‘US can’t replace Russian coal supplies to Europe’ proposed sanctions fail to pass
Samizdat | April 6, 2022
The US coal mining industry is unable to expand production to replace Russian coal on the European market, the country’s biggest exporter said on Tuesday.
The comment follows a proposal by the European Commission to impose a ban on coal imports from Russia as part of a wider package of sanctions on Moscow over the conflict in Ukraine.
“I don’t see any ability for the industry to expand production. It’s like looking at a sweet dessert that you just can’t reach,” Ernie Thrasher, chief executive officer of Xcoal Energy & Resources LLC., the US’ biggest exporter, told Bloomberg.
The US is among the world’s top five coal exporters, and sells most of its coal to India, Brazil and South Korea.
According to Thrasher, most of the US coal output has already been sold under long-term contracts and there are few spare tons to deliver to Europe. With coal being the dirtiest fossil fuel, there has been little investment in new capacity, he explained, adding that tight labor markets and supply-chain bottlenecks caused by the coronavirus pandemic would also make it difficult to deliver extra tons for export.
According to media reports, potential buyers from some EU countries have already approached Indonesia and Australia, the world’s largest thermal coal exporters. But those countries have limited capacity as well. The EU wants to move away from Russian supplies, which meet 70% of Europe’s demand for thermal coal.
Shares of US coal miners surged after the European Union announced its sanctions plan against Russia on Tuesday. Coal prices in the US have been on the rise, surpassing $100 a ton last week for the first time since 2008.
‘EU fails to agree new Russia sanctions’
EU policy makers failed to agree Wednesday on a new package of sanctions against Moscow, including a ban on Russian coal imports, Reuters reports, citing its sources. The latest round of economic restrictions was proposed by the European Commission earlier this week.
Persons familiar with the matter explained the fiasco citing “technical issues” that needed to be resolved, including on whether a coal import ban would affect existing contracts.
The sources noted that it was not clear yet how the issues will be resolved, but the EU hopes to reach a compromise at a meeting on Thursday.
Can Australian Green Hydrogen Replace Russian Gas?
By Paul Homewood | Not A Lot Of People Know That | April 5, 2022
According to Ambrose Evans-Pritchard:
“Look at the deal just reached between Andy Fortescue and EON to ship green hydrogen (as ammonia) from his 200 GW planned solar and wind zone in Australia to Germany. Simply amazing. This is where the world is going”
The first thing to point out is that there is no deal to ship anything. It is simply a commitment to a research and study partnership. In particular, there is no obligation at all for Fortescue to spend a penny beyond this research. [Fortescue Future Industries, FFI, is, by the way the company. Andy Forrest is its Chairman – “Andy Fortescue” does not exist!]
But is green hydrogen really the breakthrough AEP thinks?
The first thing to note is that hydrogen does not grow on trees! FFI plan to use wind and solar power in Australia to produce hydrogen via electrolysis, an expensive process which also wastes some of the energy input.
The hydrogen is then combined with nitrogen in another expensive process to produce ammonia, which is more energy dense, and thus cheaper to ship. The ammonia then has to be cracked in another expensive process to split the hydrogen out again.
It therefore goes without saying that in energy terms hydrogen is much more expensive than the electricity used in the first place.
Solar power, of course, will be relatively cheap in the deserts of Australia. The IEA carried out a detailed study on hydrogen a couple of years ago, and reckoned that green hydrogen there would cost around $2.20 per kg.
That translates to $72.60/MWh, say £55/MWh. But on top of that we need to add all of the other costs.
The current, extremely high wholesale price of gas is about 270p/therm, or £92/MWh. Even now, green hydrogen is unlikely to offer any significant savings, once all of the other costs are added in.
But there is no reason why natural gas costs should stay as high as they are now. Historically, market prices, which have reflected the “real” costs of extraction, have been around £14/MWh.
Allowed to function freely, markets will quickly correct the current imbalance of supply and demand, and prices will fall accordingly. It clearly makes no sense at all to spend literally hundreds of millions developing a green hydrogen alternative.
Indeed if we go down this route, we are locking in the current unaffordably high prices of gas for the long term.
So why are FFI and E.ON getting into bed on this one? The answer is simple – subsidy hunting.
There is no question from a technical point of view that green hydrogen can be produced and shipped in bulk in this way. But neither FFI or E.ON, nor for that matter their bankers, are going to invest big money just in the hope that the Ukraine crisis goes on forever.
There is only one way this project will get off the ground. They will be wholly dependent on subsidies from the EU or German government. This is most likely to be in the form of Contracts for Difference, already being mooted for hydrogen production in the UK.
Such a scheme would offer a guaranteed price to FFI and E.ON, with the cost passed on to consumers.
Finally, let’s put the production numbers into perspective.
The deal talks about 5 million tonnes of hydrogen a year. That equates to 165 TWh. In comparison, the UK consumes 855 TWh a year. Europe as a whole uses close to 6000 TWh annually.
Clearly this FFI project will make no more than a dent in the overall gas market.
Finally, one last number. The FT talk of a 200 GW wind and solar zone in Australia to make this happen.
Currently the global capacity of solar power is only 707 GW, and in Australia it is a tiny 17 GW.
It seems like we will need an awful lot of solar panels, simply to replace a tiny amount of gas!
Washington nudges Moscow toward default
Samizdat | April 5, 2022
The US authorities have stopped the Russian government from paying holders of its sovereign debt more than $600 million from reserves frozen in American bank accounts.
“Russia must choose between draining remaining valuable dollar reserves or new revenue coming in, or default,” a US Treasury spokesperson said on Monday as the largest of the payments came due, including a $552.4 million principal payment on a maturing bond.
An $84 million coupon payment was due on the same day on a 2042 sovereign dollar bond.
JPMorgan, which had been processing payments as a correspondent bank heretofore, was stopped by the US regulator, according to a source familiar with the issue, as cited by Reuters. Now Russia has a 30-day grace period to make the payment.
Russia’s foreign currency reserves held by the country’s central bank at US financial institutions had been previously frozen as part of Western sanctions imposed on Moscow over its military operation in Ukraine.
However, the country was allowed to use the funds to make coupon payments on dollar-denominated sovereign debt on a case-by-case basis. Since February 24, when the operation was launched, Russia managed to make as many as five bond payments, having averted the default that was predicted by international rating agencies.
Moscow was last allowed to make a $447 million coupon payment on a 2030 sovereign dollar bond on March 31.
The sanctions-hit country has a total of 15 international bonds outstanding with a face value of around $40 billion.
UK plans to designate Yemen’s Houthis as terrorists risk disaster warns aid agencies
MEMO | April 3, 2022
The British government’s plans to designate Yemen’s Houthi movement as a terrorist group risk worsening the humanitarian crisis in the country, leading aid agencies have warned in a letter to cabinet ministers.
According to a report yesterday by The Guardian, 11 British aid agencies, including Save the Children, Care, the International Rescue Committee and Islamic Relief sent the letter upon being informed that Home Secretary Priti Patel was pushing for the designation under the Terrorism Act as part of a review of British policy in Yemen.
There are fears that the move, described as a “blunt tool” could hamper aid efforts in the country, already on the brink of famine, as international banks and companies that import food, medicines and fuel could be impacted by terrorism laws, especially as the Houthi-led, de-facto government based in Sanaa control the most densely populated areas in the north.
“The likely ‘chilling effect’ on banks and other commercial actors could prove catastrophic for the millions of Yemenis already at risk from hunger, conflict and disease,” the letter stated.
“Grain importers and banks told humanitarian agencies they are unsure if they will be able to continue supplying Yemen if the UK proceeds with proscription of Ansar Allah,” the aid agencies explained, referring to the formal name of the Houthi group.
“[If] banks were to refuse transfers because of UK proscription, this would likely have a serious impact on remittances, which are a lifeline for 500,000 Yemeni families. Up to one in 10 Yemenis rely on remittances to meet their essential needs. They are the biggest source of foreign exchange into the country, making up 20% of the country’s GDP. More than 100,000 Yemenis living in the UK would no longer be able to support their loved ones.”
However, the plans have received the support of some of the Gulf states, especially Saudi Arabia and the UAE who have been hit by cross-border attacks by the Houthis. Both are joint-leaders of the Arab coalition which militarily intervened in the country in 2015 at the request of the internationally-recognised Yemeni government following the fall of Sanaa to the Houthi forces and their military allies the year before.
Last year the Houthis were listed as a Foreign Terrorist Organisation towards the end of former US President Donald Trump’s administration, which was condemned by human rights groups at the time who warned it could further exacerbate the humanitarian crisis. However, President Joe Biden formally delisted the movement amid announcements that the US would end its support for the Saudi-led war. Earlier this year, Biden said he would consider relisting the Houthis as a terrorist group and it has become a source of tensions between Washington and its Gulf allies, Saudi and the UAE.
European energy crisis looms amid Russia-Ukraine tensions
Global Times | April 3, 2022
With Russia’s ruble payment for natural gas taking effect on Friday, the clock is ticking for Europe to grapple with the looming gas cutoff threat which would not only make the bloc face an unprecedented full-blown energy crisis but could also create a ripple effect throughout its manufacturing, logistics, and other services sectors, undercutting European GDP by about 1 to 2 percent and even lead to a political crisis, analysts predicted.
Moscow said gas will continue flowing with payments for supply from April 1 due to be paid by the end of the month or early May, giving respite to Europe whose leaders insist they will not comply with the ruble payment decree by Russian President Vladimir Putin. Analysts said the choices left for the bloc are limited, as the alternative LNG shipment from the US cannot cover demand in the short term and Europe is also severely lacking in LNG-receptive infrastructures.
These dire consequences seem to be very ironic, as Washington stands to pocket huge profits from the Russia-Ukraine conflict, while the interests of its European allies are compromised or even sacrificed, observers said, pointing out that Europe could become one of the biggest victims of the US advancing its global hegemony.
Putin announced that the ruble payment for natural gas purchases for “unfriendly” countries took effect on Friday. Under the new rule, foreign buyers will need to open special ruble and foreign currency accounts with Russia’s Gazprombank JSC to handle payments.
If account payments are not made, Russia will consider it a default on the part of buyers, and halt supply, Reuters reported.
European leaders have rejected paying with the ruble, which they said violates existing contracts. While Baltic country Lithuania said on Saturday that it has fully abandoned Russian gas imports, other European countries have yet to make clear what their stance or back-up plans are.
According to a Bloomberg report, European buyers are “looking for clarity on how the new system will work.” The German government was reportedly studying details, Denmark condemned the move, and French Ecology Minister Barbara Pompili said she didn’t see the request as a breach of contract as companies would still be able to pay in euros.
While the political wrestling would linger and European leaders may align to bolster their hard political stance against Russia, analysts predicted that there may be some easement on actual practices.
For example, some European countries may apply for exemptions via the EU mechanism, or there may be “some difference” between governments’ tough stance and how EU energy firms handle the payment, Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies, told the Global Times on Sunday.
Looming energy crisis
Russia accounts for over 40 percent of Europe’s total natural gas supply and 50 percent of the coal supply used in Europe. The European natural gas price reportedly jumped 34 percent after the ruble payment decree.
Analysts warned that a further hike in natural gas prices could drive up living costs for ordinary Europeans, further heaping up inflation pressure and even intensifying political crises.
According to Investec Bank, the UK’s cap on energy prices could spike by another 50 percent in October to more than 3,000 pounds per household, driven by fears about disruptions to the European gas supply.
EU economic heavyweight Germany, which relies heavily on Russian energy imports, has seen its March energy price rise 129.5 percent than that of February. In March, German consumers’ spending for household energy and fuels grew by 22.5 percent year-on-year, according to data released by the Federal Statistical Office of Germany.
Germany declared an early warning in its national gas emergency plan on Wednesday, urging its people to cut their energy consumption. The country’s energy-intensive sectors including steelmaking, papermaking, and logistics have reportedly felt the pinch. Some operations have had to be suspended as they cannot afford the skyrocketing energy price.
According to media reports, there are three stages in Germany’s emergency plan, and the final stage is only activated when “there is exceptionally high demand for gas or significant disruption to gas supply, with all market-based measures implemented and supply still insufficient.”
“When the final stage is triggered as energy crisis snowballs, energy consumption will prioritize civilian use, and supply for industrial use could be totally halted in that case, exerting a devastating effect not only on Germany but also the European economy – which has been battered by the pandemic,” Cui warned, while estimating that such energy crises could erase Europe’s GDP expansion by around 1 to 2 percentage points.
It is projected that the EU economy will grow by 4 percent in 2022, according to a report issued by European Commission on February 10, before signs of an energy crisis manifested.
Cui said a curb on industrial production also weighs on fiscal government income, which matters to social welfare, resulting in a vicious circle that may even threaten the European bloc’s political stability.
No way out
A possible alternative to Russia’s natural gas is to import LNG from the US. Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Sunday that US LNG shipment is not “an immediate solution” as the plan cannot be implemented within the next few months due to soaring gas price and limited facilities to accommodate shipment.
In March, the US and Europe struck a major LNG deal, under which the US will provide the EU with at least 15 billion additional cubic meters of LNG by the end of the year. “From a realistic point of view, US LNG shipments are also unable to fully cover the gap left by Russia’s natural gas imports, not to mention higher logistical costs,” Lin said.
US exporters have shipped record volumes of LNG to Europe for three consecutive months, as prices increased10 times more than a year ago, another Reuters report said.
According to a study by energy research institute Aurora Energy Research, it would cost between 60 and 100 billion euros filling up gas shortage from non-Russian sources.
The Rich Are Taking the Poor to the Cleaners on ‘Green’ Energy in Countries That Can Least Afford It
By Vijay Jayaraj | The Western Journal | March 30, 2022
Approximately 1.3 billion Indians have been informed that their cooking gas price will go up by 65 cents per liter. In a country like India, higher fuel prices can have quick and dangerous repercussions, resulting in greater morbidity and mortality.
The situation is similar in other developing countries and the poor economies of the African continent. Unfortunately, the establishment media does not sufficiently report on how hostility toward fossil fuels has contributed to the current energy crunch.
The populations of developing countries have been ill-served by leaders who waste precious resources on “green energy” infrastructure when they could have easily used those funds to improve the production and importation of coal, oil and natural gas.
Consider India and Vietnam, two fast-growing Asian economies that have been undone by the “green” distraction that has squandered their domestic energy security in the name of climate wokeism.
Despite the acceleration of coal production, India finds itself in an energy mess thanks to billions of dollars invested in poorly performing renewable energy technologies. Between 2014 and 2019, India’s renewable energy industry received $64.4 billion in investments.
The country instead could have directed money to reliable and affordable coal power plants that would have cost only a fraction of the “green” boondoggles. In 2016, India’s renewable energy investment was equivalent to the construction costs of 11 coal power plants. Likewise, several small-scale oil refineries could have been commissioned and made operational in the last 10 years, reducing the need to import refined fuel at higher prices.
Many argue that a country like India is already using too much fossil fuel. But this argument falls flat when the nation raises fuel prices for those who can least afford it. There are 230 million people in India who earn less than $5 per day. For these people, and millions of middle-class households, the hike in fuel prices means an increase in commodity and transportation costs and an overall stagnation of economic development.
Another rapidly growing Asian economy is Vietnam, where leaders appear committed to increasing the share of “green” technologies in the energy market. This ignores problems created by the country’s move away from fossil fuels.
During the past many weeks of volatile oil prices, analysts have rued Vietnam’s missed opportunity to strengthen its domestic oil and gas infrastructure. Since February, gas retailers have faced severe shortages, with more than 300 petrol and oil retailers across the country stopping sales.
Situations like these could have been minimized had the country not been apathetic about energy security. A key reason for high gas prices is decreased production at Nghi Son Oil Refinery, which did not receive enough government support to avoid financial difficulties and a 90 percent reduction in output in January. The refinery serves 35 to 40 percent of the domestic petrol market.
Economist Dinh Trong Thinh says, “When the plant’s production is unstable or has a problem, it will affect the Vietnamese petroleum market because the market share of Nghi Son refinery is large. The risk of a factory shutdown is an important issue for the petroleum sector in particular and the economy in general, which urgently needs the intervention of state management agencies.”
However, this urgency is not reflected in government actions to retain an environmental tax that boosts fuel prices and continued investing in renewable energy projects that do nothing to improve energy security.
It is time that developing economies stop experimenting with proven failures like wind and solar and start developing infrastructure that can address international price volatility.
Vijay Jayaraj is a contributing writer to the CO2 Coalition and holds a master’s degree in environmental sciences from the University of East Anglia, England. He resides in Bengaluru, India.
UK won’t get Russian gas – Moscow
Samizdat | April 2, 2022
British energy major Shell will not be able to buy Russian gas due to London’s anti-Russia sanctions, Dmitry Peskov, the press secretary of Russian President Vladimir Putin, told the media on Saturday.
“London wants to be the leader of everything anti-Russian. It even wants to be ahead of Washington! That’s the cost!” Peskov outlined.
He was referring to the fact that the UK is the only country to have imposed sanctions on Russia’s Gazprombank, through which payments for Russian natural gas are made. The measure effectively denies Britain the ability to pay for the commodity.
On March 31, Putin signed a decree requiring gas buyers from “unfriendly countries” to open special ruble and foreign currency accounts with Gazprombank to pay for gas supplies. They will transfer funds in foreign currencies to Gazprombank, which will buy rubles on exchanges and transfer them to the buyers’ ruble accounts to make payments to Russia’s suppliers.
Russia will see record gas earnings this year – expert
Samizdat | April 1, 2022
Russia will have record revenues from natural gas sales this year due to high prices in the spot markets, Janis Kluge, a Eurasia-focused researcher at the German Science and Politics Foundation, told ntv.de news outlet.
“Almost half of the Russian budget is based on transactions with oil and gas. The state earns enormously from production taxes and export duties. It receives the income in rubles, and the amount is determined by two factors: firstly, by energy prices on the world market and, secondly, by the exchange rate of the ruble,” Kluge says.
According to him, revenue from gas will soar this year, as many of Russia’s gas contracts are adjusting to the rising spot prices.
“The gas price on the spot markets has quintupled within the past year. That means Gazprom will have record revenues,” he said, while predicting that the cost will increase significantly within the next several months.
The situation is similar with oil, Kluge says, which profits from the ruble’s sanctions-induced drop.
“Russia planned the national budget with a dollar-ruble exchange rate of 72, but now the ruble is around 85, much weaker, but with a view to energy exports this is an advantage. If we multiply the oil price by the ruble exchange rate, it shows that Moscow expected revenues of around 4,500 rubles per barrel of oil, but is getting much more, around 7,000 rubles.”
According to him, the profit from energy sales will be enough to cover the impact of Ukraine-related sanctions on the Russian economy, among other things, by halting inflation.
Kluge also believes the costs of the operation in Ukraine are not very high, and economic measures, except for a complete embargo, will hardly “stop the tanks.” And seeing that the Russian Central Bank has been inventive in introducing counter-measures to keep the economy afloat, Kluge predicts that Russia will survive the sanctions and even have a budget surplus this year.
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