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US strives to supply Europe with its own gas

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American Congressmen continue to exert every effort to thwart the completion of the Nord Stream-2 gas pipeline, which is designed to secure a long-lasting supply of Europe with Russian gas. A parliamentary bill devised by the US Senate to toughen anti-Russian sanctions envisages measures against European companies and their production facilities involved in the construction of the pipeline. Simultaneously, the ongoing “trade war” between the United States and China “incorporates” the problem of Russian pipeline gas supplies to Europe into the wider system of Washington’s foreign policy priorities, which “pushes stakes up” in this “game”.

According to the bill, which was drafted by Republican  Senator Ted Cruz and Democratic Senator Jeanne Shaheen, the new US sanctions will affect European ships that are involved in the construction of the Nord Stream – 2 gas pipeline. The restrictions will also spread to companies that are building deep-water pipelines for Russian energy projects, and, as stated by the American edition of The Foreign Policy, the document is directed directly against the Nord Stream-2 project, which “caused tensions between the US and Germany. ”

The authors of the bill point out that while laying pipelines the relevant vessels use the western know-how which Russia does not have.” “This is one of the few areas where Gazprom lacks technical knowledge and technology to implement pipeline projects,” – an expert on Eurasian energy issues in the Atlantic Council, Agnia Grigas, said as she commented on the new sanctions in an interview with The Foreign Policy.  Earlier, the American newspaper The Wall Street Journal, citing its own sources, indicated that the United States plans to impose sanctions on investors and companies that are building the Nord Stream-2 pipeline, and, in order to facilitate this process, the Senators are planning to introduce the relevant measures as amendments to the current package of anti-Russian sanctions.

In the meantime,  a high-ranking US official who wished not to be named indicated in his commentary that the provisions of the new bill were designed on the basis of the previous US sanctions which aimed at undermining the export of Iranian oil. According to The Foreign Policy, the new restrictive measures will affect individuals and legal entities that sell or rent vessels to be used in the construction of the Nord Stream-2 gas pipeline. In addition, the draft provides restrictions for those who provide financial and technical support for these vessels, as well as cover their insurance.

The company-operator of the project, Nord Stream 2 AG, has already commented on US restrictions regarding the project and the companies involved in its construction, saying that since the pipeline is being built in accordance with the law, the company does not see any need to introduce a special “plan B” in case of sanctions.

Representatives of the Donald Trump administration and the State Department, though talking about the possibility of new measures against the Russian project in general statements, confirm their readiness to apply sanctions against it. In particular, the US Ambassador to Germany, Richard Grenell, has already warned that the Nord Stream 2 project runs a “high risk of facing sanctions”. In early May, in an interview with Focus, he made it clear that Washington could impose sanctions on German companies participating in the Nord Stream-2 gas pipeline project.

In Germany proper,  plans by US officials and their like-minded counterparts in the European Commission cause ill-concealed irritation. Federal Chancellor Angela Merkel has decided to intervene in the discussion in person. Speaking in the German city of Ravensburg, she made it clear that Washington and Brussels, despite the adoption of a new version of the EU Gas Directive, would not be able to block the Nord Stream 2 project, which she considers very profitable for Germany. According to Angela Merkel, the idea of a gas pipeline across the bottom of the Baltic Sea has already been approved in principle. Simultaneously, the Federal Chancellor acknowledged that the main disputes over this project are connected with Ukraine. In her opinion, “transit through this country should continue.” She indicated that she had mentioned this to Russian President Vladimir Putin and that she is planning to discuss this issue with the new Ukrainian President Vladimir Zelensky after he officially takes office.

Angela Merkel added that “Nord Stream 2” is not a purely German project –  French, Austrian and Dutch companies are also involved in the construction of the gas pipeline. They include German Wintershall and Uniper, Austrian OMV, French Engie and British-Dutch Shell.

According to the German Chancellor, in the future Germany intends to diversify gas supplies and will build storage facilities for LNG. However, at present, the country needs the Nord Stream – 2 gas pipeline, particularly amid  a reduction in gas imports from Norway and the Netherlands.

According to the German media,  Berlin does not restrict itself to verbal statements in support of the Nord Stream 2 project but is trying its best to influence the American side in this issue. In particular, according to Bild, the German Ambassador to the United States, Emily Haber, has sent a letter to the US Congress urging them to stop threatening Russian companies PJSC  NOVATEK and PJSC Gazprom, operating in Germany, with new sanctions. In her words, such actions jeopardize the energy security of Germany and of the entire European Union.

In her letter, Emily Haber points out that since countries of the European Union have adopted amendments to the Gas Directive, the issue of blocking the construction of the Nord Stream-2 gas pipeline is closed for Europe: “All countries that criticized the Nord Stream-2 approved this document “. Given the situation, the German diplomat described any further steps that Washington might take in order to hinder the development of the project as counterproductive and potentially threatening the energy security of the EU.

“What is also worrying is that the planned LNG terminal in Rostock may come under DASKA sanctions because of a minority stake owned by the Russian company NOVATEK,” – Bild says quoting Emily Haber. According to her, these sanctions can cause damage to LNG imports to Germany.

The Belgian gas company Fluxys and NOVATEK are planning to build a transit terminal for liquefied natural gas with a capacity of about 300 thousand tons per year in the port of Rostock. The facility is scheduled to be commissioned in 2022.

In response to a request from Bild to comment on the letter of the German ambassador to the US Congress, the German Foreign Ministry confirmed that the country’s government “is in constant and close contact with the US, including on the issue of sanctions.”

 Russia deems Washington’s attempts to disrupt the implementation of the Nord Stream-2 project an instance of unfair competition which resorts to political pressure, ultimatum and sanctions to make Europeans buy American liquefied natural gas.  According to Russian president’s secretary Dmitry Peskov, instead of “racketeering” and “raiding,” Washington should think about how to persuade Europeans to buy American LNG, which costs by “tens of percentage points” more compared to that produced in Russia.

The continuing trade war between Washington and Beijing is yet another factor demonstrating that the US has been stepping up efforts to assume control of the European energy market. In response to the decision of  President Donald Trump to increase customs tariffs on the import of Chinese goods worth $ 200 billion from 10% to 25%, Beijing is increasing import tariffs on American LNG as of June 1 this year. According to the Chinese Customs Tariff Committee, the tariffs will go up from the current 10% to 25%.

The export of LNG from the US into China has dropped considerably since the Chinese tariffs came into effect in September 2018. According to Vygon Consulting, American LNG exports to China amounted to only 0.3 million tons in the first four months of this year compared to the same period in 2018, when China received 1.4 million tons of LNG. As a result, we have witnessed a forced redistribution of US liquefied natural gas flows to Europe, which, in turn, explains the toughening of Washington’s policy on the Nord Stream 2 project and reaffirms the existence of unfair competition from the United States.

The Russian gas pipeline project has been mentioned in US sanctions initiatives since the summer of 2018 as part of a policy aimed at increasing US LNG sales in Europe,” – said Maria Belova, research director at Vygon Consulting. She makes it clear that even though the trade war with China was unleashed later,  the fact that LNG is becoming one of its victims creates an additional incentive for the US to try to secure a market for it in Europe.

Meanwhile, the excess volumes of American liquefied natural gas unclaimed by the Chinese market still end up on a market which, like the oil market, is global, – says Sergey Kapitonov, gas analyst at the Energy Center of the Moscow School of Management “Skolkovo”. Amid a favorable pricing environment, more and more LNG is being delivered to Europe, which creates a certain challenge for pipeline supplies from Russia.

Given the situation, future developments on the Nord Stream 2 project will largely depend on factors outside Europe, including the situation in Asian markets (where a possible increase in gas consumption could lead to an increase in demand and a rise in prices and consequently, reorientation of supplies), and also changes in world oil prices (which a number of Russian long-term gas contracts depend on). What is also of crucial importance is the military and political situation in the Middle East and the Persian Gulf, which account for the bulk of the world’s energy resources.

 First published in our partner International Affairs

Peter Iskenderov, senior research assistant at RAS Slavic Studies Institute, candidate of historical sciences

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Energy transition is a global challenge that needs an urgent global response

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COP26 showed that green energy is not yet appealing enough for the world to reach a consensus on coal phase-out. The priority now should be creating affordable and viable alternatives 

Many were hoping that COP26 would be the moment the world agreed to phase out coal. Instead, we received a much-needed reality check when the pledge to “phase out” coal was weakened to “phase down”. 

 This change was reportedly pushed by India and China whose economies are still largely reliant on coal. The decision proved that the world is not yet ready to live without the most polluting fossil fuels. 

 This is an enormous problem. Coal is the planet’s largest source of carbon dioxide emissions, but also a major source of energy, producing over one-third of global electricity generation. Furthermore, global coal-fired electricity generation could reach an all-time high in 2022, according to the International Energy Agency (IEA).

 Given the continued demand for coal, especially in the emerging markets, we need to accelerate the use of alternative energy sources, but also ensure their equal distribution around the world.

 There are a number of steps policymakers and business leaders are taking to tackle this challenge, but all of them need to be accelerated if we are to incentivise as rapid shift away from coal as the world needs. 

 The first action to be stepped up is public and private investment in renewable energy. This investment can help on three fronts: improve efficiency and increase output of existing technologies, and help develop new technologies. For green alternatives to coal to become more economically viable, especially, for poorer countries, we need more supply and lower costs.

 There are some reasons to be hopeful. During COP26 more than 450 firms representing a ground-breaking $130 trillion of assets pledged investment to meet the goals set out in the Paris climate agreement. 

 The benefits of existing investment are also becoming clearer. Global hydrogen initiatives, for example, are accelerating rapidly, and if investment is kept up, the Hydrogen Council expects it to become a competitive low-carbon solution in long haul trucking, shipping, and steel production.

 However, the challenge remains enormous. The IEA warned in October 2021 that investment in renewable energy needs to triple by the end of this decade to effectively combat climate change. Momentum must be kept up.

 This is especially important for countries like India where coal is arguably the main driver for the country’s economic growth and supports “as many as 10-15 million people … through ancillary employment and social programs near the mines”, according to Brookings Institute.  

This leads us to the second step which must be accelerated: support for developing countries to incentivise energy transition in a way which does not compromise their growth. 

Again, there is activity on this front, but it is insufficient. Twelve years ago, richer countries pledged to channel US$100 billion a year to less wealthy nations by 2020, to help them adapt to climate change. 

The Organization for Economic Cooperation and Development estimates that the financial assistance failed to reach $80 billion in 2019, and likely fell substantially short in 2020. Governments say they will reach the promised amount by 2023. If anything, they should aim to reach it sooner.

There are huge structural costs in adapting electricity grids to be powered at a large scale by renewable energy rather than fossil fuels. Businesses will also need to adapt and millions of employees across the world will need to be re-skilled. To incentivise making these difficult but necessary changes, developing countries should be provided with the financial support promised them over a decade ago.

The third step to be developed further is regulation. Only governments are in a position to pass legislation which encourages a faster energy transition. To take just one example, the European Commission’s Green Deal, proposes introduction of new CO2 emission performance standards for cars and vans, incentivising the electrification of vehicles. 

This kind of simple, direct legislation can reduce consumption of fossil fuels and encourage industry to tackle climate change.

Widespread legislative change won’t be straightforward. Governments should closely involve industry in the consultative process to ensure changes drive innovation rather than add unnecessary bureaucracy, which has already delayed development of renewable assets in countries including Germany and Italy. Still, regardless of the challenges, stronger regulation will be key to turning corporate and sovereign pledges into concrete achievements. 

COP26 showed that we are not ready as a globe to phase out coal. The priority for the global leaders must now be to do everything they can to drive the shift towards green energy and reach the global consensus needed to save our planet.

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Pakistan–Russia Gas Stream: Opportunities and Risks of New Flagship Energy Project

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source: twitter

Russia’s Yekaterinburg hosted the 7th meeting of the Russian-Pakistani Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation on November 24–26, 2021. Chaired by Omar Ayub Khan, Pakistan’s Minister for Economic Affairs, and Nikolai Shulginov, Russia’s Minister of Energy, the meeting was attended by around 70 policy makers, heads of key industrial companies and businessmen from both sides, marking a significant change in the bilateral relations between Moscow and Islamabad.

Three pillars of bilateral relations

Among the most important questions raised by the Commission were collaboration in trade, investment and the energy sector.

According to the Russian Federal Customs Service, the Russian-Pakistani trade turnover increased in 2020 by 45.8% compared to 2019, totaling 789.8 million U.S. dollars. Yet, there is still huge potential for increasing the trade volume for the two countries, including textiles and agricultural products of Pakistan and Russian products of machinery, technical expertise as well as transfer of knowledge and R&D.

Another prospective project discussed at the intergovernmental level is initiating a common trade corridor between Russia, the Central Asia and Pakistan. Based on the One-Belt-One-Road concept, launched by China, the Pakistan Road project is supposed to create a free flow of goods between Russia and Pakistan through building necessary economic and transport infrastructure, including railway construction and special customs conditions. During the Commission meeting, both countries expressed their intention to collaborate on renewal of the railway machines fleet and facilities in Pakistan, including supplies of mechanized track maintenance and renewal machines; supplies of 50 shunting (2400HP or less) and 100 mainline (over 3000HP) diesel locomotives; joint R&D of the technical and economic feasibility of locomotives production based in the Locomotive Factory Risalpur and other. The proposed contractors of the project might be the Russian Sinara Transport Machines, Uralvagonzavod JSC that stand ready to supply Pakistan Railway with freight wagons, locomotives and passenger coaches. In order to engage import and export activities between Russian and Pakistani businessmen, the Federation of Pakistan Chamber of Commerce signed a memorandum with Ural Chamber of Commerce and Industry, marking a new step in bilateral relations. Similar memorandums have already been signed with other Chambers of Commerce in Russian regions.

— Today, the ties between Russia and Pakistan are objectively strengthening in all areas including economic, political and military collaboration. But we, as businessmen, are primarily interested in the development of trade relations and new transit corridors for export-import activities. For example, the prospective pathways of the Pakistan-Central Asia-Russia trade and economic corridor project are now being actively discussed at the intergovernmental level, — said Mohsin Sheikh, Director of the Pakistan Russia Business Council of the Federation of Pakistan Chambers of Commerce and Industry. — For Islamabad, this issue is one of the most important. Based on a similar experience of trade with China, we see great prospects for this direction. That is why representatives of Pakistan’s government, customs officers, diplomats and businessmen gathered in Yekaterinburg today.

However, the flagship project of the new era of the Pakistan-Russia relations is likely to be the Pakistan Gas Stream. Previously known as the North-South Gas Pipeline, this mega-project (1,100 kilometers in length) is expected to cost up to USD 2,5 billion and is claimed to be highly beneficial for Pakistan. Being a net importer of energy, Pakistan will be able to develop and integrate new sources of natural gas and transport it to the densely populated industrialized north. At the same time, the project will enable Pakistan—whose main industries are still dependent on the coal consumption—to take a major step forward gradually replacing coal with relatively more ecologically sustainable natural gas. To enable this significant development in the Pakistan’s energy sector, Moscow and Islamabad have made preliminary agreements to carry on the research of Pakistan’s mineral resource sector including copper, gold, iron, lead and zinc ores of Baluchistan, Khyber Pukhtunkhwa and Punjab Provinces.

A lot opportunities but a lot more risks?

The Pakistan Stream Gas Pipe Project undoubtedly opens major investment opportunities for Pakistan. Among them are establishment of new refineries; the launch of virtual LNG pipelines; building of LNG onshore storages of LNG; investing in strategic oil and gas storages. Yet, it seems that Pakistan is likely to win more from the Project than Russia. And here’s why. The current version of the agreement signed by Moscow and Islamabad has been essentially reworked. According to it, Russia will likely to receive only 26 percent in the project stake instead of 85 percent as it was previously planned, while the Pakistani side will retain a controlling stake (74 percent) in the project.

Another stranding factor for Russia is although Moscow will be entitled to provide all the necessary facilities and equipment for the building of the pipeline, the entire construction process will be supervised by an independent Pakistani-based company, which will substantially boost Pakistan’s influence at each development. Finally, the vast bulk of the gas transported via the pipeline will likely come from Qatar, which will further strengthen Qatar’s role in the Pakistani energy sector.

Big strategy but safety first

The Pakistan Stream Gas Pipeline will surely become an important strategic tool for Russia to reactivate the South Asian vector of its foreign policy. Even though the project’s aim is not to gain a fast investment return and economic benefits, it follows significant strategic goals for both countries. As Russia-India political and economic relations are cooling down, Moscow is likely to boost ties with Pakistan, including cooperation in economy, military, safety and potentially nuclear energy, that was highlighted by Russian Foreign Minister Sergey Lavrov during visit to Islamabad earlier this year. Such an expansion of relations with Pakistan will allow Russia to gain a more solid foothold in the South Asian part of China’s BRI, thus opening up a range of new lucrative opportunities for Moscow.

Apart from its economic and political aspects, the Pakistan Stream Project also has clear geopolitical implications. It marks Russia’s growing influence in South Asia and points to some remarkable transformations that are currently taking place in this region. The ongoing geopolitical game within the India-Russia-Pakistan triangle is yet less favorable for New Delhi much because of the Pakistan Stream Project. Even though the project is not directly aimed to jeopardize the India’s role in the region, it is considered the first dangerous signal for New Delhi. For instance, the International “Extended troika” Conference on Afghanistan, which was held in Moscow last spring united representatives from the United States, Russia, China and Pakistan but left India aside (even though the latter has important strategic interests in Afghanistan).

With the recent withdrawal of the U.S. military forces from Afghanistan, Moscow has become literally the only warden of Central Asia’s security. As Russia is worried about the possibility of Islamist militants infiltrating the Central Asia, the main defensive buffer in the South for Moscow, the recent decision of Vladimir Putin to equip its military base in Tajikistan, which neighbors Afghanistan, seems to be just on time. Obviously, Islamabad that faces major risks amidst the Afghanistan crisis sees Moscow as a prospective strategic partner who will help Imran Khan strengthen the Pakistani efforts in fighting the terrorism threat.

From our partner RIAC

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How wind power is transforming communities in Viet Nam

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In two provinces of Viet Nam, a quiet transformation is taking place, driven by the power of renewable energy.

Thien Nghiep Commune, a few hundred kilometres from Ho Chi Min City, is a community of just over 6,000 people – where for years, people relied largely on farming, fishing and seasonal labour to make ends meet.

Now, thanks to a wind farm backed by the Seed Capital Assistance Facility (SCAF) – a multi-donor trust fund, led by the United Nations Environment Programme (UNEP) – people in the Thien Nghiep Commune are accessing new jobs, infrastructure and – soon – cheap, clean energy. The 40MW Dai Phong project, one of two wind farms run by SCAF partner company the Blue Circle, has brought new hope to the community.

For the 759 million people in the world who lack access to electricity, the introduction of clean energy solutions can bring improved healthcare, better education and affordable broadband, creating new jobs, livelihoods and sustainable economic value to reduce poverty.

“It’s not only about the technology and the big spinning wheel for me. It’s more about making investment decisions for the planet and at the same time not compromising on the necessity that we call electricity,” said Nguyen Thi Hoai Thuong, who works as a community liaison. “The interesting part is I work for the project, but I actually work for the community and with the community.”

While the wind farm is not yet online, a focus on local hiring and paying fair prices for land has already made a big difference to the community.

“I used the money from the land sale to the Dai Phong project to repair my house and invest in my cattle. Currently, my life is stable and I have not encountered any difficulties since selling the land,” said Ms. Le Thi Doan.

Powering change

The energy sector accounts for approximately 75 per cent of total global greenhouse gas emissions (GHGs). UNEP research shows that these need to be reduced dramatically and eventually eliminated to meet the goals of the Paris Agreement.

Renewable energy, in all its forms, is one of humanity’s greatest assets in the fight to limit climate change. Capacity across the globe continues to grow every year, lowering both GHGs and air pollution, but the pace of action must accelerate to hold global temperature rise to 1.5 °C this century.

“To boost growth in renewables, however, companies need to access finance,” said Rakesh  Shejwal, a Programme Management Officer at SCAF. “This is where SCAF comes in. SCAF works through private equity funds and development companies to mobilize early-stage investment low-carbon projects in developing countries.”

The 176 projects it seed financed have mobilized US $3.47 billion to build over one gigawatt of generation capacity, avoiding emissions of 4.68 million tons of carbon dioxide (CO2) equivalent each year.

But SCAF’s work isn’t just about cutting emissions. It is bringing huge benefits across the sustainable development agenda: increasing access to clean and reliable electricity and boosting communities across Asia and Africa. SCAF will be potentially creating 17,000 jobs.

This is evident in Ninh Thuan province, where the Blue Circle created both the first commercial wind power project and the first to be commissioned by a foreign private investor in Viet Nam.

Here, the Dam Nai wind farm has delivered fifteen 2.625 MW turbines, the largest in the country at the time. These will generate approximately 100 GWh per year. They will avoid over 68,000 tCO2e annually and create more than an estimated 302 temporary construction and 13 permanent operation and maintenance jobs for the local community.

Students from the local high school in Ninh Thuan Province were also given the opportunity to meet with engineers and technicians on the project, increasing their knowledge about how renewable energy works and opening up new career paths.

SCAF, through its partners, is supporting clean energy project development in the Southeast Asian region and African region. SCAF has more than a decade of experience in decarbonization and is currently poised to run till 2026.

UNEP

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