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US threatens Europe with “gas war”

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Russia’s Foreign Minister Sergei Lavrov has said that the Nord Stream 2 gas pipeline will be launched irrespective of the US sanctions. Envisaged by the draft US defense budget for the 2020 fiscal year, the restrictions have already run into an adverse reaction in Europe and could further aggravate Washington’s relations with major European capitals, first of all, with Berlin.

The sanctions in question, which were imposed on the Nord Stream-2 and Turkish Stream gas pipelines, speak of the Congress’s desire to “do everything” to destroy relations with Russia. Nevertheless, both projects will go ahead, – Sergey Lavrov said following his visit to Washington on December 10th.

In the run-up to the Russian-American negotiations, the US Senate Committee on Armed Forces published a draft defense budget for 2020, which imposes sanctions on Russian energy projects. The draft says the restrictions on the Nord Stream 2 and Turkish Stream projects are introduced, no more, no less, to ensure Europe’s energy security.

According to the authors of the bill, the decision to include sanctions on the Nord Stream-2 project in the military budget was taken because there is no time now to elaborate a separate law regarding these restrictions. The idea is that sanctions should be introduced as early as possible in order to thwart the completion of the gas pipeline. Jim Rish, Chairman of the Senate Foreign Relations Committee, points out that the restrictions will be applied against companies that supply vessels for laying pipes at a depth of 100 feet (about 30.5 m) below sea level.

The measures, which were approved by the House of Representatives on December 11, may directly affect foreign partners of Nord Stream 2 AG, a project operator Nord Stream 2, which comprise French Engie, Austrian OMV, British-Dutch Royal Dutch Shell, German Uniper and Wintershall, as well as a number of European contractors. The developers of the bill did their best: it could shut companies out of access to any operations in the United States or any work for American business around the world, including American credit resources. As for physical persons, employees of these companies may lose the opportunity to obtain an American visa; also, any transactions related to their property or interests in the United States will be blocked. Under available information, the initiators of the bill also intend to strike at three major companies involved in laying underwater pipelines and firmly integrated into the global market. These are the German “Uniper”, the Swiss “Allseas” and the Italian Saipem.

The campaign to introduce US sanctions against partners of the Russian PJSC Gazprom was initiated by Republican Senator Ted Cruz, who in May this year submitted a separate bill to the Senate on sanctions against foreign operators of pipe-laying vessels of the Nord Stream-2 gas pipeline. In July the Senate committee which deals with such issues voted in favor of the document. The Ted Cruise bill with the final amendments has become part of the draft defense budget. The Senator assured all parties concerned that “the Congress will approve, and the president will sign the target sanctions that will punish companies involved in the construction of the gas pipeline.”  The Congressmen expect to adopt a defense budget before the Congress adjourns on December 20, 2019.

Commenting on the above mentioned document, Russian Foreign Minister Sergey Lavrov said that “the Congress is overwhelmed with the desire to do everything in its power to destroy our relations.”

However, at the last moment, Congressmen apparently tried to soften the earlier proposed sanctions. As follows from a conciliation report by members of the Senate and House of Representatives Committees on Armed Forces, the final version of the Ted Cruise bill contained yet more exceptions compared to the one passed by the related Senate Committee in July.

Approved after a three-month discussion, the bill envisages measures against foreign companies that supply vessels for the construction of the Nord Stream-2 and Turkish Stream pipelines but exempts companies that provide insurance and reinsurance services for such ships. Sanctions will not affect companies that guarantee the repair or maintenance of both pipelines.

Within 30 days of the entry into force of the bill the company can wrap up its work to provide operators of the Nord Stream-2 and Turkish Stream projects with pipe-laying vessels without facing sanctions. The Congress has also halved the maximum term of sanctions regime from ten to five years.

The President of the United States enjoys the right to make an exception and not to impose sanctions against a company that supplies ships for Gazprom projects, if this chimes in with the “US national security interests”.

In addition, the final version of the bill does not include potentially much more austere sanctions against the new Russian state debt.

In this respect, The Wall Street Journal reasonably argues that “sanctions directed against pipe-laying companies may trigger yet greater tensions between the US and Germany, which strongly opposes new sanctions.”

According to the newspaper, the Russian Gazprom and the government of German Federal Chancellor Angela Merkel “have long been prepared for the possibility of US sanctions, as reported by German officials and representatives of the Russian energy giant.” The Wall Street Journal quotes a top German official who spoke on condition of anonymity as saying that “the construction of the pipeline is coming to a close and that this project will be completed, despite the sanctions.” According to a German government representative, the Merkel Cabinet “rejects extraterritorial sanctions that affect German and European companies,” – the American edition says.

In Germany proper, many politicians have taken yet a tougher stance against US sanctions on Europeans. The fact that the German government submitted to the “economic attack” and “surrendered” to the United States over the construction of the Nord Stream 2 pipeline was voiced by Steffen Kotre, Speaker of the Alternative for Germany faction on energy issues in the Bundestag. According to Kotre, “the USA managed to link Nord Stream-2 with Ukraine, which it destabilized earlier.” The government of Angela Merkel is just unable to represent and defend the position of Germany at the moment, while the stability of Ukraine “has nothing to do with other economic projects,” – Steffen Kotre says.

A similar opinion came from Chairman of the Parliamentary Commission on Economics and Energy Klaus Ernst,who said Ukraine’s support for US sanctions undermines Germany’s energy policy and calls into question further assistance from the European Union. Kiev has received and continues to receive “substantial political and financial support from the European Union,” and at the same time, it supports US sanctions that undermine “our energy policy,” – Klaus Ernst said.

The German parliamentarian emphasized that if Washington imposes sanctions on the Nord Stream 2 gas pipeline, Berlin may respond with retaliatory measures, such as increase duties on American liquefied natural gas.

Europe should take retaliatory measures in response to US sanctions against the Nord Stream 2 gas pipeline which are enshrined in the draft defense budget for the 2020 fiscal year, the German-Russian Chamber of Commerce said in a statement. The document emphasizes that this organization condemns extraterritorial sanctions against the pipeline construction project. According to OMV CEO Rainer Seele, “sanctions against the Nord Stream 2 project are a blow to Europe and Germany, a close ally.” Rainer Seele is convinced that Berlin and Brussels need to assume a clear political position and “respond with target measures,” since energy independence of European countries depends on it.

New US sanctions against the Russian Nord Stream 2 gas pipeline will hit EU sovereignty, – predicts Oliver Hermes, chairman of the East German Economy Committee: “If these sanctions come into force, it will be a direct blow to European Union sovereignty and a fatal signal for Paris’ peace efforts. ” The expert said that the participants in the “Normandy Four” summit in Paris on December 9 took new steps to achieve a settlement in Donbass “after years of idleness”. Considering this, American sanctions will constitute a threat to a “new, bold” approach to the situation in eastern Ukraine. Oliver Hermes made it clear that if the US imposes restrictions on Russia, energy prices for European consumers will gradually go up; in addition, sanctions n will “undermine transatlantic unity” and inflict damage on US projects in Europe.

“We must respond with countermeasures to the sanctions, which are detrimental to Europe,” – the head of the German-Russian Chamber of Commerce Matthias Shepp reaffirms: “It’s time for Berlin and Brussels to take a clear political position and respond with target countermeasures,” as the energy-political security of Europe is at stake. According to Matthias Shepp, Nord Stream 2 enhances Europe’s energy security by guaranteeing low energy prices in comparison with more expensive American liquefied natural gas. “The US wants to boost the supply of its liquefied gas to Europe with the help of sanctions. Meanwhile, Germany needs low energy prices for its energy-intensive industry to survive amid global competition,” – the head of the German-Russian Chamber of Commerce emphasizes.

Meanwhile, Ukraine hopes that the measures proposed by the American Congressmen will disrupt the implementation of the Nord Stream 2 project. However, Ukrainian experts recognize that “it will be difficult to push a number of major investors out of the project. Many have nothing to lose. Some feel the strong support of European governments, above all, German businesses. Given the circumstances, there is a chance that the construction will continue and will likely be completed, though with a considerable delay. ”

Given the situation, a lot will depend on the position of Germany and France as key EU players and major participants in the “Normandy process.” From both economic and political points of view, Berlin and Paris will lose a lot if they choose not to cooperate with Russia and block the implementation of the Nord Stream 2 project. In addition, the convincing victory of Brexit supporters in the UK’s early parliamentary elections on December 12 weakens the positions of the “Euro-Atlanticists” in Europe and those oriented at Washington. What also remains important is the deadline for completing the construction of the pipeline, since both the finalization of the pipeline project and the imposition of sanctions is a matter of just a few months.

From 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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