to simply close its ageing coal power stations. At the time gas production in the North Sea was at its peak and a push for gas fired electricity was made. But it turns out North Sea gas is not infinite and the UK became ever more reliant on imports. In parallel the government dragged its feed on renewables and is not doing much to stop the ageing nuclear fleet from retiring. A crisis on the making?
Green Rules Shutting Power Plants Threaten U.K. Shortage: Energy
Rachel Morison, 19-03-2014

The U.K. risks power shortages because utilities may react to Europe’s toughest carbon-emissions rules by closing plants without replacing them.

The amount of electricity available over peak demand may drop below 2 percent next year, the lowest level in western Europe, the nation’s energy regulator says. Centrica Plc, the biggest U.K. supplier, says investment in new generating capacity has “ground to a halt.”

U.K. closures, already running at a record pace, may accelerate after a 2016 deadline to cut carbon emissions from old coal-fired generators. While Germany now gets 24 percent of its power from renewable energy after government policies encouraged the building of everything from wind farms to solar panels, in the U.K. the proportion is 12 percent.

“We will be skating on very thin ice and there won’t be the resilience or the flexibility on the system to cope with demand shocks like cold weather,” said John Roberts, the London-based counsel for the Royal Academy of Engineering. Uncertainty over policy means “generators are going to sit on their hands and not invest,” he said.
Have a nice weekend.

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