Week 29 Overview
Tragedy marred the the 29th week of the year and will undoubtedly add an additional layer of complication to the EU-Russia dynamic.
The new round of sanctions against Russia is likely to prompt a backlash and have consequences on energy security in Europe. The US imposed sector sanctions against Rosneft, Novatek and Gazprombank, have potentially key impacts for European energy security. Rosneft and Novatek are indeed entitled to export LNG to Europe and are developing some important fields in the Arctic that could be useful for Europe. The sanctions could sound legitimate, but could be equally detrimental for Europe.
A first signal seems to indicate that reality is impacting North American LNG export facilities. One project in Canada has indeed been put on hold and others may follow soon. The calls for US LNG exports to Europe are dubious in their grounding confirmed by the empty words said by politicians of the Old Continent.
In this sense, European energy security remains an issue, but nothing indicates progresses in this direction. Slow approaches and much teetering remain the leitmotif of European politics.
Meanwhile, the arm-wrestling between Ukraine and Russia gained further momentum. The plane crash on Thursday is something difficult to relegate in the wings. The event showed that the arm-wrestling between Kiev and Moscow could have serious consequences on Europe: 211 Europeans have been killed in the sky of Donetsk Oblast, about 40 kilometres from the Ukraine-Russia border. The tragic reality is that Europe is not far from this conflict zone.
RUSSIA - UKRAINE
The 29th week saw European countries maintaining their stance on Moscow, but opening the door to more negotiations with Russia.
“The situation in Ukraine has posed new challenges for cooperation between Finland and Russia. As an EU Member State, our position on the Ukraine crisis is very clear. At the same time, we consider it very important to conduct high-level dialogue with Russia now and in the future,” Finland’s Prime Minister Alexander Stubb said in the afternoon.
European diplomacy does still lean on the Ukrainian side, but much indeed depends on upcoming events. European foreign policies will be either Russia-neutral or firmly against Moscow. The new foreign policy chief’s designation will shed some light on future European stances. Will the new High Representative of the Union for Foreign Affairs and Security Policy be from Eastern Europe? In this case, Europe could easily drift away from strong cooperation ties with Russia, reinforcing its dependence on North America. The battle is complex on all fronts.
It comes as no surprise that Ukraine continues its attempts to strengthen business ties with Eastern Europe in order to attract a wider support from Brussels. Meeting a delegation from Poland on Wednesday, Ukrainian authorities did not hide their intentions.
‘Arseniy Yatsenyuk highly assessed the principled position of Poland concerning the situation in the East, as well as the Polish Government's intention to expand technical and expert assistance to Ukraine. The Prime Minister noted the importance of joint and coordinated response of the European Union to the escalation of violence by Russian-backed rebels,’ reads a note released by the Ukrainian government, after the meeting between Ukrainian PM Arseniy Yatsenyuk and European rising star Radoslaw Sikorski, current Polish Foreign Minister.
Ukrainian intentions are clear, while European will remains quite dubious. Confusion and uncertainties are not simply hanging over Brussels or Eastern Europe, but across the whole continent. European authorities have indeed to take a decision on a common energy strategy, but decisions lag. A consistent strategy has not been drawn yet and it will require some more time. As for many other policies, European energy strategy stalls. Consensus lacks.
A clear example of this slow approach became evident on Wednesday, when the European commission and the German regulator BNetzA agreed to postpone the deadline for a decision on the Opal gas pipeline. The project would grant more commercial opportunities for Russian gas, connecting the offshore section of Russia’s Nord Stream pipeline to the Czech Republic through Germany.
The project would allow Europe to diversify routes, but it would give Moscow an additional edge. The problem is that Gazprom is the only company interested in pumping gas and taking the spare capacity. The fact is that, at least at the moment, there is no real alternative to Russia. Taking time does not help the EU. A decision is required and other mothballing would be a tragic sign.
In this context, Europe’s take on sanctions is casting even more doubts. Brussels seems to be standing in the middle. Doing so, it is simply showing how weak it is on an international level.
Finally, Royal Dutch Shell’s decision to suspend development of the LNG unit at Canada’s Jumping Pound is not good news for Europe.
UKRAINE CAN BE AN EXAMPLE FOR EUROPE
“We are in war. And I will give appropriate instructions to prepare the national economy for the work in conditions of mobilization, protection of people,” Ukraine’s Yatsenyuk commented on Friday.
As strange it might seem, Europe should be learning from Kiev. The 28-country block should define alternative plans and define its side. Unfortunately for Brussels, Europe does not have any clear enemy, but itself. That is worse news.
REST OF EUROPE (1): BRITISH ATTEMPTS
The Scottish referendum is approaching fast and London is called to do something to win a difficult chess game.
On Monday, the Scottish National Party blamed the UK government for alleged mistakes made in the North Sea. According to the SNP Treasury spokesperson, the review of the tax regimes stems from a sluggish approach. It is a proof of British inconsistencies.
“The SNP have been calling for certainty in the North Sea for years – and in the run up to the referendum suddenly Danny Alexander admits there is a problem with the way the UK government treat this important industry,” Stewart Hosie MP, SNP Treasury spokesperson, commented in a note released on Monday.
The government led by David Cameron reacted, but few welcomed its move. The Prime Minister announced a cabinet reshuffle that is rather Euro-skeptic. This easily paved the way to mounting criticism from Edinburgh.
Ahead of a national election in May 2015, former Energy Minister Michael Fallon has been appointed Defence Secretary. Matthew Hancock, 35 years old, has been indicated as the successor of Fallon at the helm of the Energy Ministry.
“I want to thank Michael Fallon and Greg Barker for their immense contributions to turning around the legacy of energy underinvestment we inherited. I was particularly grateful to Greg for his support on my battles on climate and to Michael, for his backing for my pro-competition approach to the Big Six,” commented Edward Davey, Secretary of State for Energy and Climate Change.
The British government has also been trying to increase the tone of its voice in the energy debate, firmly committing to new measures to decrease inefficiencies both nationally and internationally.
On Wednesday, it announced a short term funding of £15 million over five years to establish a new regulatory body for the UK’s offshore operations.
‘The Government today announced it would contribute short term funding of £15 million over five years to help kickstart the establishment of a new arm’s length regulatory body in the official response to Sir Ian Wood’s review into improving efficiencies in the UK’s offshore oil and gas industry,’ reads a note released by the Department of Energy & Climate Change.
On Thursday, London wants to reassert it is not as bad as depicted by Edinburgh and that its measures are adequate to cope with the situation.
“I can tell you, Britain is energy secure. Indeed, according to the US Chamber of Commerce, Britain is today the most energy secure country in the EU – more secure than France, Germany, Italy, Spain. In fact, we’re the 4th most energy secure country in the whole world according to the US Chamber of Commerce – ahead of the US, Canada, Japan. And I am supremely confident we will stay high in that energy security league in the future,” Edward Davey, Secretary of State for Energy and Climate Change explained, adding that the British prospects remain rosy due to “tens of billions of pounds of investment that have already flooded into the UK’s energy system since 2010.”
REST OF EUROPE (2): ITALIAN REORGANISATION
In this grim backdrop, the only feeble hope comes from North Africa and Italy, where companies are trying to foster a reorganisation.
Italian companies continue to divest, with Eni selling its stake in EEV to Germany’s EnBW and Enel Group disposing of holdings in Slovakia and Romania.
‘As regards Slovakia, the holdings involved in the sale programme include the 66% stake in Slovenské Elektrárne a.s. (held by Enel through Enel Produzione SpA), which is that country’s leading power generator, with a market share of close to 80%,’ Enel wrote in a note, adding it is contextually selling companies in Romania.
Similarly, Eni is selling non-core assets to strengthen its financial structure. And this is good news, as it grants more leeway to the two Italian companies. They might increase their investments in North Africa and this diversification could turn out to be extremely positive.
As Serinus did last week, other bigger companies could follow with investments in Tunisia and Maghreb, stepping up efforts to foster a renaissance of hydrocarbon production in North Africa. It is worth a try.
Despite the difficulties and the hurdle, few alternatives are out there and the Maghreb card seems the most logical to play.
In summary, the 29th week of the year did not register many achievements for Europe. While Reuters suggests possible looming economic problems for Germany, any measures to avoid complications are more than welcome. Europe is under under pressures from the East, from the West and from the South.
Sergio Matalucci