World news today: Ukraine, Europe, gas

World news today: Ukraine, Europe, gas
World news today: Ukraine, Europe, gas
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ENERGY EUROCRISIS [di Mirko Mussetti]

Kremlin spokesman Dmitry Peskov indirectly confirmed the now clear strategy of bending Ukraine’s political will to resist the invader through the systematic destruction of the country’s energy and water infrastructure: «Kiev’s leadership has every opportunity to bring the situation to normal. It has the opportunity to resolve to meet Russia’s requirements and, as a result, put an end to all possible suffering of the civilian population.”

Because it matters: The energy crisis gripping war-torn Ukraine at the gates of winter also raises questions about the security of Western Europe, which is frantically engaged in the diversification of hydrocarbon supplies.

The meticulous damage to the Ukrainian electricity grid through the use of long-range missiles, kamikaze drones and now also fighter-bombers of the Russian Federation does not generate concerns only for the health of the civilian population under attack, but also for the tightness of electrical and thermal systems of countries outside the conflict.

This is the case of the small Republic of Moldova, which on 23 November 2022 saw its capital Chișinău remain in the dark for hours. President Maia Sandu immediately convened the Supreme Security Council to study solutions to address further blackouts future, taken for granted. The accusation made by Gazprom of “theft” of natural gas destined for Bessarabia by Kiev constitutes an optimal pretext for a reduction (and probable suspension) of hydrocarbon flows through the arteries in Ukrainian territory. In order to exhaustively implement the frost strategy, Moscow must in fact turn off the taps of the pipes that carry gas to Ukraine during the cold season (Kiev still gets its supplies from Gazprom). But that would mean ceasing (or reducing) deliveries to other countries as well.

The resumption of the flow of crude oil through the Družba (Friendship) pipeline, damaged during the latest bombings, makes Central European countries breathe a sigh of relief – Hungary primarily, exempt from the blockade on Russian oil imports – but the significant increase in the transit price imposed by the Kiev authorities in any case worsens the Old Continent’s energy crisis. Raising planning royalties (€13.60 per tonne from 2023) constitutes an unwanted financial burden for those countries already heavily committed to economic and military support for Ukraine.

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The European Union’s need to diversify energy supplies is not fulfilled due not so much to the lack of immediately expendable alternatives, but also and above all to the dogmatic approach of Brussels on the issue. It’s not just the announced imposition of a price cap to hydrocarbons – if it ever applies – to make the producing countries desist from stipulating contracts with the European chancelleries, but also the insistence of the Community institutions in wanting to find the necessary resources on the spot markets (short deliveries based on availability, generally higher prices). The failure to make long-term commitments, in the framework of the programs for an energy transition greensclashes with the interests of the countries producing fossil fuels, unable to stabilize prices and plan future investments (exploration, drilling, new pipes).

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Exploiting this weakness of the EU – intellectual rather than political or financial – geographically distant countries with limited historical relations such as Qatar and China sign long-term agreements to protect complementary economic interests. On the occasion of the World Cup in the emirate, Beijing concluded a major agreement with Doha for the supply of 4 million tons of liquefied natural gas (LNG) to the People’s Republic for 27 years starting from 2026. The longest cooperation ever in the hydrocarbon sector. Doha had recently accused the EU of “hypocrisy” for its intention to institute a ceiling on the price of gas in violation of the free market principles so dear to the West.

The largest LNG production expansion project in the world is being implemented in Qatar, but it will not be completed before 2026. China has already shown that it knows how to move well in advance to grab a large part of future production. It is currently unclear how much of these resources could become the prerogative of the European chancelleries.

However, the reorientation of Middle Eastern oil and gas exports is bad news for Europe. Not only because the actual availability for the Old Continent could be reduced, but also because, with the historic monopsony relationship no longer being present, the prices for LNG are destined to rise, making the European industrial apparatus as a whole less competitive.


The article is in Italian

Tags: World news today Ukraine Europe gas

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