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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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Europe

An Austro-Franco-German Proposal for a European Post Covid-19 Recovery Programme

Tereza Neuwirthova

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WIIW Director Holzner addressing the Conference

The conference named “75 years of Europe’s Collective Security and Human Rights System”, which took place on the 1st of July at the Diplomatic Academy of Vienna, brought together experts related to the reality of the Old Continent and its Union over the course of the past 75 years of its post-WWII anti-fascist existence. It was jointly organized by four different entities (the International Institute for Middle East and Balkan Studies IFIMES, Media Platform Modern Diplomacy, Scientific Journal European Perspectives, and Action Platform Culture for Peace) with the support of the Diplomatic Academy of Vienna, numerous academia supporting and media partners.

The conference gathered over twenty high ranking speakers from Canada to Australia, and audience physically in the venue while many others attended online – from Chile to Far East. The day was filled by three panels focusing on the legacy of WWII, Nuremberg Trials, the European Human Rights Charter and their relevance in the 21st century; on the importance of culture for peace and culture of peace – culture, science, arts, sports – as a way to reinforce a collective identity in Europe; on the importance of accelerating on universalism and pan-European Multilateralism while integrating further the Euro-MED within Europe, or as the Romano Prodi’s EU Commission coined it back in 2000s – “from Morocco to Russia – everything but the institutions”.

The event itself was probably the largest physical gathering past the early spring lock down to this very day in this part of Europe. No wonder that it marked a launch of the political rethink and recalibration named – Vienna Process.

The panel under the name “Future to Europe: Is there any alternative to universal and pan-European Multilateralism? Revisiting and recalibrating the Euro-MED and cross-continental affairs”, was focused on discussing the determinants of Europe’s relations with its strategic Euro-MED and Eurasian neighborhood, the possible pan-European political architecture as well as on the forthcoming post-crisis recovery.

On the latter topic, the panelist Mario Holzner, who is the Director-General of the WIIW Austria, outlined the policy proposal on the post-pandemic European recovery programme, elaborated by his Viennese Institute in collaboration with the Paris-based research institute OFCE  and the German IMK Macroeconomic Policy Institute. The Recovery Fund recently proposed by the European Commission represents a benchmark in the era of stalled European integration, and during the unstable and precarious post-pandemic times it holds a crucial role for overcoming the immense political and economic crisis of 2020 . Following on much public debate about the recovery financing, which however has heretofore lacked the proposals for concreteprojects that the EU should allocate the funds into, it is now urgently needed to come up with these.

WIIW, OFCE and IMK, three research tanks dealing with economic topics, suggested two main pillars – an EU one, and a national one- for the spending of the Commission’s recovery programme that reaches the amount of €2tn and is to allotted over a 10-year horizon. The spending of the EU pillar is to be channeled into the area of healthcare, eventually giving rise to a pan-European health project under the name Health4EU. Not least, another efficient allocation of the funds located in the programme’sEU pillar is to projects helping to mitigate the risks resulting from climate change, as well as to develop an EU-wide rail infrastructure that would substantively contribute to achieving the Commission’s goals of carbon-neutrality at the continent.

Among other, the proposal introduces two ambitious transport projects- a European high-speed rail infrastructure called Ultra-Rapid-Train, which would cut the travel time between Europe’s capitals, as well as disparate regions of the Union. Another suggested initiative is an integrated European Silk Road which would combine transport modes according to the equally-named Chinese undertaking.

Mr. Holzner’s experts team put forward the idea to electrify” the European Commission’s Green Deal. Such electrification is feasible through the realisation of an integrated electricity grid for 100%-renewable energy transmission (e-highway), the support for complementary battery and green-hydrogen projects, as well as a programme of co-financing member states’ decarbonisation and Just Transition policies. Together, the suggested policy proposals provide the basis for creating a truly sustainable European energy infrastructure.

From the national pillar, it should be the member states themselves who benefit from the funding allocation in the overall amount of €500bn. According to the experts from WIIW, these resources should be focused on the hardest-hit countries and regions, whereas it is imperative that they are front-loaded (over the time span of three years).

The overall architecture of the programme’s spending, involving the largest part of the budget, needs to be focused on long-term projects and investment opportunities that would serve as a value added for the European integration, while also allowing to build resilience against the major challenges that the EU currently faces. The proposed sectors for the initiatives which could be launched from the EU’s funding programme are public health, transport infrastructure, as well as energy/decarbonisation scheme. Accordingly, it is needed that the funding programme is primarily focused on the structural and increasingly alarming threat of climate change.

As stated in the closing remarks, to make this memorable event a long-lasting process, the organisers as well as the participants of this unique conference initiated an action plan named “Vienna Process: Common Future – One Europe.In the framework of this enterprise, the contributing policy-makers and academics will continue to engage in meaningful activities to reflect on the trends and developments forming the European reality while simultaneously affecting the lives of millions. The European system, formed over centuries and having spanned to a political and economic Union comprising 27 states, is currently being reconfigured as a result of numerous external factors such as Brexit, the pandemic, as well as the dynamics in neighbouring regions. All of these are engendering the conditions for a novel modus operandi on the continent, whereby it is in the best intention of those partaking at this conference to contribute to a more just, secure, and peaceful European future.

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Britain, Greece, Turkey and The Aegean: Does Anything Change?

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Since at least 1955, the Aegean Sea has long been an area of contention between local powers Greece and Turkey on the one hand, and the US-UK-Israeli strategic axis on the other, with the Soviet Union and then Russia defending its interests when necessary, since the Aegean cannot be separated from the Eastern Mediterranean as a strategic whole, nor from Syria, Cyprus, Egypt, Palestine and Israel. In this essay, we shall, by using original documents, unravel the background to the present media hysteria over a potential war between Greece and Turkey.

Mental Underpinning

As Giambattista Vico, beloved by James Joyce, wrote, the world moves between periods of order and disorder. At the moment, there certainly seems to be a surfeit of disorder or, in the words of some attention-grabbing media pundits, chaos. We should also bear in mind Francesco Guicciardini’s dictum that things have always been the same, that the past sheds light on the future, and that the same things return with different colours. The current Aegean clash between Greece and Turkey is no exception. Let us look briefly at British policy to gain a more realistic insight into what is really happening, and slice through the emotional and warlike rhetoric emanating mainly from President Erdogan, emphasising as it does Ottomanism and Sunni Mohammedanism (thus undermining Kemalism), and in turn holding NATO to ransom, and distracting the Turkish people from an impending economic crisis.

British Imperial Origins

The origins of Turkish claims go back to Britain bringing Turkey into the Cyprus question in 1955, in breach of Article 16 of the Treaty of Lausanne, and then helping Turkey with its propaganda.1 This enabled Turkey to link the Cyprus issue to unfounded claims in the Aegean. Let us look more closely at British policy.

In 1972, Turkey was threatening Greece over its legitimate building of a radar station on Limnos, first for national defence purposes, and then integrated into NATO’s radar network. Britain recognised Greece’s objections to Turkish sabre-rattling: the Head of the FCO’s Southern European Department (SED) consulted Western Organisations Department (WOD), including the comment ‘what looked prima facie like a strong Greek case in law’.2 In a typical bout of taking French leave of the problem, WOD replied: ‘The last thing that we want to do is to find ourselves playing any part in it’.3 Thus, the rights and wrongs of the case were irrelevant to the FCO. Non-involvement was the order of the day.

But internally the debate continued. On 28 September, an FCO legal adviser wrote: ‘My preliminary view is that I agree with the Greek contention that when the Montreux Convention entered into force the provisions of the Lausanne Straits Convention concerning the de-militarisation of Lemnos terminated. I am of this opinion because of the plain words of the two treaties in their context and in the light of their object and purpose.’4

In the event, the issue was fudged, and war was avoided. But the claims remained, to be resuscitated whenever it suited Turkish foreign policy, as in 1975 and in the wake of the invasion and occupation of over one third of Cyprus. Turkey expanded its claims to cover several Greek islands. Again, in private, the FCO revealed the absurdity of the Turkish claims, with the Head of Chancery at British Embassy in Ankara writing: ‘Another example of perhaps typically Turkish thinking on this occurred when I was discussing this subject with Mr Dag, a First Secretary who works to Mr Süleymez […] He said that all that was needed for progress was that the Greeks should give in! I was left with the impression that reference to the International Court was still seen as something rather irrelevant and that the Turks hankered firmly, however unrealistically, for a bilateral solution. This is perhaps not surprising as they can presumably not have very much confidence in winning their case at the Court on its merits alone.’5 In this connexion, Henry Kissinger also pressurised the British Prime Minister to water down a draft UN resolution, so as to appear less supportive of the Greek position.6

The British position can be seen even more plainly in an FCO brief in 1977: ‘It happens that the British Government’s view of the issue is much closer to the Greek than the Turkish view. In particular, Britain supports the entitlement of islands to have a continental shelf.’7

The backstage reality is however better encapsulated in the following extract from an FCO paper: ‘We should also recognise that in the final analysis Turkey must be regarded as more important to Western strategic interests than Greece and that, if risks must be run, they should be risks of further straining Greek rather than Turkish relations with West.’8

At the Moment

The question arises as to whether anything will alter intrinsically in Greek-Turkish relations and in Anglo-Saxon support for Turkey. We are currently witnessing a repeat of previous illegal Turkish actions in the Aegean. France, as often in the past, tends to support Greece more openly, and now Italy has joined in a naval exercise with the French and Greeks. Germany is more difficult, as it still seems to place its enormous business interests in Turkey (its ally in the Great War), including large arms sales, above international law. Britain, the US’s acolyte in the Eastern Mediterranean, is enjoying the possibility of a Franco-German EU-weakening split, as it always has.

If it does however come to serious push and shove, Germany will have to succumb to the French view on Turkish law-breaking, since the EU depends more than ever on the Franco-German axis, and irritated commentators are starting to make comparisons between the Nazi genocide of Jews and Turkey’s genocide of Armenians and others. This is likely to have an effect on the German institutional psyche, still intent on being seen to be humanitarian, to balance the horrors perpetrated in the past. This leaves us with a potential disagreement between the Franco-German axis and thus the EU (even with a Germany being reluctant to criticise Turkey too obviously) on the one hand, and the US-UK-Israel axis on the other. Although the US is still trying, with the UK (and, until recently, Germany) to force Greece and Turkey to talk to each other on an equal footing, this is precisely what Turkey wants, so as to avoid its claims going to the International Court at the Hague. Russia, although happy to see two alleged NATO allies talking about war against each other, and undermining an organisation that it sees as obsolete and a threat to world peace, would not like to see major disorder on its southern flank, as this could affect its strategic interests in Syria and the region as a whole, interests that are considered by many to more legitimate than those of the US, thousands and thousands of miles away.

The only question is whether there will be another international fudge – which means only postponing the problem – or whether UN Law of the Sea will prevail (of course Turkey has not signed the UNLOSC Convention) and put Turkey in its place, with a concomitant return to Kemalism and friendship with neighbours, or even a weakened but less jingoistic Turkish state.

Footnotes

1 – Mallinson, William, Cyprus: a Modern History, I.B. Tauris, London and New York, 2005, 2008, and 2012 (now Bloomsbury), pp. 22-25.

2 – Hitch to McLaren, minute, 7 September 1972, BNA FCO9/1525, file WSG 3/318/1, in Mallinson, William, Britain and Cyprus, Bloomsbury Academic, 2020.

3 – Ibid., Ramsay to McLaren, minute, 13 September 1972.

4 – Ibid., Wood to Hitch, minute, 28 September 1972.

5 – Fullerton to Wright, letter, 28 September 1975, BNA FCO 9/2233, file WSG 3/318/1.

6 -Telephone conversation between Kissinger and Callaghan, BNA PREM 16/1157.

7 – FCO brief, May 1977, BNA PREM16/1624.

8 – ‘British Interests in the Eastern Mediterranean’, FCO paper prepared by South East Europe Department, 11 April 1975, BNA FCO 46/1248, file DP1/516/1.

From our partner RIAC

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From Intellectual Powerhouse to Playing Second Fiddle

Dr. Arshad M. Khan

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A multi-ethnic, multi-religious culture built Spain into an intellectual powerhouse so much so that after the reconquesta scholars from various parts of Europe flocked there to translate the scientific and philosophical works from classical Arabic into Latin triggering the European renaissance. 

But soon there were other changes.  The Holy Office of the Inquisition was born.  Muslim dress, Arab names and the Arabic language were outlawed.  A new inferior class of people emerged – Moriscos.  They were Muslims who had converted to Catholicism under threat, usually of exile and loss of property.  Many of course continued to practice Islam in secret. 

Discrimination and mistreatment led to Morisco rebellions which were crushed.  Eventually they were forced into internal exile to the northern provinces of Extremadura, La Mancha and New Castile where there was greater tolerance particularly in La Mancha. 

In Toledo, the area around the cathedral gained fame as an informal school of translators.  Often Morisco, these translators’ services were available to scholars or others requiring translation of Arabic texts.  It is here that the narrator of Cervantes’ epic Don Quixote of La Mancha finds a translator for an Arabic manuscript, a supposedly historical account of Don Quixote’s adventures.  The author of the fictional text is Cide Hamete Benengeli, a name that is clearly of a Morisco.  If Spain was busy making Moriscos a non-people, Cervantes was reminding them of their heritage.  

In 1492 when the last Arab Emirate (Grenada) was relinquished to Catholic Spain the treaty signed promised Muslims the right to their way of life in perpetuity.  Their Catholic Majesties Ferdinand II and Isabella I soon reneged on the deal.  Restrictions, internal exile, discrimination and forced conversions were the result.  But even the converted were not safe.  As Ottoman power expanded to the Mediterranean, Spain felt threatened.  Morisco loyalty became suspect and in the early 17th century they were expelled from Spain as were the Jews.  So ended 900 years of coexistence, fruitful and friendly that changed to suspicions and final expulsion under Catholic Spain.

And what of Spain?  Having lost its intellectual dynamism, it took its brand of intolerant Christianity to the Americas and added it to European diseases to which the people there had no immunity.  A devastated but Christianized population was the result.  Time and immigration have changed demographics.  A majority of Argentines for example have Italian ancestry; German influence in Chile which encouraged immigration from there in the 19th century is another example.  

Our own Ferdinand and Isabella composite resides in the White House with a good chance he will not next year.  Life will go on and people will continue to practice the religion of their birth or choice. 

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