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Russian Energy Week: Is the world ready to give up hydrocarbons?

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In an official message to mark the opening of the Russian Energy Week international forum on 13-15 October in Moscow, Russian President Vladimir Putin stressed that there are numerous issues on the agenda related to current trends in the global energy market, including improvements to industry infrastructure and the introduction of modern digital technologies into its operation.

“The efficiency of energy production and consumption is the most important factor in the growth of national economies and has a significant impact on people’s quality of life. Many countries have already adopted policies to accelerate the development of clean energy technologies,” he wrote in the message to guest and participants.

“The forum business programme is therefore set to look in detail at the possibility of developing green energy based on renewable sources and the transition to new, more environmentally friendly fuels. I am confident that the events of the Russian Energy Week will allow you to learn more about the achievements of the country’s fuel and energy sector, and that your initiatives will be put into practice,” Putin said.

Leaders of foreign states have also sent greetings to the participants and guests. For instance, President of the Republic of Angola João Manuel Gonçalves Lourenço, Prime Minister of Vietnam Pham Minh Chinh, Crown Prince of Abu Dhabi Armed Forces Mohamed bin Zayed bin Sultan Al Nahyan, and Vice Premier of the State Council of China Han Zheng.

In their greetings, it generally noted the importance of the topics to be discussed at the forum as well as the need to build an international dialogue and consolidate efforts to achieve the sustainable development goals, including as regards climate change.

The programme covers a wide range of issues of transformation and development in the global energy market. In the context of energy transition, the issues of energy development are inextricably linked with the introduction of new technologies, and the transformation aimed at reducing greenhouse gas emissions into the atmosphere. Climate protection is a task that cannot be solved by one country; it is a global goal, which can be achieved through building dialogue and cooperation between countries.

The participants in the discussion will answer the question: Is the world ready to give up hydrocarbons? In addition, during the panel session, the participants will discuss whether oil, gas and coal are really losing ground in the global energy sector; whether the infrastructure will have time to readjust for new energy sources; how long will there be enough hydrocarbons from the field projects that are being implemented; and whether an energy transition using fossil fuels is possible.

The international climate agenda is forcing many countries to reform their carbon-based energy systems. For Russia, which holds a leading position in the global hydrocarbon markets, the transition to development with low greenhouse gas emissions presents a serious challenge, but at the same time it opens up new opportunities for economic growth based on renewable energy, hydrogen technologies, advanced processing of raw materials and implementing green projects.

The Climate Agenda included sessions dedicated to the operation of the Russian fuel and energy sector in the context of energy transition, the impact of the European green pivot on the cooperation between Russia and Europe, as well as the session titled ‘The Future of Coal in a World Shaped by the Climate Agenda: The End, or a New Beginning?’

Sessions of the ‘New Scenarios for the Economy and the Market’ track are dedicated to the global challenges and opportunities of the electric power industry; the impact of ESG on the Russian fuel and energy sector; the potential for the renewable energy sources; and other issues of the future of energy.

The Russian Energy Agency under the Ministry of Energy brings together experts from key international analytical organizations to discuss the future of world energy during the session titled International Energy Organization Dialogue: Predicting the Development of Energy and Global Markets.

The Human Resource Potential of the Fuel and Energy Sector, participating experts will discuss the prospects for developing the professional qualification system, and a session titled Bringing the Woman’s Dimension to the Fuel and Energy Sector. Optimizing regulation in the energy sector and organizing the certification and exchange of carbon credits in Russia are the basis of the Regulatory Advances in Energy. 

Anton Kobyakov, Advisor to the Russian President and Executive Secretary of the Russian Energy Week 2021 Organizing Committee, said “the level of various formats of international participation testifies to the importance of the agenda and Russia’s significant role in the global energy sector. We are a reliable strategic partner that advocates for building international cooperation based on the principles of transparency and openness. With the period of major changes in the industry, it is particularly important to engage in a dialogue and work together to achieve both national and global goals.”

The forum, organized by the Roscongress Foundation, the Russian Ministry of Energy, and the Moscow Government, brought together many local and foreign energy and energy-related enterprises. The speakers attending included  Exxon Mobil Corporation Chairman of the Board of Directors and CEO Darren Woods, Daimler AG and Mercedes-Benz AG Chairman of the Board Ola Kallenius, BP CEO Bernard Looney, and TotalEnergies Chairman and CEO Patrick Pouyanné.

MD Africa Editor Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

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Massive Lying About the War in Ukraine

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The chief purpose of the Western sanctions against Russia, after Russia invaded Ukraine on 24 February 2022, has been to stop Russia’s sales of energy — mainly pipelined Russian gas — to Europe. Russia had been the top supplier of energy to Europe, because its energy was by far the cheapest in Europe. It was the least expensive to produce and sell to Europe, largely because it was pipelined into Europe whereas other suppliers needed to containerize and ship their gas and oil to Europe — which is far costlier to do. In all of Europe, virtually the only energy that is pipelined comes from Russia. Therefore, the sanctions that prohibited Russian energy to be supplied to Europe caused energy-prices in Europe to soar.

However, Western ‘news’-media don’t blame the sanctions for Europe’s soaring energy-prices, because those sanctions come from the U.S. and have the cooperation and participation by European governments. Here are the main ‘causes’ of Europe’s soaring energy-prices according to U.S.-and-allied ‘news’-media (and you will see examples from Western Governments and ‘news’-media there simply by clicking onto each one of these phrases, each one of which is linked):

“Russia’s cutting off the gas to Europe”

“Russia strangling Europe”

“Russia’s energy war”

“Putin’s energy weapon” 

So: each of those ‘news’-media is routinely lying to their audience in order to place the blame for Europe’s soaring fuel-prices upon the Government of Russia, instead of upon the Government of America and upon its various vassal-Governments in Europe that constitute together the EU. 

In addition to using those lying phrases, U.S.-and-allied ‘news’-media use distractionary and misleading ‘explanations’ of the soaring prices. For example, the American and German-owned Politico ‘news’-site headlined “Why cheap US gas costs a fortune in Europe”, and ‘explained’ that “The liquefied natural gas (LNG) loaded on to tankers at U.S. ports costs nearly four times more on the other side of the Atlantic, largely due to the market disruption caused by a near-total loss of Russian deliveries following the invasion of Ukraine.” What caused that “near-total loss of Russian deliveries” isn’t so much as even discussed in their ‘news-report’, and the word or even concept of “sanction” doesn’t even appear once in the article. That’s how propaganda — NOT news — is done. Their ‘news’-report instead discusses whether the U.S. suppliers, or instead the European middlemen to whom they sell American liquefied natural gas, is to blame, but, of course, all such discussion is distractionary, instead of at all explanatory, of the question “Why cheap US gas costs a fortune in Europe”. This is the way to deceive Europeans into re-electing their politicians who serve U.S. billionaires instead of European consumers.

A comedic, but also extremely informative, documentation of the absurd extent to which U.S.-and-allied Governments and media go in order to pretend that these cut-offs of Europe’s least-costly energy are due to Russia instead of to the U.S. can be seen in the 8-minute video by Matt Orfalea, “Who Blew Up Nord Stream Pipelines? | A Mystery!”

To see some of the many OTHER tricks that U.S.-and-allied ‘news’-media use in order to deceive Europeans to vote for the politicians in these U.S.-vassal-nations (propagandistically called U.S. ‘allies’, instead), I have provided many more examples in my prior “Debunking Lies About the War in Ukraine”. That article, combined with this one, presents a fully documented (in the links) and comprehensive picture of European Governments as serving U.S. billionaires instead of European consumers. If what it says is true — and you can easily decide that for yourself by clicking onto any link anywhere that you doubt what is being alleged there — then you will know that your Government doesn’t care about you, at all, and is instead serving America’s billionaires, at your considerable expense.

In order to keep those U.S.-and-‘allied’ weapons flowing to Ukraine so that America can defeat Russia in the battlefield of Ukraine by using Ukraine’s army instead of America’s soldiers, the lies that have been documented here need to be believed by Europeans — and they are (or at least have been) believed by Europeans. The tricks have been working, thus far.  

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Oil Price Threshold: Action and Reaction

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The introduction of a price threshold for Russian oil has been discussed for several months. The idea was announced back in early September in a statement by the finance ministers of the G7 countries. Its essence was to prohibit the transportation of Russian oil and oil products by sea in the event that the contract price exceeds a predetermined price level. Along with transportation, there are related services—insurance, financing, brokerage services, etc. A “price threshold coalition” was formed, which, along with the members of the G7, included Australia and the EU member states.

Washington, London and Brussels have already developed legal mechanisms for the new restrictions. On December 5, oil price restrictions should come into force, and in February, they are expected to be applied to oil products. The initiators of the sanctions expect attempts to circumvent new sanctions and are trying to cement possible loopholes in advance. What kind of workarounds are expected among the Western countries, and what are the chances they’ll be able to impose a price cap on other countries?

The price threshold for oil is a relatively new and non-standard variety of economic sanctions. The most common and universal instrument of modern sanctions are restrictions on exports and imports, as well as blocking sanctions. The latter entails a ban on any financial transactions with individuals or organisations included in the lists of blocked persons. The Russian oil industry has already faced a wide range of export and import restrictions. The US, EU, UK and a number of other countries have introduced or are gradually introducing bans on the supply of oil and petroleum products from Russia. They have largely blocked the supply of equipment for the domestic energy sector. Even before the start of the special military operation, a number of large Russian oil companies were subject to sectoral restrictions in the form of a ban on long-term lending and a ban on deliveries in the interests of individual projects. It turned out to be more difficult to impose blocking sanctions. A number of top managers and major shareholders of Russian oil assets were included in the lists of blocked persons. However, the West did not dare to block the companies themselves; Russia is too large a supplier of oil to the world market. Blocking the financial transactions of Russian suppliers would lead to a panic in the market and an astronomical rise in prices. Collateral damage is the only thing stopping the West from blocking Russian oil companies.

A price cap was proposed as a softer measure. The US and its partners are betting on the fact that Western companies control significant volumes of transportation and insurance. They are also betting on the dominance of the US dollar in global financial markets. Russian producers are being driven towards a situation in which they will either have to sell oil within the price threshold, or it will simply not be delivered. In addition, such cargo will not be insured, and financial transactions involving banks from the “threshold coalition” will become impossible. Moscow has already threatened to stop supplies to those countries that go ahead and implement the decisions of the “coalition”. But the “coalition” itself has largely given up on Russian oil anyway. India, China and other friendly countries may not join, but Western carriers will not deliver Russian oil there.

The initiators of the sanctions expect a number of schemes to be attempted to circumvent the new measures. The first is the formal observance of the price threshold, but manipulations with the price of transportation or other related services. The US Treasury is warning carriers, insurers, bankers and other market participants in advance that commercially unreasonable rates will be considered a sign that the price cap regime is being violated. The concept of commercial justification is not disclosed, but the signal itself is fixed. Another possible circumvention option is the distortion of documentation, which can take place both on the supplier’s side and be the result of collusion between the supplier and the carrier. In this case, carriers are recommended to keep all the documentation of the transaction for five years, and insurance and other service providers must have a clause in contracts that the oil being transported is below the price threshold. The presence of such archives does not insure against violation in itself. But it allows the regulator, in case of suspicion, to quickly check the history of transactions. Companies can get off relatively lightly for unintentional violations, but deliberate circumvention is fraught with criminal prosecution. Another way around is to mix Russian oil with an oil of a different origin. So far, clear criteria for such proportions have not been defined, although the US Treasury calls for caution in such transactions. In determining these proportions, the EU may take into account the clarifications of the European Commission on mixtures subject to import restrictions.

The experience of US law enforcement practice shows that there will be violations of the sanctions regime, and US regulators have developed mechanisms for detecting them. The EU and the UK have less experience, which does not exclude the active prosecution of violators. However, the indicated methods of circumvention still seem to be “mouse fuss”, which will not systematically solve the problem for Russia. In Moscow, much more ambitious steps can be developed.

The most obvious measure is to build up Russia’s own tanker fleet. Reports of such steps have appeared in the foreign media, although reliable estimates are difficult. In the hands of the US, the EU and other initiators, there is a means to counteract. They can simply add Russian oil tankers to the lists of blocked ships. Then their service in foreign ports will be significantly hampered. Secondary American sanctions and fines are feared even in friendly countries. The experience of secondary US sanctions being used against the Chinese COSCO Shipping Tanker and some other companies for the alleged transportation of Iranian oil in 2019 can serve as a warning. The European Union has also provided for a mechanism to punish ships carrying Russian oil above the price ceiling. Violating ships will be denied financial, insurance and other services in EU jurisdiction. The wording of paragraph 7 of Art. 3n of EU Council Regulation No 833/2014 suggests that we are talking about any ship, regardless of the country of origin.

Similar problems may also arise when a Russian insurance company is set up to serve bulk oil shipments, or if one or another company from friendly countries is involved. Here, the United States and its allies also have the instrument of secondary sanctions in their hands. The same goes for financial transactions. Operations in the currencies of the initiating countries will be blocked. Here again the question of settlements in national currencies comes to the fore. The big question is, whether the banks in friendly countries run the risk of the same secondary sanctions in case of transactions above the price threshold. The legal mechanisms for such sanctions specifically for the price threshold have not yet been spelled out. However, they may appear at any moment, or the initiating countries, primarily the United States, may provide an explanation of the application of already existing norms to the price threshold. This happened recently with explanations of possible sanctions for using the Mir payment system in the interests of blocked persons.

In the bottom line, the participants of the “threshold coalition” do not have to seek the entry of more countries into their ranks. It is enough to threaten with secondary sanctions or coercive measures in case of revealed violations, or simply block insurance services or financial transactions passing through Western insurance companies and banks in violation of the prescribed norms.

By building up pressure on the Russian oil sector, the US and other initiators of sanctions will use their rich experience of restrictions against Iran. At one time, Washington managed to “globalise” its ban on the import of Iranian oil and services related to such imports. Iran continues to survive under the sanctions, although it has suffered losses. There is no doubt that Russia will also retain efficient ways to supply its oil to foreign markets. However, as in the case of Iran, the sanctions will increase the cost of Russian oil exports.

From our partner RIAC

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Analyzing China Solar Energy for Poverty Alleviation (SEPAP) Program

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photo:Xinhua

In 2014, China deployed a large-scale initiative named as Solar Energy Poverty Alleviation Program (SEPAP) to systematically alleviate poverty in poor areas including underdeveloped regions of western China. In recent years, moving the country toward technological leadership and making China the largest solar investor has been on Government’s central Agenda. While having environmental benefits associated, SEPAP is a multi-purpose project which aims to reduce poverty, promote jobs and income in rural areas, boost China’s solar market, and improve rural lives. It is noteworthy that SEPAP is a program that has harmonized the social, developmental, and industrial goals. SEPAP acquired the highest level of political endorsement after Xi Jinping pledged to eradicate poverty from China by 2020, which resulted in its ascension from the pilot program to a nationwide campaign. According to World Bank, China has lifted 800 Million people out of poverty by 2022 and contributed to the Global reduction of people living in poverty as close to three-quarters. China has become able to achieve this milestone by adopting targeted poverty alleviation strategies and by providing economic opportunities to the unprivileged people to raise their income level.

Through this initiative, China aimed to add 10GW of solar capacity by 2020, which will benefit over 2 Million people. The program targeted 35,000 poverty-stricken villages which were located in 471 counties in 16 Provinces. According to an evaluation study conducted in 2020, this program has resulted in an increase of 7%-8% in the per-capita disposable income of the county. Chinese Government investment in solar energy and using it as a strategy for poverty eradication has brought out positive results and the effects are twice as high in the subsequent two to three years, especially in Eastern China.

Three different contexts contributed to making SEPAP a priority on Government’s agenda, making a historical conjuncture. First was the political push to eradicate prolonged rural poverty in China. To combat the higher rural-urban income gap, China adopted an “industrial” approach that emphasized developing innovative industrial facilities in the unprivileged region to make them self-sufficient in the long run. The second was the significant demand for rural electrification, where former technological preferences, especially small hydropower, were no longer feasible. The third driver was the overcapacity and shrinkage of the country’s solar energy sector and the subsequent necessity to stimulate distributed solar PV installation. Before 2013, China’s solar energy sector was mostly export-oriented with a dominant share of exports in overseas markets in Europe. During 2008 Trade disputes in the EU and US combined with the financial crisis lead Chinese solar manufacturers to the brink of Collapse. So, opening the domestic market for solar consumption was launched as a rescue strategy. The officials favored the installation of the distributed, small-scale solar system that can generate energy that may be utilized locally. By 2013, China becomes the world-leading market for solar energy and by 2015, It reached a total installed capacity of more than 43.18GW. Considering the scenario, SEPAP was formulated with a strategic vision that will benefit the local people while also expanding distributed Solar PV generation and absorbing overcapacity. 

In 2014, SEPAP was launched by National Energy Administration (NEA) and State Council leading group

Office of Poverty Alleviation and Development (CPAD) as two joint policies. A first policy designed two alternatives for policy implementation. Installing rooftop Solar PV systems for low-income families formerly registered with CPAD was the initial option. The other policy alternative was to build Solar Power Station on the non-arable lands near the counties and villages. Using a robust financial model described in policy guidelines, the SEPAP was funded by both Government subsidies and corporate donations as a part of their corporate social responsibility initiatives. The second joint policy includes detailed guidelines for developing pilot SEPAP Projects in six provinces which included 30 counties. The provinces targeted were relatively underdeveloped while having abundant solar resources. Provincial Governments were involved to carry out the implementation process which include collecting comprehensive data on the poor household, energy supply and consumption, and quality of grid connection for each county. After the approval of plans from central governments, they were executed by the county’s government via an open bidding process. Provincial Governments’ poverty alleviation funds and policy banks’ preferential loans were utilized for the financial support of the pilot project of the Program. To ensure accountability and transparency in projects, monitoring and evaluation teams were designed by NEA and CPAD to maintain a check and balance on program activities and construction maintenance. To raise poor household income through this project, the profits gained from the sale of solar power were distributed fully among residents after Tax deductions. The policy goal also guaranteed 3000RMB of annual income per household for more than 20 years. The program created a win-win situation by alleviating the poor from poverty while absorbing China’s overcapacity of solar energy at the same time. 

China’s ambitious plan to align poverty alleviation goals with the expansion of renewable energy has some serious practical concerns associated with it. Analyzing the program leads to significant gaps in policy design and implementation. The program faced severe budgeting and financial problems because of a lack of appropriate arrangements and no detailed financial mechanism was developed for post-construction maintenance of the projects. Only the central government endorsement was not enough to tackle these challenges but consistent support from the banking and bureaucratic sector was the pre-requisite for program implementation. Moreover, proper financial incentives were also required to encourage the solar companies to take lead in the construction of projects. Another challenge associated with the project was the complication in the governance structure where energy regulators took the lead rather than development officials. Misallocation of expertise affected the priorities in agenda setting of the program i.e. energy regulators based on their expertise, advocated the expansion of industrial capacity rather than looking out for poverty and development issues in the local context. Moreover, the time frame designed for the assessment of pilot projects was not enough for the critical evaluation of the success and failure of the project before its transition toward a national program. 

Even though it’s a commendable approach, the combination of renewable energy technology with poverty reduction needs to be further examined through rigorous empirical studies both in China and in other developing nations. Future studies on how to integrate industrial strategies with development priorities and what governance institutions or structures might best serve these many policy goals can provide great insight into various policy alternatives that would be beneficial in the long run as well. 

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