Europe: Countries of the bloc sound out strategies to avoid the commodities trap

 After the rude awakening caused by the military aggression by Russia on Ukraine and the assessment of the overwhelming dependency of countries - especially Germany - on gas supply from Russia, thinktanks in the EU reflect about how not to repeat the same mistake with other commodities such as rare earths, titanium or graphite, writes WELT:

The Ukraine war and the gas crisis are causing politicians to view Europe's heavy dependence on a few raw material suppliers with greater concern than before. When it comes to mining and processing strategically important raw materials, countries such as China hold quasi-monopolies – and of all things when it comes to the materials on which the European energy and mobility transition depends.

The business-oriented think tank Center for European Politics (CEP) has now investigated how dependent the EU is on such raw materials. Germany and other European economies are therefore too dependent on raw materials from a few countries for future key technologies and should end this dependency as quickly as possible. "The chances of survival of the European economic and social model are also decided on the international commodity markets," says the unpublished study, which is available to WELT.

For the study, the researchers specifically identified resources that are indispensable for future technologies, but whose supply situation is critical. To do this, they brought together two analyses: on the one hand, a study by the German Raw Materials Agency (DERA), which identifies groups of raw materials that are essential for the energy transition and digitization, and on the other hand, a list from the European Commission of 30 raw materials for which there are supply risks.

The researchers have identified twelve substances that are equally promising and supply-critical. The list includes materials such as lithium, cobalt and rare earths, which also dominate the public debate about the scarcity of raw materials. However, substances such as titanium, graphite and more exotic substances such as scandium and vanadium also appear.

They are in wind turbines, solar systems, batteries for electric cars, fuel cells, electric motors or in microchips, displays and fiber optic cables. And for all the substances examined, a few or even just individual countries dominate the global supply.

"Not only is a large part of the relevant raw material deposits outside of one's own sphere of influence," says study author André Wolf. “The global markets are currently also predominantly dominated by countries that represent strategic rivals or that do not share the environmental and social standards that are essential for the EU’s self-image. The move away from fossil resources threatens to replace old dependencies with new, unwanted ones.”

The dominance of China is particularly striking: The country was the most important sponsor of eight of the twelve substances examined in 2020. If one also takes into account the processing of raw materials, China's dominance is likely to be even greater.

And the leadership in Beijing has shown in the past that it is willing to use this power. At the end of 2010, China had stopped exports of rare earths to Japan because of a diplomatic dispute in order to extort concessions from Tokyo.

The realization is not new, but Brussels and national capitals have been alarmed since Russia invaded Ukraine. The fact that geopolitical upheavals are jeopardizing the supply of raw materials is suddenly no longer an abstract danger.

“Russia is blackmailing us. Russia uses energy as a weapon,” said Ursula von der Leyen, President of the European Commission recently. There is concern in her authority and in the national capitals that such a scenario could happen again.

Because geopolitically the world threatens to split into two blocs again: on the one hand the western world, on the other hand countries like Russia, China and other authoritarian systems. Against this background, the EU states want to secure the supply of critical raw materials and end one-sided dependencies.

Two years ago, Industry Commissioner Thierry Breton's staff presented an action plan on raw materials, but it was relatively non-binding. Since the outbreak of the Ukraine war, the agency has tightened its course. In March von der Leyen announced a law on critical raw materials. The draft should be available by the end of the year.

One of the things discussed in Brussels is that companies or even states should build up strategic stocks of important raw materials. The increased mining of critical raw materials in Europe should also make the EU more independent from the rest of the world.

However, the CEP experts warn that the Commission's plans could overshoot the mark. In particular, the scientists consider plans to mine critical raw materials in Europe to be misleading. "Massive state support for the mining of future raw materials in the EU area would be a questionable strategy from an economic policy point of view," says the study.

The EU does have significant deposits of lithium and rare earths, for example. States like China are not only so dominant on the raw materials markets because of the deposits there, but also thanks to state subsidies, low wages and low environmental standards. “The EU cannot and should not copy such a strategy.”

Instead, in the short term, Europe should look around for new sources of raw materials in friendly countries that have large deposits, good infrastructure and share Europe's values. Norway, Canada and the USA in particular are ideal partners.

In fact, the EU is striving for such strategic raw material partnerships, but so far it has only agreed on two: with Canada and, of all places, Ukraine. However, a sense of proportion is required for the agreements, after all, new one-sided dependencies must not arise.

In the long term, the EU must expand the recycling of strategically important raw materials in order to secure supplies, write the CEP researchers. The EU Commission is also in favor of this. According to a study by the authority, the recycling rate for cobalt and platinum metals, which are mainly used for electric motors, was 20 percent in the EU in 2020. In the case of iridium or lithium, however, the quotas would be close to zero.

LNG: Germany negotiates with Canada for LNG-shipments

 Source WELT:

Saint John on Canada's rough east coast offers many photo opportunities: a lighthouse, a former fort, a marketplace with a fountain. It is the oldest city in the country, with almost two million tourists visiting each year, many on cruise ships.

What is hardly known, however, is that Saint John is also the only Canadian port with a terminal for liquid gas - and therefore probably a new hope for Germany recently.

On the fringes of the G-7 summit in Elmau, Bavaria, Chancellor Olaf Scholz (SPD) spoke to Canadian Prime Minister Justin Trudeau and advocated an expansion of energy trading, according to the Bloomberg news agency. Specifically, Scholz wants to import more liquid gas from Canada to replace Russian gas. It is apparently another attempt to free Germany from Vladimir Putin's grip.

The industry speaks of “Liquified Natural Gas”, or LNG for short. These three letters have been at the center of world politics since the beginning of the Ukraine crisis. It's about the question of where millions of Europeans should get the raw material with which they heat and operate many of their power plants.

Because Russia, the most important gas supplier up to now, became an outlaw after attacking its neighbor. An unpredictable aggressor who cannot be trusted.

Gas: Italy shifts to Algeria for gas procurement

Eager to divest itself von Russian dependance on natural gas, Italy has switched in a precipitous move to Algeria as a supplier just days after the russian invasion into Ukraine. Italy and especially its energy giant ENI have deep and decade-old ties to Algeria. Even major investements by ENI and acquisitions of BP shares on oil fields are under discussion, Le Monde: 

Algeria is showing a diplomatic upturn with Italy which takes on a particular meaning as Europe is prospecting for alternatives to Russian gas, war in Ukraine obliges. The recent ballets of visits by Italian officials to Algiers, where the red carpet is rolled out at the energy giant Ente Nazionale Idrocarburi (ENI) – already historically well treated – testify to a most cordial atmosphere. Italy had become, in recent years, increasingly dependent on Russian energy supplies (40% of its gas imports, or about 30 billion cubic meters [m3]). It is now more than ever eyeing Algerian gas, while it is imperative for it to diversify its purchases abroad, particularly in the Mediterranean.

The overall economic relationship between the two countries has certainly always been healthy. Italy is Algeria's third supplier (behind China and France) and its first customer (ahead of France and Spain). It is also the first foreign investor, a status due to the weight that ENI represents on Algerian soil. History is a big part of it. The tutelary figure of the historic leader of the company, Enrico Mattei (1906-1962), a Christian Democrat politician who was a great promoter of independent Algeria (who died in 1962 after a mysterious plane crash), has always acted bridge between the two countries.

“ENI is a company considered to be a friend of Algeria, a friend of the Algerian revolution at the time, notes Akram Kharief, Algerian security expert and founder of the Menadefense site. It is very difficult to compete with her. In recent weeks, the glorification in the Algerian press of this memory has reached unprecedented levels. "The esteem for Italy is felt among the people of the people", could we read, on March 30, in an editorial of the official daily El Moudjahid.

The staging, in Algiers, of friendship with Italy does not date from the war in Ukraine. The distinguished welcome reserved in the Algerian capital for the Italian President of the Republic, Sergio Mattarella, during a visit in November 2021, had already sent a first message in the midst of the crisis between Algiers and Paris. The recent Algerian-Spanish turbulence on the Western Sahara issue – following concessions made by Madrid to Rabat – has added to the ambient Italophilia in Algeria. The remarks of the boss of the Algerian public company Sonatrach, Toufik Hakkar, on April 1, evoking the possibility of "recalculating" the price of gas sold to the Spaniards, announce a probable changeover in the long term of part of the supplies from Spain to Italy.

This is fitting, at a time of Rome's strategic shift vis-à-vis Russian gas dictated by urgency. As usual, Italian diplomacy negotiated it in a few hours, with a mixture of agility and pragmatism. Monday, February 28, barely four days after the start of the Russian offensive in Ukraine, the Italian Foreign Minister, Luigi Di Maio, was in Algiers, accompanied in particular by the managing director of the energy giant ENI, Claudio Descalzi, to to assess the possibility of increasing gas imports. In energy matters, Italian diplomacy and ENI are used to moving forward together.

Exploitation of new deposits

In the Algerian case, the calculation is simple. Algeria is the country's second largest supplier (21 billion m³), ​​and the Transmed gas pipeline transporting gas to Sicily – also called the Enrico Mattei gas pipeline – is not operating at full capacity (its capacity is 30 billion m³ per year) . What hope, in the short and medium term, additional deliveries.

The Italian minister's trip to Algiers was only the start of a tour centered on energy issues, which took the head of Italian diplomacy, in March, to Africa, the Arabo-Persian Gulf and Azerbaijan. But Algeria is considered, within Italian diplomacy, with particular attention.

So Claudio Descalzi was back in Algeria on April 3 to meet once again the CEO of the Algerian public energy giant, Sonatrach, ENI's historic partner, to discuss the increases in deliveries in the short term and, at a further afield, the exploitation of new deposits. In particular, it is a question of “accelerating” the implementation of joint projects in the region of Berkine Sud, on the border with Tunisia. According to the Algerian press, ENI is also negotiating the acquisition of assets from British Petroleum (BP) in two major gas projects in In Saleh (Centre) and In Amenas (East). According to unconfirmed information, Sonatrach is also discussing the acquisition of ENI assets in Russia.

Be that as it may, the prospect for Algeria to deliver significant quantities of gas to Italy is long term. In the immediate term, its production and transport potential is limited. "Algeria's ability to offset Russian gas for Europeans is questionable," says Olivier Appert, energy and climate center adviser at the French Institute for International Relations (IFRI). Faced with the aging of its infrastructure and the flight of its domestic consumption, Algeria has in fact suffered from a continuous decline in its gas exports, which have fallen from 64 billion m3 in 2005 to 41 billion in 2020. substantial investments to reverse the curve. ENI and the Italians are in the running.

US: four russian hackers indicted

Four russian hackers with links to russian intelligence service FSB are indicted for the failed attempts to infiltrate energy companies, SPON:

The US government on Thursday published its indictments against four Russian citizens, whom it accuses of having hacked numerous energy companies around the world on behalf of the secret service FSB and the Ministry of Defense.

The charges relate to cases that date back a while. In the US, there are sealed, ready-made indictments that can be made public at any time. In this case, they are from June and August of the previous year. Now the US authorities thought the time had come to make them public.

These are two separate charges, but they have one thing in common: the hacking activities they describe are sophisticated and have been carried out over a long period of time. They are not aimed at short-term effects, but consist of targeted and well-prepared attacks in which malware is intended to be smuggled into the systems of companies in the critical infrastructure - in order to manipulate their operation on a »Day X« chosen by the attacker or even completely shut it down sabotage.

It is this type of cyber attack that is of greatest concern to security agencies around the world. An infiltrated energy infrastructure, which in extreme cases could be switched off by malicious actors, is considered a nightmare scenario.

Europe: Anti-fracking NGO's received russian money

Investigations by different media suggest that european environmental NGO's opposed to fracking received money injections from russian sources, WELT:

The interests of western climate protectionists and the Russian dictator Vladimir Putin coincide, albeit for very different reasons: slowing down the promotion of fossil fuels in western countries is their common goal. For the activists, this is a stage on the way to a CO₂-free industrial society, for Putin, whose country benefits enormously from the international oil and gas business, it is an important trump card.

For years there have been indications that Moscow is supporting activists in the US and Europe in their fight against fossil fuels in order to be able to sell Russian gas and oil better. In the mid-2000s, the Kremlin decided to fill what it called a “value vacuum”: using so-called “soft power” to place its own views and interests in other countries. According to various sources, Russia also financed non-governmental organizations (NGOs) in Europe and the USA in order to push through its agenda.

Many NGOs enjoy special rights in the West: the EU and the United Nations grant environmental organizations extensive legal standing and information rights. Germany grants many organizations the tax-privileged status of "non-profit". As a rule, the NGOs do not have to disclose where they get their money from.

Researchers who analyzed NGO funding on behalf of the European Parliament in 2016 had to admit their failure: "The analysis reveals a complex web of intertwined NGOs, linked by the membership of numerous overlapping networks that pursue many different purposes," she said Conclusion. “It is often difficult to identify which organization in a network is engaged in which activities, or how grants flow between them in relation to those activities.”

There is an "obvious gap between NGOs' declared commitment to accountability and transparency and actual practice," the researchers concluded. Entries in the transparency register of the EU would mostly be avoided. It often remains unclear what interests the funders of the associations really have.

Anyone who demands insight into the funding of NGOs is therefore dependent on key witnesses. The Russian government has transferred 82 million euros to European climate protection associations whose aim is to prevent natural gas production in Europe, an informant told scientists at the Martens Center for European Studies.

Former NATO Secretary General Anders Fogh Rasmussen reported back in 2014 that Russia had supported environmental organizations "in order to maintain European dependence on Russian gas". "What are they smoking at NATO headquarters to spread such accusations?" Greenpeace countered the allegations. Due to the lack of transparency of the money flows described, it is not possible to make a conclusive, independent assessment of whether they are correct or not.

At least NATO stuck to their description. "We share the concern of some allies that Russia may seek to impede potential shale gas exploration projects in Europe in order to maintain Europe's dependence on Russian gas," a NATO official told Foreign Policy. Experts have puzzled over the "sudden" emergence of well-organized anti-fracking environmental groups in Eastern Europe, where Russia has been selling its energy but previously had no public concerns about natural gas production, the magazine wrote.

Fracking, which involves breaking up rock in the ground with a liquid to produce gas, has gotten a bad rap, although it's been tried and tested for decades with few problems now. Former US Secretary of State Hillary Clinton had also advocated fracking, but reported unusual resistance. In a private speech in 2016, made public by Wikileaks, she lamented: "We were dealing with fake environmental groups, and I'm a big environmentalist, but they were funded by the Russians."

American security expert Fiona Hill, former director for Europe and Russia on the Trump administration's National Security Council, reported on a conversation with Putin in November 2011 in which he made it clear to experts and journalists that he saw fracking in the US as a "major threat of Russian interests”. "We were struck by how much emphasis he put on the subject," Hill said.

American media reported on documents that were supposed to show that energy managers from Russian companies had transferred millions to American environmental organizations - which they, however, rejected. Representatives of American energy companies also accused the Kremlin of covert financing of climate protection groups. "Russia is funding the anti-fracking movement in the US," the head of Continental Resources claimed.

Climate and environmental protection organizations distributed misleading films of places where fracking is being done: Drinking water from the tap was burning, toxic gases and chemicals were seeping out of the ground, and entire regions were contaminated. Mass media picked up on the scenarios, particularly aggressively by the Russian channel “Russia Today”.

He labeled fracking companies as child molesters, falsely claiming natural gas extraction would cause cancer in children. A US National Security Agency report saw Putin's people behind the reports, which "probably reflected the Russian government's concerns about US natural gas production and potential challenges to Gazprom's profitability." "We have seen Gazprom funding from environmental NGOs," agrees Dominique Reynié of the Fondation pour L'innovation politique, a French research institute.

After Germany's decision to phase out nuclear energy, Gazprom celebrated "building new, modern gas-fired power plants in Germany". However, the expansion of fracking in the USA worried the Russian competition: the Americans had achieved a decisive turnaround by intensifying natural gas production by fracking in their own country - with positive consequences for the climate. The USA has been able to reduce its CO₂ emissions more than almost any other country in the past 15 years because it has replaced coal with cracked natural gas, which releases much less CO₂.

Europe also has immense shale gas resources. The EU Commission states that gas contained in shale rock using fracking "can contribute to the security of supply of the EU and its competitiveness". In the 2000s, the big energy companies in Europe were ready to develop domestic natural gas.

But the resources remained in the ground, the pressure from climate activists on companies and governments led to investors turning away, the investment bank Goldman Sachs determined. The Financial Times and recently the New York Times came to the same conclusion.

Exploration of new gas fields in Europe collapsed, including in Great Britain, which has particularly rich shale gas resources. Not only NGOs, but also scientific institutes cheered the trend. For example, the Grantham Research Institute on Climate Change of the London School of Economics recently called for the end of all domestic oil and gas exploration.

The market is now "fixated on climate change and the dwindling appetite for fossil fuels," wrote financial news agency Bloomberg. Share prices of companies that said they would expand their production of gas and oil came under pressure; Apparently, investors feared damage to their image. In the Netherlands, a court ordered the energy company Shell to reduce its CO₂ emissions, which further slowed exploration efforts.

The great opposition to natural gas production in Europe made gas from Russia attractive. Europe has radically reduced its production of conventional natural gas: 15 years ago it produced more gas than Russia exported, now Russia exports three times more natural gas than Europe produces. From 2015 to 2019 alone, Russia was able to increase its natural gas imports to Europe by a third. The continent now covers around 40 percent of its needs with Russian natural gas.

The market is now "fixated on climate change and the dwindling appetite for fossil fuels," wrote financial news agency Bloomberg. Share prices of companies that said they would expand their production of gas and oil came under pressure; Apparently, investors feared damage to their image. In the Netherlands, a court ordered the energy company Shell to reduce its CO₂ emissions, which further slowed exploration efforts.

The great opposition to natural gas production in Europe made gas from Russia attractive. Europe has radically reduced its production of conventional natural gas: 15 years ago it produced more gas than Russia exported, now Russia exports three times more natural gas than Europe produces. From 2015 to 2019 alone, Russia was able to increase its natural gas imports to Europe by a third. The continent now covers around 40 percent of its needs with Russian natural gas.

In recent years, Germany has relied particularly consistently on Russian energy. It phased out nuclear power, but did not allow terminals for gas shipments by ship from the US, instead planning dozens of new gas-fired power plants. The intended main supplier: Russia.

When former US President Donald Trump declared in 2018 that Germany had become dependent on Russia for its energy supply, German diplomats laughed at him. At the latest, however, the Russian invasion of Ukraine revealed Germany's dependency relentlessly. Chancellor Olaf Scholz (SPD) said Germany was dependent on Russian gas. If no more gas came from Russia, there would be a risk of “damage to society as much as possible,” said Economics Minister Robert Habeck (Green Party).

In the USA, too, the new government of President Joe Biden has meanwhile made a change. On his first day in office, Biden stopped the Keystone XL pipeline, which was supposed to transport oil from Canada 3,500 kilometers to the United States, after protests by activists. After the import stop for Russian oil, the President now has to put up with the accusation of endangering the supply security of the USA.

The result of the fight against natural gas production in Europe and the USA is sobering, it has not served climate protection. Natural gas is still burned, it only comes from Russia. Nuclear power plants were shut down in favor of natural gas. The war in Ukraine also makes natural gas more expensive, so that the demand for coal increases, which causes CO₂ emissions to rise more sharply. In Germany, the green economics minister is considering letting coal-fired power plants run longer due to a lack of alternatives to Russian gas.

British Prime Minister Boris Johnson, on the other hand, is now considering starting fracking in his country. Russia is no longer a reliable source, it is important to ensure the energy supply. The climate protection group Extinction Rebellion has announced that it will soon occupy oil refineries in Great Britain. "Fossil energies must be stopped once and for all," declared the activists. "Now is the time, this is the moment".

Europe: members of the Bloc sound ways to end dependency from russian gas

 The measures are planned to be effective by the end of the year, WELT:

The pressure on the EU states to impose an embargo on Russian energy supplies is increasing. The heads of state and government meeting in Brussels on Thursday will also argue about this issue again. It is very unlikely that they will agree on a gas embargo this week. But the pressure will remain.

The European Commission, the EU's powerful administration, is therefore already preparing for a possible supply freeze for oil and gas from Russia – even in the event that Russia stops supplies of its own accord.

Russia accepts payment for gas supply only in rubles

 WELT:

In the future, customers in Germany and other EU countries will have to pay in rubles for gas deliveries from Russia. Russian President Vladimir Putin on Wednesday instructed the government to stop accepting payments in dollars or euros. Deliveries would continue to be fully guaranteed, the Kremlin chief assured in a government video conference that was broadcast on state television.

The "unfriendly states" blacklisted by Russia are affected. This includes Germany and all other EU countries, but also the USA, Canada and Great Britain.

The announcement promptly strengthened the Russian currency, which is under massive pressure. The move could therefore also aim to support the ruble exchange rate. Gas companies would first have to buy rubles on the foreign exchange market.

The central bank and the Russian government now have a week to determine the modalities for switching from foreign exchange to ruble payments, Putin said. The West itself has devalued its currencies by freezing Russian assets abroad.

"Escalation of the Economic War"

"This is an escalation of the economic war," Jens Südekum, a member of the scientific advisory board of the Federal Ministry of Economics and Technology, told the Reuters news agency. "Not many expected this broadside."

For Südekum, this represents a clear breach of contract. "There are long-term contracts for gas supplies that are denominated in dollars," said the professor at the Institute for Competition Economics at Heinrich Heine University in Düsseldorf. "If Putin now declares that he only accepts rubles, he is breaking these contracts." The West will now have to react in some way. "An embargo on energy imports from Russia has now become more likely."

If the West followed Russia's request, it would have to circumvent its own sanctions over the war against Ukraine and take rubles from the Russian central bank. "But it was actually sanctioned," said Südekum. "That's why you can't actually do that."

As a reaction to the sanctions imposed by the West, the Russian government had already decided at the beginning of the month that its own financial obligations to "unfriendly states" would only be settled in rubles. These include Ukraine, Switzerland and Japan.

Nord Stream 2: operating company lays off all personnel

 The operating company of the contentious pipeline has announced that it discharges all 140 employees, BILD:

Does this mark the end of the Putin pipeline?

According to Swiss Economy Minister Guy Parmelin, the operating company Nord Stream 2 has laid off all employees. The company is based in the tax-efficient Swiss canton of Zug.

As Parmelin explained on Monday evening on French-speaking Switzerland television, 140 people were affected by the dismissal. The company asked for a meeting with representatives of the cantonal authorities this Tuesday, the broadcaster reported.

Last week, the United States imposed sanctions on Nord Stream 2 AG, prohibiting further business with the company. The German federal government has put the approval process for Nord Stream 2 on hold in view of the Russian escalation in Ukraine.

Nord Stream 2 is a subsidiary of the Russian gas company Gazprom and is headquartered in Zug, a good 30 kilometers south of Zurich. The pipeline that was laid and completed through the Baltic Sea was supposed to bring Russian gas to Germany.

The project was also supported by former Chancellor Gerhard Schröder (77), who, as a friend of Russia's warmonger Vladimir Putin, has been lobbying on his behalf for years. He is the head of the supervisory board at the oil giant Rosneft, has a top position at Nord Stream and is actually supposed to become a supervisory board member at the Gazprom group.

On Tuesday it became known that four employees from Schröder's former chancellor's office had quit - including the long-standing office manager Albrecht Funk. The reason: Schröder's failure to distance himself from Putin.

Nord Stream 2: german chancellor stops pipeline project in reaction of russian invasion into Ukraine

 WELT:

As a reaction to the Russian actions towards Ukraine, the federal government is stopping the Nord Stream 2 pipeline project. Chancellor Olaf Scholz (SPD ) on Tuesday in Berlin. "And without this certification, Nord Stream 2 cannot go into operation."

Scholz condemned President Vladimir Putin's decision to recognize the self-proclaimed People's Republics of Luhansk and Donetsk as independent states as a serious breach of international law. With his actions in eastern Ukraine, Putin is not only breaking the Minsk Agreement, but also the UN Charter, which provides for the preservation of the territorial integrity and sovereignty of states.

Nord Stream 2: the curious deals of the mecklenburgian foundation for climate protection

 The state of Mecklenburg-Vorpommern in the north of Germany has created a foundation for climate protection quite accurately one year ago. This foundation, the Stiftung Klima- und Umweltschutz MV, is seen as remedy to handle possible sanctions against operators and involved companies. However the object of the foundation and the backers are obscure. Recently the foundation purchased shares of a limited shipping company, the MAR Agency GmbH. The goals and intentions of this company are more than obscure. Traces lead to puppet-masters of Nord Stream 2, writes WELT:

Siegfried Kempe can look back on an adventurous life. The man from Mecklenburg had already sailed the seven seas as a sailor in GDR times. Later he maneuvered tugboats into the port of Rostock. In August 2018 it was over, retirement at the age of 63.

The local magazine "Der Warnemünder" paid tribute to the captain a. D. as someone who was a very educated man and gave good advice for retirement. But then everything turned out differently, Kempe was suddenly needed again. He should have a role in a play set on the grand stage of world politics.

The sailor is now an actor in the endless drama about Russian natural gas, American sanctions and German fickleness. However, hardly anyone knows, because Kempe acts behind the scenes. It's about the state-owned company Gazprom and its controversial pipeline in the Baltic Sea.

The commissioning of the line, which is now almost complete, was and is in jeopardy: First by punitive measures under the aegis of Donald Trump, now by Vladimir Putin's demonstration of power at the Ukrainian border.

In order to save the project, the state government of Mecklenburg-Western Pomerania and the Gazprom subsidiary Nord Stream 2 AG (NS2), which is responsible for the pipeline construction, have devised a sophisticated construct. And the name Kempe appears in it.

Russia: is Surgutneftegaz the Kremlin's secret thrift?

 The mysterious company refuses to reveal their owners and hoards a tremendous amount of foreign currency. Insights from german newspaper WELT in this curious business.

Only now and then does the Russian oil company Surgutneftegaz make a name for itself. But then all of a sudden and quite sensational, to remind everyone again, as it were, that he does exist after all. Most recently in mid-November of this year. The stock soared 49 percent in three days. That would be extreme for a young company that has become the plaything of speculative investors. And it is even more so with a traditional company.

But Surgutneftegaz with its 111,800 employees is no ordinary case. The group, which accounts for eleven percent of all Russian oil production and seven percent of oil processing, is different. Although the third largest oil company in the country, it still poses great puzzles to this day.

The biggest: Why is Surgutneftegaz, based in the West Siberian lowlands on the Ob River, hoarding so much free money? And on foreign exchange accounts, which at least bring stable interest income and thus contribute a whopping 20 percent to earnings before taxes and over 40 percent to free cash flow.

The bottom line is now 3.8 trillion rubles (46 billion euros). That is 82.5 billion rubles more than at the end of the second quarter. Certainly, compared to a US technology company like Apple, that's just a quarter. But within Russia and within the classic industrial sector also across Europe, there is hardly any company that could even come close to Surgutneftegaz in this respect.

For the market and its experts, it is and remains largely incomprehensible what this financial behavior and this strategy are actually supposed to be. All the more so since the group - apart from the quarterly company figures, to which it is obliged due to the stock exchange listing - discloses almost no information about itself.

The analysts of the Russian investment company BKS recently stated succinctly in a comment for the business portal RBK.

A few years ago, Vladimir Bogdanov, who took over the management of the once state oil company at the age of 33 at the time of the Soviet perestroika in 1984 and retained it after its privatization in 1993 together with his manager colleagues, once suggested that the reason for the - almost obsessive - frugality lay in the extreme hardship of the 1990s.

“This money is a security mechanism,” the now 70-year-old replied to a question at a shareholders' meeting. “Nobody knows what will happen to the oil price. We need the money so that our workforce can live quietly. Because what will we do if a situation like 1998 occurs again? ”At that time, the ruble crash caused turmoil.

Bogdanov is estimated by Forbes magazine to have a fortune of two billion dollars and is also called the "Siberian hermit" because of his seclusion and media aversion.

“This money is a security mechanism,” the now 70-year-old replied to a question at a shareholders' meeting. “Nobody knows what will happen to the oil price. We need the money so that our workforce can live quietly. Because what will we do if a situation like 1998 occurs again? ”At that time, the ruble crash caused turmoil.

Bogdanov is estimated by Forbes magazine to have a fortune of two billion dollars and is also called the "Siberian hermit" because of his seclusion and media aversion.

Accordingly, Bogdanov's statement, which is supposed to come across as sympathetic, is anything but plausible for the market. Let alone satisfying.

Over the years, the "hermit" Bogdanov, who like many top Russian business representatives and politicians has been on the US sanctions list since 2018, has managed to disguise the real owners of Surgutneftegaz despite being listed on the stock exchange.

Even in 2009, when the group bought 21.1 percent of the Hungarian gas company Mol in its only attempt to expand abroad and Mol demanded disclosure of the real owners, Bogdanow remained tough: he simply gave up his involvement with Mol after a short time.

All of this has led to a lot of speculation and conflicting information over the years. The group itself stated in 2005 that 15.7 percent of the shares were held by ING-Bank and 7.7 percent by the International Bank of Moscow.

The Moscow political scientist Stanislaw Belkowskij leaned furthest in his speculations, and he said in an interview with WELT at the end of 2007: “Putin is also a great businessman. He controls 37 percent of the shares in Surgutneftegaz ”.

This assessment is largely correct, according to the British magazine "Times" once confirmed by the US secret service CIA under US President George Bush. Putin himself, on the other hand, made it clear in the meantime that many of the shares in Surgutneftegaz are simply held by the people who work there.

Nobody believes that the oil company really leads its own life and is not close to the Kremlin. On the one hand, the oil trader Gunvor, who was half held for a long time by Putin's Petersburg intimate and businessman Gennady Timchenko, owes its establishment to its proximity to Surgutneftegaz.

On the other hand, there has always been a strict ban in Russia's financial circles on using financial instruments such as derivatives on the Surgutneftegaz share, WELT learned some time ago from an investment banker with an assurance of anonymity. This shows that the company is something special for the Russian rulers and that it is controlled from the very top.

So the public didn't really get any further on the subject of ownership over the years. And the fact mentioned at the beginning that the Surgutneftegaz share suddenly went through the roof in November and the daily trading volume in Moscow meanwhile rose a whopping 3900 percent, while the overall market fell in double digits in November, was not clarified.

There is talk in the Moscow investment scene that Surgutneftegaz could participate in a major acquisition or merger with his fat financial pillow. Such speculation is not new, of course. There was a rumor once before that Surgutneftegaz could swallow the second largest and private Russian oil company Lukoil - the epitome of transparency compared to Surgutneftegaz. The share soared back then too. But both companies denied it.

Another explanation for the stock's jump in November is that the ruble fell over five percent against the dollar in November, and the subsequent revaluation of Surgutneftegaz's foreign exchange accounts suggests an increase in corporate earnings.

In the first nine months of the year, sales were positive, but the bottom line was that profits fell by two thirds to 297 billion rubles (3.6 billion euros), which was partly due to the relative strength of the ruble, which was unfavorable for the company.

The company's shares could rise 400 percent if it finally implemented a substantial reform in its corporate governance, wrote Ronald P. Smith, oil and gas analyst at BCS Global Markets in Moscow, recently. The curiosity is that the market capitalization of the group is only half as high as the fat financial pillow on the accounts.

The three reforms mentioned by Smith include, on the one hand, shifting the notorious financial cushion into more lucrative asset classes or distributing it, and on the other hand, bringing order to the rumored “phantom” of high state participation.

Gas crisis: American LNG coming to Europe

 As european countries struggle with high energy prices along with empty gas reservoirs, Cheniere Energy is sending providential LNG tankers to Europe. Gas prices drop, writes WELT:

Is it the spirit of Christmas or the invisible hand of the market? The fill levels in German and European gas storage facilities are at an all-time low, energy prices jump to new, alarming record levels every day - a fleet of American gas tankers appears on the western horizon as a savior in an emergency to alleviate Europe's energy poverty.

What sounds like a Christmas fairy tale is reality: According to information from the Bloomberg news agency, at least ten tankers with liquefied gas are on their way to Europe. "Another 20 ships seem to be crossing the Atlantic, but have not yet announced their final destination," report the market watchers. "The US cargoes will help offset the lower shipments from Russia, Europe's main supplier."

is it the spirit of Christmas or the invisible hand of the market? The fill levels in German and European gas storage facilities are at an all-time low, energy prices jump to new, alarming record levels every day - a fleet of American gas tankers appears on the western horizon as a savior in an emergency to alleviate Europe's energy poverty.

Gas prices: reflections about Russia as the main supply source

 French newspaper Le Monde reflects about the strategic options of the Bloc concerning gas supply in the light of skyrocketing energy prices and the clatter of boots at the border to Ukraine:

Europe is entering winter, and the question is no longer whether it will have gas to heat itself and run the factories, but at what price. It has flared up in recent weeks and costs six times more than a year ago. The bill for individuals and manufacturers will be heavy in 2022. The functioning of the European market lends itself to this, as does the economic context: demand is strong during this season, activity remains strong despite the threat of the Omicron variant of SARS-CoV -2, storage is at a very low level (63%) and the unexpected shutdown of French nuclear power plants is increasing tensions.

If there were just that ... Gas prices, and by extension electricity prices, are also trending against the backdrop of Russian boots on Ukraine's eastern borders. Russia supplies a third of the European Union (EU) gas. This share, greater than that of Norway and Algeria combined, puts Vladimir Putin in a strong position to derive double benefit, financial and political, from the situation. The Russian president has been playing this market power for months by asking Gazprom not to export more than expected by its contracts with European customers.

Germany: Russia curbs gas supply; retaliation for murder verdict?

 No more gas is flowing from Russia via Belarus to Germany since sunday. Some experts see this as an expression of disapproval by the Kremlin for the murder verdict against the russian hitman that killed a chechen individual in Berlin in 2019 and the restive attitude of newly appointed foreign minister Annalena Baerbock, writes BILD:

He did it again!

Russian President Vladimir Putin (69) has turned off the gas. Since Sunday, no more Russian gas has flowed to Germany via Belarus and Poland.

▶ ︎ “For commercial reasons”, as they say from Moscow, but experts see a different reason for turning the gas tap on again in the direction of the Federal Republic of Germany.

The Poles were the first to notice last Friday that something was wrong with the gas deliveries via the Yamal pipeline of the Russian state-owned company Gazprom. At around 5 a.m., the pressure in the pipeline dropped, initially by only about ten percent, and then by another 90 percent on Saturday morning.

Nord Stream 2: german politicians blame chancellor Merkel for high energy prices

 Several politicians blamed the hiking energy on Merkel's inactivity and naivity in dealing with russian president Putin, thus enabling him to blackmail Europeans with gas prices, writes german newspaper BILD: 

The signs couldn't have been clearer.

For years, experts and politicians, who know how Russia repeatedly uses energy as a weapon, have warned that the new Nord Stream 2 pipeline in the Baltic Sea will come with a political price. Not only for Ukraine, but above all for Germany.

Doubling the Russian-German gas transport capacity by bypassing all European partners would not result in a diversification of the sources of supply, as Chancellor Merkel and her foreign and economic ministers have been claiming for years. Instead, it creates one-sided dependencies, gives Putin influence over German politics and, above all, the power to freeze ourselves and others if we don't play by his rules.

But Angela Merkel (67) ignored all warnings.

Even when the completion of Nord Stream 2 was about to begin in the summer and Putin began to implement his plan, Merkel did what she did so often in crisis situations over the years - nothing.

► Nothing happened when Russia's state gas giant Gazprom announced in June that from October it would only feed half as much gas into the “Yamal” pipe via Belarus and Poland.

► Nothing happened when Gazprom announced in August that it would also drastically reduce additional bookings through Ukraine from October.

► Even when the Kremlin announced just one week after the completion of the Baltic Sea pipeline in September that “the fastest possible commissioning of Nord Stream 2 would of course compensate for natural gas prices in Europe”, Merkel did nothing to avert the impending catastrophe at the last second .

Today gas at the European trading point in the Netherlands costs twice as much as when the extortion tube was completed five weeks ago, and Vladimir Putin only made it clear on Wednesday that without the commissioning of Nord Stream 2, "the tensions on the European energy market" would persist .

What threatens is an extremely expensive winter, for which experts hold the Chancellor partly responsible.

"Germany's precarious situation results from various wrong decisions by the governments under Ms. Merkel," says Ostpolitik expert Jan Behrends (51) from the Leibniz Center for Contemporary History in Potsdam. These include "the hasty nuclear phase-out, the construction of the Nord Stream pipelines and the failed policy on Russia," the Russia expert told BILD.

The Eastern Europe expert Renata Alt (56, FDP) also goes tough with the Chancellor in court.

She told BILD: “The current gas price explosion is not least due to the naivety of the two grand coalitions under Angela Merkel's chancellorship. Anyone who sows naivety in dealing with Vladimir Putin's system will reap dependency and an energy crisis. "

Alt further criticized the outgoing Chancellor: “For a project that has no added value for Germany, Ms. Merkel has jeopardized our relations with EU partners such as Poland and the Baltic states. There is nothing to explain this ingratiation to Russia and nothing to excuse. "

Nord Stream 2: will the project be cancelled over Navalny poisoning?

 Voices are being raised in Germany and especially among members of the ruling party CDU to end the controversial Nord Stream 2 pipeline project after powerful critic of the Putin government, Alexey Navalny, was posioned with the "Novitchok"-agent in Tomsk, writes german newpaper BILD:

"The German government can condemn the poisoning of Putin critic Navalny "in the strongest terms". She can be "dismayed". It can "urge" the Kremlin to explain itself.

But as long as she does common cause with Putin on the Nord Stream 2 gas pipeline, all explanations will be empty words.

After expiration of transit deal: Russian gas transit via Poland drys up

Reuters:

"Russian natural gas transit via the Yamal-Europe pipeline, which traverses Poland, has almost dried up, Interfax cited gas pipeline operators as saying on Monday, days after a gas transit deal between Moscow and Warsaw expired.

Russian gas giant Gazprom declined immediate comment.

The gas transit deal between Russia and Poland, dating back to the 1990s, expired on May 17 as Warsaw aligns its energy regulations with European Union rules and curbs its decades-old dependence on Russian fuel."

You can read the rest of the piece via the below link:

https://www.reuters.com/article/us-russia-poland-gas/russian-gas-transit-via-poland-has-almost-halted-ifx-idUSKBN2311MF 

Russian governement tries to steady battered oil industry

Oilprice.com writes:

"Russia’s President Vladimir Putin has tasked the government with implementing a set of measures aimed at supporting the oil industry for the duration of the OPEC+ production cut agreement.

According to a document published on the website of the Russian presidency, the measures include a prescription not to sanction companies that stray outside their production quotas and a temporary lifting of penalties for state oil companies for not sticking to their 2020/2021 investment programs.

The document also lists “special rates” to be implemented by pipeline operator Transneft and Russian Railways for transporting crude oil and oil products for the duration of the OPEC+ deal."

You can read the rest of the piece via the below link:

https://oilprice.com/Energy/Crude-Oil/Putin-To-Bail-Out-Russian-Oil-Industry.html 

    

The repercussions of the oil glut on russian foreign policy

The magazine The American Interest analyzes the impact of the oil glut on strategic aspects of russian foreign policy: 

"While the economic pain may have yet to cross Putin’s threshold, Russia, like every other country, will succumb to this new reality. Putin’s official popularity ratings have dropped to the low 60 percent range and, perhaps more importantly, for over a year polls have shown that a large majority of the Russian people think the country is going in the wrong direction. They also think that more resources should be spent on domestic problems and that Russia should pursue policies that improve relations with the West.

Putin, of course, is no democrat; he can choose to ignore public opinion. But with oil prices at inconceivable lows, the Kremlin will have to make serious decisions on where to invest what will be increasingly limited resources. Russia’s military has historically been more active when fossil fuel energy prices soar and less so when they fall. When the economic crunch hits, Russia tends to cut back on training and exercises (often with devastating consequences) before it disrupts actual operations. But this is no ordinary shift in market forces. It is a combination of Putin’s hubris in starting an oil war he thought he could win combined with a crisis nobody saw coming. Something will have to give. Recovery will be difficult for almost every country, but especially so for a country almost solely dependent on carbon earnings."

You can read the rest of the piece via the below link:

https://www.the-american-interest.com/2020/04/22/how-the-oil-shock-will-contain-putin/ 

Oil war: Russia hit by threefold calamity

Russia is afflicted by the low oil prices but also by the economic downturn due to the Covid-19-pandemia and the stagnation of the national economy that ist hurt by sanctions; russian business leaders are becoming impatient writes german newpaper Die Welt:

"The fact that Vladimir Putin was so quick after a phone call with his counterpart Donald Trump to participate in an oil cut together with Opec and other oil countries speaks volumes. Just a month earlier, he had the Saudis blown away with this request - and thus triggered an unprecedented drop in prices from $ 66 to $ 22 per barrel of the Brent variety, because Riyadh flooded the market out of anger.

Maybe he had simply underestimated the Saudis. Just as he had underestimated the corona virus. For a long time, the Kremlin had been unimpressed and kept relatively quiet. On March 17, Putin had declared in Crimea that everything was actually under control.

In the meantime, like many other countries, things blow up in his face. More precisely: in contrast to most countries even more. It is now becoming clear that Russia is getting a triple blow. On the one hand, the economy was stagnating, among other things because of the Western sanctions and the associated isolation, with growth of 1.3 percent."