The Russian invasion of Ukraine, on February 24, 2022, will be remembered among the 21st century’s pivotal events, a turning point in world history.

There is no aspect of today’s international relations and global economy that has not been touched by the conflict and the reactions it has provoked. Barely three decades after the Berlin Wall collapse, a Cold War 2.0 is looming with a global geopolitical realignment affecting world trade, supply chains, and financial networks.

The renowned French anthropologist and historian, Emmanuel Todd, has even claimed that World War III began; he also added that the leaderships involved show a worrisome “nihilistic vertigo”.

The conflict is perceived in Moscow as existential for Russia. However, there are indications that it could be existential for Western democracies as well. NATO’s Secretary General has even claimed that the real risk is not an escalation but a victory of Russia.

Whoever will prevail will get a bigger voice in dictating the future world order rules; particularly, if will continue to be under the exclusive US leadership or will move towards an authentic multipolar setting.

After this conflict, nothing could be the same again; but for transatlantic relations, the Russian invasion of Ukraine has been a real panacea.

In 2019, then US President, Donald Trump, threatened to withdraw the United States from NATO if its other members had not increased their military spending. He was followed by the French President, Emmanuel Macron, who argued that “What we are witnessing is NATO brain death” and that “America’s ally is turning its back on strategic issues.”

In the summer of 2021, then, US, and NATO, ruinously withdrew from Afghanistan. The humiliating exit from Kabul raised serious doubts about the Alliance and it stirred strong transatlantic tensions.

Today the situation has reversed, and NATO members should thank Vladimir Putin’s reckless decision for that. If one were to think of a celebratory moment of the revived transatlantic relation, nothing would do better than a bust of the Russian leader provocatively placed inside the North-Atlantic Council great hall in Brussels with the inscription “The man who saved the Atlantic Alliance” underneath.

Today NATO and the EU are cohesively confronting Russia in Ukraine by providing massive economic and military aid, and the strongest sanctions ever imposed to Moscow. The latter include the end of all Russian oil and gas supplies to Europe, the freezing of as much as $350 billions of Russian funds deposited in Western banks, as well as a significant increase of European countries’ military spending. Germany alone announced a huge and unprecedented €100 billion increase. If NATO further eastward enlargement towards Ukraine has been momentarily stopped, the one towards Northers Europe appears successful with the forthcoming entry of Finland and, if Turkey will consent, Sweden.

President Biden’s brave visit to Kiev on February 20th has been the iconic moment of such sequence of successes.

It should not go unnoticed, however, that the war has triggered reactions which go far beyond the European continent and the transatlantic partnership.

Last May, the Atlantic Alliance launched its new Strategic Concept by claiming that: “The Russian Federation is the most significant and direct threat to Allies’ security and to peace and stability in the Euro-Atlantic area… [and to] the rules-based international order. “

China has now been included in the Concept for the first time by emphasizing that: “[its] stated ambitions and coercive policies challenge our interests, security, and values… It strives to subvert the rules-based international order… The deepening strategic partnership between the People’s Republic of China and the Russian Federation…attempts to undercut the rules-based international order…”   

It was a radical political evolution. If Russia was Europe’s main energy supplier, China is still the EU’s top trading partner, not to mention that it is the United States’ too.

Both NATO and the EU have then embraced not only America’s stance towards Russia, but also its growing concern about China. It is all built upon Biden Administration’s narrative that has framed nowadays geopolitical moment as the inflection point of an epic confrontation between democracies and autocracies.

To confront Russian and Chinese autocracies, the renewed transatlantic partnership is even ready to stomach an increased, dangerous, coordination between Moscow and Beijing, unprecedented since the heights of the Cold War in the1950s and 1960s. NATO and the EU, apparently, are also giving up to the globalization as we have known it for the last three decades. Traditional energy and supply chains are changing or are re-considered, trade routes are re-oriented and words like near-shoring, re-shoring and de-coupling are now frequently used in the economic and trade jargon. 

While the whole outcome and cost of this geopolitical shift are still uncertain, there is no doubt that Europe has already borne the higher price.

The diversification of energy supplies from Russia is presenting hefty bill for European consumers and for their economies’ competitiveness. Sanctions against Russia, and those looming against China, risk putting all supply chains under significant stress and to disrupt a quite fruitful trade relationship. Among this policy shift unintended consequences, there are also higher inflation and raising interest rates. Both could radically change the last four decades economic patterns.

The Chip Act adopted by Biden Administration last October, to stop the selling of semiconductors to China, might trigger a major technological war which could somehow hobble the ongoing Fourth Industrial Revolution, not to mention the rising tensions about Taiwan.

The so-called IRA (Inflation Reduction Act) recently adopted by Washington to boost the green energy transition is creating strong commercial tensions with the Brussels.

Unfortunately, despite all Western predictions, sanctions have not yet brought Russia to its knees. According to the IMF, in 2024 the Russian economy is even predicted to grow by 2,1%, more than Germany and United Kingdom. 

Furthermore, the sanctions against Moscow have been adopted only by the Western democracies and few other Asian like-minded countries.

The strengthened transatlantic bond, then, has not been matched by a similar increased world leadership of the so-called Global West. Western democracies’ long-held belief that the world revolves around them is challenged. A different world is taking shape. Although confusely, the so-called Global Rest appears on the rise and developing its own geopolitical consciousness. An increasing number of emerging economies are perceiving themselves as alien from many western narratives, visions, and policies, as well as from the tightly Western-led global financial system. De-globalization is looming, and de-dollarization too.

A global poll published on February 22^nd has confirmed previous assessments. To a large extent, Global Rest seems believing that “US and European support for Ukraine is driven by the desire to protect Western dominance”. In other words, it would have nothing to do with defending democracy and Ukraine’s territorial integrity.

A long list of countries – mostly Global West’s traditional partners – are showing disaffection towards the US-led rules-based world order that since 1945 has been shaping global politics. Algeria, Argentina, Egypt, Indonesia, Nigeria, Saudi Arabia, Turkey, United Arab Emirates, just to name a few, perceive such order as biased, sometimes hypocrite, and often imbued with double standards; its rules seem formally valid for all but a few selected Western countries. These emerging economies are queuing to join what appears to be the vanguard of the Global Rest, the BRICS (Brazil, Russia, India, China, and South Africa), the G7’s real global alter ego.

No doubt that Russia has been effectively isolated from the Global West; no doubt either that the transatlantic partnership has been strongly reinforced. However, there are also discomforting indications that the Global West appears more and more isolated from the Global Rest. Prevailing against autocracies requires winning hearts and minds globally, as much as among Western constituencies.

The well-deserved condemnation and punishment of Russia notwithstanding, the conflict could have been better used by the EU as a unique chance to give content to its widely claimed strategic autonomy, particularly by pushing harder for negotiated solutions while maintaining the support to Ukraine.

The EU has instead opted for being the US’ junior partner, and a Polish-Baltic traction institution. It is dismaying that even the recently exited UK seems having a greater political influence in Brussels than before.

A quite successful re-strengthening of the transatlantic relationship has been accomplished. It is a crucial outcome considered the uncertain times ahead.

Maybe it could have been achieved better.

If the price that Europe, especially, has paid was worth will become clearer only in the coming years.

L'articolo The war in Ukraine and the Transatlantic Partnership proviene da InsideOver.

Since the outbreak of the COVID-19 pandemic, the oil industry has been one of the most heavily-affected sectors of the economy hit by the unprecedented crisis. The unique anomalies that have been noticed in the supply and demand equilibrium have shattered oil prices, leading to the historical moment in April 2020 when future oil contracts being traded in negative (below zero) rates.

As a renewed surge of CIVID-19 cases hits in a second wave, and given the latest developments following the outcome of the US elections, worries around the oil prices threshold are coming once again into the foreground.

Second Wave of COVID Raises Grave Concerns for Oil Markets

As we are leaving the summer far behind, more and more COVID-19-related cases and deaths are being reported at the global level. By mid-October 2020, there was a remarkable trend in the Covid-19 incidents across the world, indicating that a second more aggressive wave of the virus is due.

This has been the exact case up to date, as we are witnessing the virus numbers moving rapidly upwards. As a response several governments, including Germany, France, and the UK have decided to reimpose lockdowns across several parts of the country or in the national level.

This new situation has created grave concerns as the lockdown policies not only sharply reduce the daily consumption of oil products in the everyday life of the citizens in these countries, but also trigger a hard blow on the aviation industry as a whole.

With the volume of international trips being dramatically downsized, the demand for petroleum-based jet fuel is sharply falling, bringing down together the price of oil across the global markets. By early November and once UK Prime Minister Boris Johnson confirmed that the country was entering again a national lockdown, the market promptly reacted and showcased the aforementioned concerns, sending the WTI price under $34 a barrel at some point during last Monday’s session (November 2). This was the lowest since early June.

Prices briefly rebounded during that week, due to the volatility that the US elections have created and also the fact that OPEC+ has started reconsidering the scheduled easing of oil production by January 2021, pushing the prices to gain some momentum, but significant worries remain.

Biden’s Election and Potential JCPOA Renegotiation

The election of Joe Biden as the 46^th President of the United States could add further pressure on the short-term outlook of the oil prices. As mentioned earlier, the race to the US elections has helped the prices to shortly rebound by mid-week; however, Biden’s win could affect the short-term performance of oil for two major reasons.

On the one hand we should anticipate that the President-elect will adopt a much stricter policy towards the COVID-19 pandemic. While Trump has followed a focused strategy, trying to mitigate as much as possible the grave consequences of the virus on the US economy, namely enforcing measures to boost the finances of the states, Biden will most probably pursue a more aggressive approach, similar to the one that many EU countries have followed, through the implementation of new lockdowns in several parts of the country and a mask mandate.

At the same time, Biden has stated that a renegotiation with the Islamic Republic of Iran around the JCPOA is definitely on the table. The Joint Comprehensive Plan of Action or “Iran Deal” has been a long-term process between Iran and P5+1 seeking to terminate parts of the Iranian nuclear program in exchange for lifting economic sanctions from Tehran and assisting the struggling economy of the country.

During the mid-2010s, Joe Biden – as the US Vice President at the time – played a pivotal role in the planning and implementation of the deal; and apparently the new President-elect still deeply believes in it. Trump, to the contrary, has fought every aspect of the deal during his Presidency, calling it the “worst deal ever negotiated”.

A potential renegotiation with Iran would not be an easy path, as Trump’s backing off from what was agreed and the likely election of a hardliner in the place of Iranian President Hassan Rouhani by the summer of 2021 could further complicate an already flawed relationship.

If Tehran comes to an agreement with Washington and the sanctions are lifted, then we should anticipate millions of barrels of Iranian oil finding their way back to the global markets daily, further deteriorating the problematic supply and demand equilibrium. Regardless of the outcome of the negotiations though – which are expected to run in the long-term anyway – the very fact that Biden is willing to restart the talks with the Islamic Republic will likely create additional concerns and push the oil prices even lower in the near future.

How Might OPEC+ React to an Oil Collapse?

Under the current circumstances, it is likely that we are due to face another perfect storm for oil prices on a global scale in the near future. In early December, OPEC is scheduled to meet and discuss the Organization’s strategies, in order to mitigate the impact of the another sharp downtrend in the demand of the petroleum products.

OPEC+ had previously implemented a supply cut of 9.7 million barrels per day to tackle the unparalleled challenges, posed by the COVID-19 crisis. This decrease – which started on May 2020 – was limited to 7.7 million barrels per day by August 2020 with an additional scheduled supply boost of two million barrels per day in January 2021; apparently the January boost has been currently paused, considering the new facts.

This step has temporarily provided some support to the fluctuating prices but would have minimal impact in the months to follow. Predicting that the new COVID-19 wave will have many similarities with the first surge of the virus, it is highly likely that we will face another oil crisis in the near future, sending WTI prices below 30 USD per barrel by early 2021.

This is the most probable scenario, unless there is a breakthrough development on the COVID-19 front – like the Pfizer/BioNTech’s latest vaccine announcement which gave an impressive 10% boost to WTI- or OPEC+ decides to proceed with radical moves, sharply cutting further the global supply in order to manipulate the oil rates; still such a move would put at risk the viability and the long-term outlook of petroleum-based economies, especially those of the rich monarchies of the Gulf and thus any such bold actions are unlikely to occur.

L'articolo Are Oil Prices About to Go into Freefall Once Again? proviene da InsideOver.

A recent discovery of significant natural gas reserves within the Turkish Exclusive Economic Zone (EEZ) in the Black Sea was the main topic of Turkish President Recep Erdogan’s speech on August 21.

During a televised press conference from the Presidential Complex in Ankara, the Turkish President announced that the drilling vessel Fatih had discovered the largest-to-date energy reserve in Turkish territory. This statement comes at a crucial moment for the Turkish economy and the security and energy landscape in the region.

Erdogan Announces the ‘Good News’

On Wednesday August 19, Erdogan delivered a promising speech in the opening ceremony of the Kalyon Solar Technologies newest giga-facility in Ankara. Erdogan mentioned that he was to announce some very good news by Friday, regarding a development which would bring about a new era for Turkey.

Shortly after his statement, speculations around the context of the upcoming good news have been circulating; a Bloomberg report confirmed by Wednesday evening that the “good news” was related to a significant discovery by a Turkey in an energy field in the Black Sea.

The pre-announcement has partially eased the pressure on the Turkish lira, which momentarily gained more than 2% against US dollar; however the actual statement two days later, has reversed the gains, indicating that the estimations around the energy reserves which Erdogan made public during his Friday speech did not meet the expectations.

The natural gas reserves in Black Sea’s Tuna-1 zone could reportedly be approximately 11.3 trillion cubic feet (tcf), or 320 billion cubic meters (bcm). According to Erdogan, this could be just a part of the total reserves in this energy field and could eventually be the catalyst to turn Turkey to a net gas exporter and a substantial energy hub in the wider region.

A Morale Boost for the Struggling Turkish Economy and a Very Optimistic Prediction

The Turkish President has tried to over-emphasize the discovery and imply that this would be game-changer for the Turkish economy, at a moment that both the short-term and macro-economic indicators seems rather grim for Ankara. Erdogan has also stressed the role of his son-in-law and current Minister of Finance and Treasury of Turkey Berat Albayrak. Before his appointment in the Ministry of Finance, Albayrak has served as the Minister of Energy and Natural Resources from 2015 to 2018, and has taken critical steps regarding the exploitation of the recent discovery and the nationalization of the country’s energy industry.

Erdogan has also tried to present a rather too optimistic time-plan for the exploitation of the resources, since he stated that by 2023 the reserves could be fully exploited and natural gas would be available to the domestic and international markets. The fact is that 2023 is a year of particular significance for the Turkish President since it coincides with the centenary of the Republic of Turkey.

Erdogan’s 2023 vision is a personal political bet, as the Turkish President would like to make a direct comparison with the founder of the Turkish Republic Kemal Ataturk and prove that his neo-Ottoman strategy has been much more beneficial for the Turkish people than the Kemalist legacy.

According to experts of the energy industry, gas reserves normally take four to seven years from the time of discovery until the phase of final extraction, and in the case of the latest Turkish discovery, analysts said that this time-frame could be even longer, up to 10 years. We can easily see that the claims of the Turkish President are over-optimistic and primarily aimed at serving his current political agenda.

Comparing Tuna-1 with other Natural Gas Reserves in the Region

In order to gain a clearer idea of the recent discovery it’s worth taking a quick look into other significant discoveries of energy reserves in the region over the past few years. To achieve a better understanding of the sizes we will also refer to the current population of each country, so we can set some very basic parameters for a more accurate comparison.

It’s important to mention once again here that the current estimations regarding Tuna-1 suggest that the reserve holds approximately 11.3 trillion cubic feet of natural gas. However it has not been clarified yet whether this the recoverable or the overall amount of the field. Turkey has a population of approximately 83 million.

Back in 2010, Israel discovered the massive Leviathan reserve. Leviathan is the largest gas reserve in Israel and holds approximately 22 trillion cubic feet of recoverable natural gas. Leviathan delivered gas to the domestic market not earlier than 2019. Israel is a country of approximately 9 million.

In 2015, Egypt discovered the largest natural gas field in the Mediterranean, the well-known Zohr. Zohr holds an estimated amount of more than 30 trillion cubic feet of recoverable natural gas. By 2019, Zohr achieved a daily production of 2.7 billion cubic feet per day, and Egypt has a total population of approximately 100 million.

Finally the island country of Cyprus, discovered the Glafkos field in 2019. Glafkos is expected to deliver between 5 and 8 trillion cubic feet of natural gas, an impressive amount for the small country with a population of only 1.2 million.

From the Black Sea to the Eastern Mediterranean

The discovery of the natural gas field in the Black Sea comes at a critical moment for Turkey. Since late July, Ankara has attracted much attention, due to the controversial seismic research activities within parts of the Greek continental shelf.

Erdogan is seeking to establish a wide energy zone spanning from the Eastern Mediterranean all the way up to the Black Sea. The combination of grandiose announcements — in the case of Black Sea — and hybrid methods to create a de facto situation in the case of Eastern Mediterranean all fall within the same plan.

Erdogan’s ambitious strategy is to showcase Turkey as a remarkable regional energy hub and a unique energy corridor in a strategic crossroads between the East and the West.

L'articolo Will Turkey’s Gas Discovery in the Black Sea be a Game Changer? proviene da InsideOver.

Year on year growth in demand for liquid natural gas (LNG) has mostly come from developing countries. Are the increasing imports of LNG a positive outcome or a road to increasing dependency on external sources?

Trends in LNG Exports

Two main trends associated with LNG exports and imports have emerged in the last few years. Growth in LNG imports has come from developing countries. Certain patterns have also emerged in countries contributing to the growth of the liquid natural gas industry.

From a geographic perspective, the main regions accounting for growth in LNG imports are Asian countries. Particularly, countries in Asia which are in South and Eastern Asia.

Another pattern in the imports of LNG has been the increasing exports from countries which are already world leaders in fossil fuel exports. Qatar, Australia and the United States are some of the leaders.

The Key Importance of Pricing

The price of liquid natural gas, compared to other fuels has played a role in the imports of this fuel type. The price of LNG exports from the US has steeply declined since 2014. With lower prices, how will the increasing imports to developing countries will affect their foreign relations and the economy?

The countries from which developing countries buy liquid natural gas, play an important role. The developing countries which saw most grow in LNG imports, imported the fuel mostly from developed countries.

Foreign relations also affect the buying process. Buying from neighboring countries or allies is, after all, different than buying from countries with whom relations aren’t as warm. While buying from allies has only given marginal benefits to countries like Bangladesh and Qatar, India’s purchase of LNG from the United States has facilitated their relations in other areas.

Economic Downsides of LNG

A cheaper energy source like LNG also has its downsides. Imports from external sources, while economical in the short term, could decrease energy independence of the importing countries in the long term. There are several examples in developing countries where LNG is a trade-off between independence and diversification. Turkey has diversified its energy sourcing by increasing LNG imports, and Chile is preparing to use LNG imports once again.

However, the overall trend has not been beneficial to energy source diversification and independence in developing nations. Particularly, in South American countries. Countries like Brazil have decreased LNG imports and its role as an energy source.

Liquid natural gas exports are divided between government-controlled companies and private ones. The political implications of importing gas from one or the other type of seller also differ. With the growing entanglement of public and private enterprises in the energy sector, it may seem as if state and non-state actors and their differences are being blurred. Yet, in developing countries, there are still large and expanding differences (politically-motivated decisions, prioritization of internal development rather than lower costs).

The Pros and Cons of Developing Countries’ Rising Dependence on LNG

From economic point of view, increasing LNG imports in developing countries could deliver both positive and negative long term impacts. The cheaper and sometimes cleaner energy source should reduce costs of production and the negative effects of pollutants.

On the macro level, in countries where LNG fuel is used by individuals, effect on their disposable income is bound to appear. In two developing countries with largest growth in LNG imports (China and India), the energy source could increase disposable incomes because of being relatively cheaper compared to other fuel sources, and decreases in price.

Governmental spending on energy generation and fuel sourcing is also bound to be affected. While LNG is a cheap source of energy, and a good tool for increasing the speed of economic growth (in the form of lowering expenditure of businesses on their energy and fuel needs), it could be damaging for long term economic development.

Time to Think Long-Term

Without investments into now more expensive — but cheaper in the long term renewable energy — developing countries face a perilous future. They could be left with only a more expensive source of energy, and the infrastructure for it. Moreover, spending becomes an even larger gamble because of LNG imports being subject to price volatility due to non-energy related factors.

There is some uncertainty to this hypothesis. Because renewable energy infrastructure costs are decreasing year by year, choosing to not invest into it in the present could be an economical decision. Yet, spending billions on energy infrastructure which will get relatively more expensive in the future, is also not the most rational decision.

Such dilemmas are not faced by exporters. For LNG exporting countries, several benefits come from the exports of this fuel type. Because of the early set prices of liquid natural gas exports and their mild fluctuation, there is less volatility and room for manipulation. Hence, liquid natural gas exporting countries can use this benefit for convincing potential importers, and making easier sales.

Stronger ties with importing countries are a given. In many countries, LNG trade relationships have brought on a larger concern for political developments in the parties on the other side of the trade. However, energy ties are far less impactful and strong when countries with already strained relations, or private enterprises engage in the trade. LNG exports haven’t given a strong push for better relations of China and the US.

Boosting Domestic Production of LNG

The development of domestic gas industry so far has been the most noticeable benefit for the exporting nations. It not only allows to better serve exports, but also to have a fallback for increasing domestic demand.

In contrast to exporting countries, for countries importing the fuel, it expands dependence on external sources. LNG contracts can be difficult to renegotiate, and in times of price drops, not all buyers have been able to take advantage of them.

A drawback for imports of LNG into developing countries is the infrastructure requirement and difficulties that come with it for developing countries. Pakistan has experienced a slow pace of building of LNG infrastructure, even with 4^th place in growth in imports in 2018. For other liquid natural gas importing countries in the developing world, the mission to build more objects is often impossible without loans.

This drawback of importing LNG is often compounded by a lack of qualified workforce and a skills shortage for solving problems with the gas infrastructure objects. Outside help is often a necessity both for normal operations, and for accident management.

The increasing development of the domestic industry is a benefit all exporting nations can reap. Exports of other fuels also promote better relations between countries. Yet, not all benefits come without a cost to the other side. LNG exports have one benefit for the exporters, which is also a drawback to the importers. Importing nations not only buy the LNG from certain nations, but also the expertise and loans to import the fuel. In cases like these, many developed nations with sales of LNG, also guarantee sales of related products.

The push to make a choice between fossil fuels, including liquid natural gas, and renewable energy will increase in the future. If the premise of decreasing costs of renewable energy will follow, then the current use of LNG is the most beneficial choice for developing countries.

Factors working against savings on energy in developing countries have been high infrastructure costs, need for external financing, and not always placing value on the cheaper energy options. There are several reasons why they are bound to deliver to deliver a low impact. These include improving financial states of developing countries and decreasing shipping and infrastructure costs. Yet, even with low impact of the current issues, they are a damaging effect to both present and future savings.

With LNG, savings also extend to pollution. Liquid natural gas is a good alternative to oil and coal, which are often used as energy sources in developing countries. In the present, alternative energy sources for largest importers of LNG don’t necessarily have to be a priority, especially when energy flow disruptions are unlikely.

With ongoing processes having a positive effect on energy diversification in developing countries, larger LNG imports are more of a strong push for growth, rather than dependency.

L'articolo Is Rising Demand for Liquid Natural Gas a Zero-Sum Game? proviene da InsideOver.