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New anti-Russian sanctions to hit European energy sector

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The US plans to tighten sanctions against Russia, scheduled for November, is causing growing concern from the international business community, in the first place, from Europeans and those economic areas in which key players demonstrate maximum interdependence, including in the energy sector.

Among those who lashed out at the US intention to impose restrictions on Russian companies Rosneft, Gazprom and LUKOIL similarly to sanctions slapped on US Rusal in April this year, is the head of British Petroleum Bob Dudley. BP owns 19.75% of Rosneft shares and is Rosneft’s major private shareholder.

According to Bob Dudley, in the event of such a tightening of US sanctions, the European energy system will crumble. “I do not think this will happen. If you impose sanctions like Rusal on Rosneft, Gazprom or LUKOIL, you will cut off European energy systems, which is a little bit too much”, he said as he spoke at an Oil & Money 2018 Conference in London.

Bob Dudley is fully aware of the contemporary realities and the potential of Russian companies, particularly since BP and Rosneft have been developing a variety of joint projects. In 2015 BP acquired 20% in the Srednebotuobinsky field in Eastern Siberia and has been prospecting for oil within the framework of a joint venture with Rosneft – “Ermak Neftegaz”.

Reports say the share in the Russian company accounts for a third of the total production of British Petroleum. “In general, we consider Rosneft a fairly good partner,” Bob Dudley said in an interview with The Bloomberg, an American business news agency.

At present, the US Congress is considering two packages of anti-Russian sanctions. In the case of “spotting Russia’s attempts to influence the course of elections in the United States”, the White House is to block the resources of major Russian banks, including Sberbank, VTB and Vnesheconombank, and energy companies. Among the latter are  “Gazprom”, “Rosneft” and “LUKOIL”.

The forecast by the BP chief that the European energy sector will face severe crisis should the US Congress launch new sanctions echoes the moods that are gaining strength in Europe. A statement to this effect came from the Eastern Committee of the German Economy (Ost-Ausschuss der Deutschen Wirtschaft e. V.) which represents the interests of about 350 German companies and associations operating in Russia and other former Soviet republics, as well as countries of South Eastern Europe. The Committee’s Managing Director Michael Harms said that business in the European Union should not suffer because of cooperation with Russia. According to reports released in Germany, Western sanctions and Russian counter-sanctions have “negatively affected” more than 70% of German companies since March 2018. A study conducted by the above organization reveals that 94% of these companies would prefer the existing sanction regime against Russia eased. The East Committee of the German economy has expressed “tremendous concern” over the possibility of the US imposing new sanctions against Russia and against European companies running  joint projects with Moscow, including those involved in the construction of the Nord Stream 2 gas pipeline.

“We believe that any attempts to see implementation of sanctions in an extraterritorial format are unacceptable and at odds with international law,” Michael Harms said. He deems as inadmissible the imposition of sanctions on European business for cooperating with Russia.

This position is shared by top management of the French energy giant Total, which has been pursuing a number of joint projects with Russia which are vital for ensuring Europe’s energy security, including in the production of liquefied natural gas (LNG). In an interview with the French edition of Capital, Total CEO Patrick Pouyanne questioned the very effectiveness of anti-Russian sanctions – in other words, he doubted the key factor that caused their coming into effect: “I believe that the sanctions are ineffective. What they lead to is the fact that leaders consolidate forces around themselves without changing their policies.”

“Business communities in most European countries – the Czech Republic, France, Germany, Spain – believe that sanctions should be lifted at an early date. Some experts think that this should happen gradually but business thinks differently,” – says Ernest Ferlenghi, president of Confindustria Russia, an association of Italian business in Russia, who is a staunch opponent to sanctions. “Every lost day provides an opportunity for our competitors, especially in Asia. They have vast opportunities, particularly the Chinese, for investing money in various projects. They become more competitive due to a strong financial resource,” – emphasizes the Italian businessman.

Significantly, the most critical position on the further tightening of sanction against Russia has come from countries and companies which guarantee stability on the European energy market, in particular, those representing Germany and Austria. The Vienna-based newspaper Der Standard cites in this connection the successful activities of the Austrian energy concern OMV: “OMV relies on Russia, its CEO Seele maintains good relations with Russia. The head of the state-subsidized concern has managed to secure what he had already succeeded in achieving as head of BASF subsidiary Wintershall – participation in the development of a large gas field in Siberia, Urengoisky.” “As for the second major project – the construction of the Nord Stream 2 pipeline from Germany to Russia through the Baltic Sea – Seele enjoys political support”, – the newspaper says.

By introducing sanctions against top Russian energy companies that closely cooperate with European business the Donald Trump administration is in fact trying to make use of national legislation to secure the US financial and economic interests in Europe. According to reports, one of the reasons for tightening sanctions is the currently observed positive trends in the implementation of Russian projects in areas where the US is particularly vulnerable  – the export of pipeline gas and the production of LNG.

As for Russian gas supplies to Europe – which Washington sees as a direct competition considering its own liquefied natural gas supplies – this year PJSC Gazprom has the potential, for the first time after 2011, to reach a production level of over 500 billion cubic meters of gas annually. At the same time, annual exports to foreign countries can hit a record high of over 200 billion cubic meters.

Meanwhile, Russia’s PJSC NOVATEK, which mainly deals with LNG production, has announced the discovery of a gas condensate field with reserves of at least 320 billion cubic meters in the Arctic, on the North Obsk license area in the waters of the Gulf of Ob. This field can become a resource base for NOVATEK’s third LNG producing facility, the Arctic LNG-3. “The discovery of a new field is an important starting point for one of our future Arctic LNG projects. The North-Ob field is unique in terms of its reserves, boasts an advantageous geographical location, and has a huge resource base. On top of that, the experience we have gained suggests that we have every potential for the successful implementation of the new LNG project,” – said Leonid Mikhelson, Chairman of the Board of PJSC NOVATEK.

By 2030 the company expects to bring LNG production to 57 million tons per year, and provided extra resources have been tapped – up to 70 million tons. This will enable Russia to successfully compete with the top LNG producer, Qatar, thereby leaving the United States far behind.

Success of Russian energy projects and expansion of Russia’s ties with European partners in energy and other major sectors of the economy present, in the eyes of the administration of US President Donald Trump and the Congressmen, a key threat to American business interests. This is what underlies Washington’s “sanctions” policy and European leaders have increasingly been making a point of it lately.

First published in our partner International Affairs

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Deciphering EU’s new investment deal with China

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The perceived economic gains of the Comprehensive Agreement on Investments (CAI), which the 27-nation European Union recently struck with the People’s Republic of China, come at the cost of disregarding human rights, which the Western bloc is known for, amid clear and irreconcilable systemic differences.

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The closing days of 2020 saw the European Union and China striking a deal known as the Comprehensive Agreement on Investments (CAI), thereby concluding seven long years of negotiations, as per the year-end deadline. China is also the EU’s biggest trading partner after the United States, but a strategic and systemic rival too.

The European Commission, Brussels-based executive arm of the EU, primarily led the negotiations on behalf of the bloc. Germany, being the holder the EU Council Presidency and led by Chancellor Angela Merkel’s continued push, combined with Beijing’s last-minute concessions, proved instrumental in expediting the process of finalising the CAI before the end of 2020.

However, the deal will still have to wait for a formal ratification by both sides and an approval by the Strasbourg-based EU Parliament, a tougher task, before finally setting it on course to be effective in a couple of years’ time, if not by early 2022.

Better rules, level-playing field for European businesses

The EU, by this deal, aims to widen the access for European companies to lucrative Chinese markets, with billion-plus consumers, on a wide range of sectors, particularly in services such as healthcare, finance, cloud-computing and air travel, among others, that has always been restrictive to foreign players in the past.

The deal could bring in a level playing field in the conduct of European businesses in China wherein Chinese state-owned enterprises will no longer be given preferential treatment through subsidies, thereby promoting fair competition and ensuring transparency in technology transfers. Newer possibilities for the expansion European businesses in China will be opened.

The CAI also promise better rules, investment protection, and an investment dispute settlement mechanism within two years of signing, which will replace all the separate bilateral investment treaties currently signed between China and EU member states. The EU maintains that the main purpose of this new deal is to address the economic imbalance in its relations with China.

However, the most striking aspect of the CAI is that, for the first time, China commits to follow accepted standards on climate and labour aspects, even though in a vague form. And for the EU, the timing of this deal with China is significant as a way of signalling its reengagement with the world in the aftermath of a post-Brexit scenario.

At the same time, the CAI reaffirmed reciprocal access for Chinese companies into European markets, which they always had. So, the deal matters to Europe, more than it matters to China. So, the real question is the extent of compromises which European negotiators had to make to strike the deal with the Asian superpower.

The issue of forced labour in China

Many EU member countries and the US had been apprehensive about the human rights situation in the northern Xinjiang province of China where there have been evidences and investigations on the use of forced labour from the media and elsewhere, which has not been duly factored in while concluding the investment deal.

It has been alleged that in the past several years, the Chinese government has forced over a million Uighur minorities in Xinjiang to perform seasonal labour against their will and are often underpaid. But, the Chinese government has repeatedly denied such allegations.

Many European lawmakers believe that China is not interested in fully complying with international agreements after signing it and is not a responsible and trustable partner. The presence of mass detention camps in this province, as verified by satellite imagery and other documents, is also a human rights concern which the EU was not supposed to ignore, considering its historical commitments to human rights.

US concerns and strategic rivalry

The incoming Biden administration has also raised concerns about the CAI, stating that it would “welcome early consultations” with its European partners on shared concerns surrounding China’s unfair economic practices, hinting at the issue of forced labour and the deal’s lacking on the question of enforcement of human rights.

Being a security and strategic partner of the US and part of the North Atlantic Treaty Organisation (NATO), any such deal which EU and its member countries sign with its strategic rival, China, could effectively undermine American-led efforts to counter the strategic and geopolitical threat posed by Beijing’s aggressive and expansionist policies around the world.

It also flies in the face of an incoming Biden administration which is openly committed to mend relations with allies in Europe that had been worsened under Donald Trump. Many experts in the US have felt the EU should’ve waited for a few more weeks until the Biden administration takes charge to form a co-ordinated approach, as it related to their common systemic and strategic rival, China.

Moreover, the deal comes at a time when individual EU members such as Germany and the Netherlands have recently released their own outlook on the Indo-Pacific strategy, which is perceivably aimed at containing China’s rise and to ensure balance of power in the region. Meanwhile, France’s outlook is in existence for two years now.

Way ahead for implementation

The deal has now been reached at the technical level, paving way for a final ratification. But, getting the deal through the European Parliament, which attaches far more significance to human rights concerns than the Commission and the Council, is going to be a tough task, as many European legislators are increasingly sceptical of Chinese intentions and commitments to any deal.

The coming months are going to be crucial with regard to how the European legislators will debate and take forward the deal to the next level.

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Hungry for change: An open letter to European governments

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In 2020, the entire world knew what it was to be hungry. Millions of people went without enough to eat, with the most desperate now facing famine. At the same time, isolation took on a new meaning, in which the lonely and most remote were deprived of human contact when they most needed it, while the many victims of Covid-19 were starved of air. For all of us, the human experience fell far short of satisfying even the most basic needs.

The pandemic has provided a taste of a future at the limits of existence, where people are bereft, governments are stymied and economies wither. But it has also fuelled an unprecedented global appetite for change to prevent this from becoming our long-term reality.

For all the obstacles and challenges we face in the weeks and months ahead, I start 2021 with a tremendous sense of optimism and hope that the growling in our stomachs and the yearning in our hearts can become the collective roar of defiance, of determination and of revolution to make this year better than last, and the future brighter than the past.

It starts with food, the most primal form of sustenance. It is food that determines the health and prospects of almost 750 million Europeans and counting. It is food that employs some 10 million in European agriculture alone and offers the promise of economic growth and development. And it is food that we have learned impacts our very ecosystems, down to the air we breathe, the water we drink, and the climate we enjoy, come rain or shine.

Even before the pandemic, 2021 was destined to be a “super-year” for food, a year in which food production, consumption and disposal finally received the requisite global attention as the UN convenes the world’s first Food Systems Summit. But with two years’ worth of progress now compressed into the next 12 months, 2021 takes on a renewed significance.

After a year of global paralysis, caused by the shock of Covid-19, we must channel our anxieties, our fear, our hunger,and most of all our energies into action, and wake up to the fact that by transforming food systems to be healthier, more sustainable and inclusive, we can recover from the pandemic and limit the impact of future crises.

The change we need will require all of us to think and act differently because every one of us has a stake and a role in functioning food systems. But now, more than ever, we must look to our national leaders to chart the path forward by uniting farmers, producers, scientists, hauliers, grocers, and consumers, listening to their difficulties and insights, and pledging to improve each aspect of the food system for the betterment of all.

Policymakers must listen to Europe’s 10 million farmers as custodians of the resources that produce our food, and align their needs and challenges with the perspectives of environmentalists and entrepreneurs, chefs and restaurant owners, doctors and nutritionists to develop national commitments.

We enter 2021 with wind in our sails. More than 50 countries have joined the European Union in engaging with the Food Systems Summit and its five priority pillars, or Action Tracks, which cut across nutrition, poverty, climate change, resilience and sustainability. And more than two dozen countries have appointed a national convenor to host a series of country-level dialogues in the months ahead, a process that will underpin the Summit and set the agenda for the Decade of Action to 2030.

But this is just the beginning. With utmost urgency, I call on all UN Member States to join this global movement for a better, more fulfilling future, starting with the transformation of food systems. I urge governments to provide the platform that opens a conversation and guides countries towards tangible, concrete change. And I encourage everyone with fire in their bellies to get involved with the Food Systems Summit process this year and start the journey of transitioning to more inclusive and sustainable food systems.

The Summit is a “People’s Summit” for everyone, and its success relies on everyone everywhere getting involved through participating in Action Track surveys, joining the online Summit Community, and signing up to become Food Systems Heroes who are committed to improving food systems in their own communities and constituencies.

Too often, we say it is time to act and make a difference, then continue as before. But it would be unforgivable if the world was allowed to forget the lessons of the pandemic in our desperation to return to normal life. All the writing on the wall suggests that our food systems need reform now. Humanity is hungry for this change. It is time to sate our appetite.

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Blank Spot in EU

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The historic exit of the Great Britain from the European Union sparked both opportunities and chaos alike. Whether it comes to sectors within and beyond the orders of Britain, the trade policy with Northern Ireland or the isolated position of the bloc as the pandemic continues to perforate the continent with each passing day. It took a span of 4 years and a combination of referendums, disagreements in the House of Commons, displacement of public office and relentless efforts of the diplomats to bargain and negotiate an exit deal. Despite of the celebrated trade deal in action, much of the uncertainty still looms across Europe. The economic bloc now faces an empty spot of a 28th member post UK-exit and with rilling economic desperation and the Coronavirus spiralling alike, EU seeks a promising role to displace some of the pressure buildup.

The United Kingdom, mainly London, serves as the only unarguable financial rival to the metropolis of New York. Although the financial epicentre casted no qualms over trade post Brexit and even the EU financial markets reported no apparent glitches in trade across borders now subject to custom rules and regulations, the sheer volume of the trade denominated in LIBOR projects a sinister possibility of financial turmoil in the near future. Moreover, the trade deal negotiated, hailed by either parties as a victorious bargain, does little to placate uncertainty in the financial markets which further encourages the need of a solid alliance or partnership to fill the gap and subsequent irregularities faced by the European Union.

Turkey stands as one of the aspirants seeking EU membership. Every European state enjoys the privilege to seek EU membership which is subject to yearly review. Turkey has been a lurking party to seek EU approval since 1987. The opportunities opened up in 2016 after decades of tensions over Turkey’s shady democracy and violent role in dealing with their Kurdish minority, residing on the south-eastern borders of Turkey shared with a war-torn Syria. A refugee deal was signed in 2016 between Turkey and EU to facilitate Syrian refugees amidst the greatest refugee crisis since World War II. The deal served as a defining chapter in improving bilateral relations. Despite of Turkey’s conditions in the refugee deal: demanding a $60 billion grant from EU to pivot the refugee crisis, EU subliminally promised an expedited track for Turkey’s ascension to EU membership. 

However, Angela Merkel, the Chancellor of Germany, and arguably the most powerful political figure in the circles of Europe, always stood against and awry to Turkey’s membership in EU. The talks of Turkish membership were even stalled back in 2019 in the EU parliament and the prospects looked murky. However, as Merkel inches closer to departure from Germany’s political benches after decades of systematic control, Turkey cites the opportunity as a blessing in disguise. Coupled with Germany being at the verge of a severe recession synonymous in scale to the financial crisis of 2009, Germany’s position could actually shift in favour of Turkey ever since UK-exit baffled even the most sage minds of the continent.

The opportunities, however, are not the only blocks paving way for Turkey towards EU. Turkey shares a brutal conflict with Greece, another EU member state that has muddled the chances of Turkey in the EU for decades. Turkey has the longest continental coastline in the East Mediterranean which has been long contested with Greece over the gas reserves found profoundly in the waters of the East Mediterranean. Both countries have overlapping areas and have time and time again rejected each others claims over respective maritime borders and continental shelves. The icy relations between the duo have been hazy due to multitude of other reasons as well. Ranging from disputes over Turkish migrants crossing Greek borders to ships anchoring in the disputed regions without prior alert. The recent turmoil incited when Turkey officially declared Hagia Sophia, a museum in Istanbul and a historic remnant of Greek Orthodox Christian Cathedral, as a mosque which infuriated the Greek patriots.

Turkey’s ascension to membership might be a solution to economic disparity in the region; Turkey serving as a corridor between Europe and Asia and opening channels of economic flourish to EU like Silk Road initiative with China. The ascension could even solve the border disputes with Greece and project a solution to the energy reserves in Mediterranean, solving the divide once and for all. Even with Recab Tayyab Erdogan’s boasting position over improving relations with EU, the extent of ease in bilateral relations is still unclear. As top Turkish Diplomat’s schedule visit to Brussels in a week, and Turkey and Greece are to resume exploratory talks over territorial claims in the Mediterranean on January 25th, glimmers of astounding results are on cards in the arching diplomacy of Europe.

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