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Biden Bans Russian Oil, Warns of ‘Putin Price Hike’ at Pump

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Biden Bans Russian Oil, Warns of ‘Putin Price Hike’ at Pump
President Joe Biden announces a ban on Russian oil imports, toughening the toll on Russia's economy in retaliation for its invasion of Ukraine, Tuesday, March 8, 2022, in the Roosevelt Room at the White House in Washington. (AP Photo/Andrew Harnik)

President Joe Biden announced Tuesday the U.S. will ban all Russian oil imports, toughening the toll on Russia’s economy in retaliation for its invasion of Ukraine, but he acknowledged it will bring costs to Americans, particularly at the gas pump.

The action follows pleas by Ukrainian President Volodymyr Zelenskyy to U.S. and Western officials to cut off the imports, which had been a glaring omission in the massive sanctions put in place on Russia over the invasion. Energy exports have kept a steady stream of cash flowing to Russia despite otherwise severe restrictions on its financial sector.

“We will not be part of subsidizing Putin’s war,” Biden declared, calling the new action a “powerful blow” against Russia’s ability to fund the ongoing offensive.

He warned that Americans will see rising prices, saying, “Defending freedom is going to cost.”

Biden said the U.S. was acting in close consultation with European allies, who are more dependent on Russian energy supplies and who he acknowledged may not be able to join in immediately. The announcement marked the latest Biden attempt at cutting off Russia from much of the global economy and ensuring that the Ukraine invasion is a strategic loss President Vladimir Putin, even if he manages to seize territory.

“Ukraine will never be a victory for Putin,” Biden said.

The European Union this week will commit to phasing out its reliance on Russia for energy needs as soon as possible, but filling the void without crippling EU economies will likely take some time. The U.K., which is no longer part of the EU, announced Tuesday that oil and oil products from Russia will be phased out by the end of the year.

Unlike the U.S., which is a major oil and gas producer, Europe relies on imports for 90% of its gas and 97% of its oil products. Russia supplies 40% of Europe’s gas and a quarter of its oil. The U.S. does not import Russian natural gas.

The issue of oil sanctions has created a conflict for the president between political interests at home and efforts to impose costs on Russia. Though Russian oil makes up only a small part of U.S. imports, Biden has said he was reluctant to ban it, cutting into supplies here and pushing gasoline prices higher.

Inflation is at a 40-year peak, fueled in large part by gas prices, and that could hurt Biden heading into the November midterm elections.

“Putin’s war is already hurting American families at the gas pump,” Biden said, adding, “I’m going to do everything I can to minimize Putin’s price hike here at home.”

Gas prices have been rising for weeks due to the conflict and in anticipation of potential sanctions on the Russian energy sector. The average price for a gallon of gasoline in the U.S. hit a record $4.17 Tuesday, rising by 10 cents in one day, and up 55 cents since last week, according to auto club AAA.

Biden said it was understandable that prices were rising, but cautioned the U.S. energy industry against “excessive price increases” and exploiting consumers.

Even before the U.S. ban many Western energy companies including ExxonMobil and BP moved to cut ties with the Russia and limit imports. Shell, which purchased a shipment of Russian oil this weekend, apologized for the move on Tuesday amid international criticism and pledged to halt further purchases of Russian energy supplies. Preliminary data from the U.S. Energy Department shows imports of Russian crude dropped to zero in the last week in February.

In 2021, the U.S. imported roughly 245 million barrels of crude oil and petroleum products from Russia — a one-year increase of 24%, according to the U.S. Energy Information Administration.

“It’s an important step to show Russia that energy is on the table,” said Max Bergmann, a former State Department official who is now a senior fellow at the Democratic-leaning Center for American Progress.

Bergmann said it wasn’t surprising that the U.S. was able to take this step before European nations, which are more dependent on Russian energy.

“All of this is being done in coordination, even if the steps are not symmetrical,” he said. “We are talking to them constantly.”

The White House said the ban on new purchases was effective immediately, but that the administration was allowing a 45-day “wind down” for continued delivery under existing contracts.

The news of Biden’s decision Tuesday was first reported by Bloomberg.

The White House announcement comes amid bipartisan pressure on Capitol Hill to ban Russian energy and impose other economic costs.

Last week, House Speaker Nancy Pelosi gave a big boost when she declared, “Ban it.”

On Monday, Democrats on the powerful Ways & Means Committee posted, then removed, an announcement on a bipartisan bill to ban Russian oil imports and slap further trade sanctions on the country, according to an aide, because of pushback from the White House to acting before Biden had made his decision.

“President Biden is finally doing what members of Congress have been pushing for all along,” Sen John Barrasso, R-Wyo., and a member of party leadership, said Tuesday. “His decision to ban Russian oil is a much-needed step to kill Putin’s cash cow.”

Said Jason Furman, a Harvard professor and former economic adviser to President Barack Obama: “The United States economy can fully handle any of the challenges associated with higher oil prices. But it will bring some challenges. We’re going to have higher prices at the pump, and there’s no way around that.”

Pelosi said the House would go forward with a vote Tuesday on legislation to ban the Russian oil imports, impose trade costs on Russia and expand sanctions authority against Russians for attacks on civilians in Ukraine.

Before the invasion, Russian oil and gas made up more than a third of government revenues. Global energy prices have surged after the invasion and have continued to rise despite coordinated releases of strategic reserves, making Russian exports even more lucrative.

As a consequence of Russia’s invasion of Ukraine, the U.S. and international partners have sanctioned Russia’s largest banks, its central bank and finance ministry, and moved to block certain financial institutions from the SWIFT messaging system for international payments.

But the rules issued by the Treasury Department allow Russian energy transactions to keep going through non-sanctioned banks that are not based in the U.S. in an effort to minimize any disruptions to the global energy markets.

German Chancellor Olaf Scholz has said he opposes a European ban on Russian energy imports and that there’s no other way to meet the European Union’s needs for motor fuel, heat and electricity, and industrial use. Vice Chancellor Robert Habeck said Tuesday that when he visited Washington last week, U.S. officials acknowledged Europe was in a different situation.

“They told me in the talks that they will neither demand nor ask that Germany do the same. But I would extrapolate from that for us, and for me, that we need as soon as possible to create the possibility to take similar measures.”

While Russian oil makes up a small amount of overall U.S. energy imports, the U.S. could replace Russian crude with imports from other oil-rich nations, but that could prove politically problematic.

Key U.S. senators are warning the Biden administration from seeking any oil import deal from the Nicolas Maduro regime in Venezuela.

“The Biden administration’s efforts to unify the entire world against a murderous tyrant in Moscow should not be undercut by propping up a dictator under investigation for crimes against humanity in Caracas,” said Sen. Bob Menendez, D-N.J., the chairman of the Foreign Relations Committee, in a statement late Monday. “The democratic aspirations of the Venezuelan people, much like the resolve and courage of the people of Ukraine, are worth much more than a few thousand barrels of oil.”

________
AP

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The Case for Free-Flowing Electrons

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The Case for Free-Flowing Electrons
Photo illustrartion. PX Sphere

The average human body contains some 7 octillion electrons (that’s 27 zeroes) that weigh, altogether, just 19 grams. These tiny particles should be able to cross borders more easily than the average passport-bearing person, but beyond Europe, international trade in electricity is minimal.

Yet energy insecurity and climate threats require that transnational currents – electrons – flow more readily than they do today. Could megaprojects in the Middle East help to make that happen?

Just a few years ago, the answer would have been a resounding “No.” Oil, gas, and coal scoot easily around the world on ships, trains, trucks, and pipelines. Electricity needs cables, and traditionally, the high losses of current in transmission lines has limited their use over long distances.

At higher voltages, less current is lost – a 1,000 kilovolt line loses less than a quarter of the power than a typical 400-500 kilovolt system, which is the backbone of national grids. 

DC requires conversion at the delivery point to be usable, but it has other advantages: half the losses of AC, less cable required, and the ability to connect systems running on different frequencies. It also avoids propagating a fault from one network to another – an important advantage for international links.

But developing ultra-high voltage lines using direct current (DC), rather than the more familiar alternating current (AC), has proven challenging.

Since 2009, though, China has been at the forefront of developing ultra-high voltage, long-range lines, to bring electricity from its sunny, windy, and coaly interior to coastal cities. This and other gains have made previously unthinkable projects plausible.

The world’s longest existing subsea cable, the 720-kilometer North Sea Link, which joins the electricity systems of Norway and the United Kingdom, was completed in June 2021.

Other projects have morphed from bold ideas to the mainstay of regional energy planning. While Europe has struggled to balance its ambitious plans for net-zero carbon with energy affordability and availability, continental scale electricity grids are now seen as a way to balance out local fluctuations and daily and seasonal variations in wind and solar output.

The most notable of these is the £16 billion ($17.3 billion) Xlinks power project, a plan to produce 10.5 gigawatts of renewable energy in Morocco and feed it through a 3,800-kilometer, subsea high-voltage direct current link to the UK.

The plan would take advantage of Morocco’s steady sunshine and wind, and availability of open land, giving it much lower renewable generation costs than in Britain. Its southerly latitude would also help in supplying the UK with solar-generated electricity in winter. In total, Xlinks could reportedly supply up to 7.5 percent of the UK’s total electricity needs.

Other ambitious intercontinental links in the works include IceLink, which would connect geothermal and hydro-rich Iceland to Britain with up to 1,200 km of cable, and the 20 gigawatt, 4,200 km Australia-Asia PowerLink from Darwin to Singapore. Expensive and large-scale though they are, these projects all have serious investors backing them (even if the Australia-Asia project now appears to have taken a back seat to plans for hydrogen exports).

Two other proposed projects – the EuroAsia and EuroAfrica Interconnectors – are modest in comparison but more practical in the short-term. Part of an envisioned “energy highway,” these projects would join Israel and Egypt to Cyprus, Crete, and mainland Greece, with an intended start date of 2025.

With gas and renewable output booming in the Eastern Mediterranean, subsea cables are an alternative to subsea gas pipelines, which have struggled to gain political and economic traction. Cables would also have a longer shelf life, as Europe’s decarbonization plans mean a gas pipeline would have to be converted to carry hydrogen to continue operating into the 2040s.

Within the Middle East, more modest gains have been made toward a regional electricity market. The Gulf Cooperation Council Interconnection, which tied the six countries’ grids together in 2009, operates at a limited scale and doesn’t yet feature commercially based electricity trading. One problem is that Saudi Arabia’s grid is on 60 hertz frequency, unlike its neighbors, which are on 50 hertz, requiring converter stations.

Plans to join the GCC lines with Iraq have also been hung up by commercial debates and Baghdad’s political paralysis.

Better progress is being made on Saudi-Egypt and Saudi-Jordan connections, long discussed projects that now appear to be underway. With these and other interconnections complete, electricity could one day flow from Muscat all the way to Athens.  

Still, enthusiasm for such initiatives should be tempered. Outside the EU’s single market, large-scale international electricity trading hasn’t taken off, primarily due to commercial barriers and concerns over supply security. Disruptions in gas and oil, which can be stored for months, are bad enough for countries; a sudden electricity shut-off would be disastrous.

Some of the proposed transmission lines would also cross contested maritime territories, like in the Eastern Mediterranean, where Israel, Lebanon, Cyprus, Greece, and Turkey all disagree on borders. The Desertec Industrial Initiative of 2009, which was conceived to bring renewable energy from North Africa to southern Europe, foundered on the realization that Morocco, Algeria, Tunisia, Libya, and Egypt had urgent energy needs of their own, not to mention internal political problems and exterior squabbles.

Even when electricity interconnectors do proceed, their economic potential should not be overstated. For instance, the EuroAfrica and EuroAsia lines would supply only 10 percent of peak demand in Greece, one of the EU’s smaller economies, while electricity sales might earn the projects about $1 billion annually, a drop in the bucket compared to Saudi Arabia’s oil exports, which bring in that amount daily at current prices. 

Megaprojects make headlines and some of them may be worth pursuing in the long term. But the more painstaking work of local electricity interconnections, and building markets and commercial relations, is what should be progressed now. If the world is going to meet its green energy targets, both the Middle East and Europe must make it easier for electrons to slip across borders.

Syndication Bureau___________________

Robin M. Mills is CEO of Qamar Energy, and author of “The Myth of the Oil Crisis.”

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Patagonia’s Bold Activism Offers Lesson for ESG Movement

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Patagonia’s Bold Activism Offers Lesson for ESG Movement
Patagonia's Bold Activism Offers Lesson for ESG Movement. Getty Images

Few other companies have been so closely associated with environmental causes than Patagonia. When the company announced this month that it would donate all its profits – averaging more than $100 million a year – to the Earth, consumers around the world saw the move as confirmation of its principles and values. The outdoor apparel company has made environmental protection and activism core to its operating procedure and company principles since the beginning. While the decision is certainly historic, the details are a little more revealing. What’s clear is that corporate responsibility initiatives have been flipped on their head in the wake of this bold gesture. 

Environmental protections have long been core to Patagonia’s brand. The company has revolutionized the clothing industry through the use of recycled fabrics and other environmentally-friendly manufacturing standards. Such standards come with a cost and that has led to prohibitively high price tags for many of Patagonia’s items, which include everything from fleece tops to surfing wetsuits (using special environmentally friendly natural rubber, of course). The cost for items is so high that many joke the company should be called “Patagucci.”

Bucking the trend of excessive consumerism, Patagonia recently started pushing customers to repair their existing Patagonia clothes instead of buying new ones. The repair and reuse campaign falls neatly into the company’s iconoclastic business approach. In an interview with Fast Company Magazine, Yvon Chouinard, the billionaire founder of the company said he was “an avowed socialist. I’m proud of it. That was a dirty word just a few years ago until Bernie Sanders brought it up.”  

Selling $400 jackets to wealthy consumers while aspiring to socialist values is a fascinating position. What’s more interesting in terms of Patagonia’s branding is the company’s long-standing contracts with the US military. The company has a dedicated team, supporting the US Special Operations Command (USSOCOM) with delivering US-made technical cold weather and combat uniforms. It doesn’t stop there. The company, which has been vocal on a variety of political issues in the US, has a special tactical clothing division called Lost Arrow, which works closely with various US police departments. The company has gone to great lengths to conceal details of Lost Arrow and its revenue, according to investigations by GQ

There is nothing wrong with selling equipment to militaries and police departments. In some ways, it demonstrates just how tough the products are. In Patagonia’s case, however, it reveals the genius of the company’s branding. The company has made billions selling clothes that make its customers feel empowered from a social and environmental standpoint. By now, many consumers are aware of the challenges of climate change and how social structures allow corporate greed to flourish. Patagonia enables the consumer with enough money to buy a garment that will last a lifetime and be easy on the Earth. 

There is a story that Slovenian philosopher Slavoj Zizek likes to share about Starbucks. When you get to the cash register there are often expensive bottles of water that brand themselves in a socially conscious way. The company will build a well in an impoverished community when you buy a bottle of expensive water. The logic here, Zizek points out, is that the consumer is aware that the coffee she is about to drink has come to her by some form of exploitation. The coffee farmer in some other corner of the world is living in an impoverished community and worked hard so that she could have a cup of coffee. Instead of changing the system that allows this to happen, the bottled water company offers the consumer a way to feel better about their decisions by purchasing a product inside the system. Buy something and we will help that far away place. 

Patagonia’s announcement that all profits will go to a specially created trust designed to invest in various environment and climate-related charities is another realization of this thinking. Many have heralded Chouinard for his principled stance in taking this decision for good reason. It’s a bold act but one that must be understood in the context of the vast fortune that he has already made and the untold tax benefits that this decision will rain down on his family. 

There are lessons from Patagonia’s brand pivots for the corporate environmental, social, and governance (ESG) movement. Over the last decade, major international corporations have adopted various forms of ESG standards designed to calm investor and consumer concerns about the ethical behavior of companies. There are even ESG funds traded on stock markets worldwide. In recent years, vocal critics like Elon Musk have said that ESG standards are effectively meaningless in terms of the real-world behavior of companies. He might have a point but the larger issue is why ESG standards were created in the first place. 

Patagonia’s bold decision and the struggles over ethical corporate governance are two sides of the same coin. There is a rot at the core of the global capitalist system that consumers and some investors are becoming obsessed with. That rot manifests in poor environmental projections to the growing inequality that defines many societies and deepens political divisions in countries like the US. On some level, we all know this is happening and we are complicit in the system. 

Patagonia has found a way of positioning itself as a counterweight to that system while benefiting handsomely from it. ESG goals attempt largely to do the same thing but have missed the mark. Make no mistake, Patagonia’s divestment decision is a great one for environmental causes. One is left wondering, however,  if the Earth is now Patagonia’s only shareholder, does she have any ethical concerns about clothing the US military and police departments? 

Syndication Bureau____________________

Joseph Dana is the former senior editor of Exponential View, a weekly newsletter about technology and its impact on society. He was also the editor-in-chief of emerge85, a lab exploring change in emerging markets and its global impact. Twitter: @ibnezra.

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Middle East Construction Boom is About More Than Dollars. It’s About History

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Middle East Construction Boom is About More Than Dollars. It’s About History
Dubai UAE Flag. Copyright: Copyright (c) 2020 Captured Blinks/Shutterstock

A defining image across Asia over the past few decades has been the construction crane looming over a horizon of tall, box-style buildings, the air speckled with dust from whirring industrial machines and the ever-present buzz of cars and motorbikes. From Shanghai to Mumbai to Dubai, the construction of real estate and infrastructure projects has radically altered lives and societies and even geopolitics across the vast Asian continent and beyond.

Consider where you are right now, reading this article. You may be in a dazzling skyscraper somewhere in Asia the home of the world’s tallest buildings – or an office in London or New York, or perhaps a cafe in Riyadh or Karachi. Wherever you are, the construction industry has shaped your experience and your life – and will continue to do so.

Think of Shenzhen in1979, just a year before it was designated as one of China’s first special economic zones. It was a modest fishing city of some 330,000 people with a planned economy and limited contact with the outside world. Today, it’s a sprawling metropolis of nearly 13 million people and a major tech hub both for today’s recognizable Chinese brands think Tencent or Huawei – and the next generation of tech behemoths.

Shenzhen was just one of several Chinese cities that underwent radical transformation in the late 20th century and the first two decades of the 21st. China poured more concrete and cement in construction projects from 2011-13 than the US did for the entire 20th century. The construction crane has been an ubiquitous feature of Chinese life over the past few decades. The re-shaping of China’s built environment has been breathtaking in scope and history-altering, helping lift several hundred million people from poverty and cementing China’s strength as a global superpower.

The Middle East and North Africa region has also been a major center of construction activity over the past two decades. While Dubai captures much of the attention with its dazzling architecture and Manhattan-style skyline, it is not alone. From Cairo to Karachi, and from Rabat to Riyadh, construction is reshaping the region. 

In the middle of World War II, British Prime Minister Winston Churchill stood before the House of Commons and made a plea to rebuild its damaged chamber rooms, gutted by German bombing. “We shape our buildings,” Churchill said, “and afterwards our buildings shape us.”

The same can be said of major construction projects in infrastructure and real estate. There is the mundane and the dramatic. First, the mundane: housing. Well-planned development in this sector coupled with affordable mortgage financing and reliable property deeds remain the cornerstone of a healthy middle class. For far too long, this essential provision of mortgages and affordable housing had been neglected across the region. While Saudi Arabia’s construction boom captures headlines, its mortgage boom also deserves more attention. 

Now, to the dramatic: major geography-shifting infrastructure projects. Consider just two feats of geography-altering engineering – the Suez Canal of the late 19th century and the Panama Canal of the early 20th. In both cases, engineers reshaped our world, linking oceans and seas blocked by land, and charting new paths for trade and commerce, while reordering global geopolitics and economics.

Some commentators like to suggest that geography is destiny. The reality is that we cannot ascribe our destiny to one factor alone, and to simply pinpoint geography misses the point. It’s the built environment of your geography that can shape your destiny, and the most important question of all is this: are you connected? Egypt and Panama are far more connected than they would have been without their respective man-made canals.

If your geography is rich with the infrastructure of connectivity sea ports, airports, roads and rail, high-speed internet access – then your destiny heralds more promise. But even the best geography can be undermined by poor planning and management. A glaring example would be the beautiful geography of Somalia a long Indian Ocean and Arabian Sea coastline, a gateway to East Africa, with easy Red Sea access to the bustling port city of Jeddah. Somalia, of course, has done little to leverage its geography and remains a failing and flailing state. So, too, Lebanon, with enviable Mediterranean Sea geography and highly unenviable governance.

By contrast, there was no geographic “destiny” in the rise of Singapore or South Korea or Hong Kong. In all three cases, each country or city-state leveraged its never-depleting resource – geography – and built up the infrastructure of connectivity to create an environment conducive to business and trade.

In the Arab world, the prime example of construction-altering history would be the development of the United Arab Emirates. Again, there was no “destiny” of geography in the rise of the UAE. The country with 0.13 percent of the world’s population now accounts for about 2.5 percent of the world’s sea container commerce and 1.5 percent of total trade, and has emerged as a major hub for aviation, tourism, technology start-ups and outward investment. 

Today the center for construction in the region has moved to Saudi Arabia. The NEOM megaproject has both dazzled and dazed observers, but look closer at the $1 trillion of construction and real estate projects across the Kingdom over the past six years and you will see a country launching itself deeper into connectivity and transforming its society in the process. While the headlines blare the eye-popping dollar amounts spent, it’s important to remember that infrastructure and construction – rather than geography alone – is a powerful shaper of a people’s destiny.

Syndication Bureau______________

Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins School of Advanced International Studies and editor and founder of the Emerging World newsletter. Twitter: @AfshinMolavi

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Why Our Electricity Prices Can’t Be Left to Bogus ‘Free Markets’

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Why Our Electricity Prices Can’t Be Left to Bogus ‘Free Markets’
Why does the UK, which generates 40 percent of its electricity from renewables and nuclear plants. Getty Images

The so-called electricity markets were created to help private capital, not people. It is time that we wind up such bogus electricity markets and return all such public services to the people, to be run cooperatively for their benefit.

The price of electricity has risen astronomically in Europe over the last two years: by four times over the previous year and 10 times over the last two years. The European Union (EU) has claimed that this rise in prices is due to the increase in the price of gas in the international market and Russia not supplying enough gas. This raises the critical question: Why should, for example, the German electricity price rise four times when natural gas contributes around one-seventh of its electricity production? Why does the UK, which generates 40 percent of its electricity from renewables and nuclear plants, and produces half the natural gas it consumes, also see a steep rise in the price of electricity? All this talk of blaming Russia for the recent increase in gas prices masks the reality that the electricity generators are actually making astronomical windfall profits. The poorer consumers, already pushed to the wall by the pandemic, face a cruel dilemma: With electricity bills likely to make up 20-30 percent of their household budget during winter, should they buy food or keep their houses warm?

This steep rise in electricity prices is the other side of the story of the so-called market reforms in the electricity sector that have taken place over the last 30 years. The cost of electricity is pegged to the costliest supply to the grid in the daily and hourly auctions. Currently, this is natural gas, and that is why electricity prices are rising sharply even if gas is not the main source of electricity supply to the grid. This is market fundamentalism, or what the neoclassical economists call marginal utility theory. This was part of Augusto Pinochet’s electricity sector reformsthat he introduced in Chile during his military dictatorship there from 1973 to 1990. The guru of these Pinochet reforms was Milton Friedman, who was assisted by his Chicago Boys. The principle that electricity price should be based on its “marginal price” even became a part of Pinochet’s 1980 constitution in Chile. The Chilean reforms led to the privatization of the country’s electricity sector, which was the objective of initiating these reforms.

It was the Chilean model that Margaret Thatcher copied in the UK, which then the EU copied. The UK dismantled its Central Electricity Generating Board (CEGB) that ran its entire electricity infrastructure: generation, transmission, and bulk distribution. This move also helped the UK shift away from domestic coal for its thermal power plants, breaking the powerful coal miners’ union. These were also the Enron market ‘reforms’ in California, leading to the summer meltdown of its grid in 2000-2001.

The European Union banked heavily on natural gas as its preferred fuel to bring down its greenhouse gas emissions; it also ramped up renewables—solar and wind power—and phased out lignite and coal. The EU has imposed a series of sanctions on Russia, made public its plans to impose further sanctions on the country, and seized about 300 billion euros of Russia’s reserves lying in EU banks. The EU has also said that it will cut down on Russia’s oil and gas supplies. Not surprisingly, Russia has sharply reduced its gas supplies to the EU. If the West thought it could weaponize its financial power, why did it think that Russia would not retaliate by doing the same with its gas supplies to the EU?

Due to the Russian supplies of natural gas to Western Europe falling, the price of LNG has risen sharply in the international market. Worse, there is simply not enough LNG available in the market to replace the gas that Russia supplied to the EU through its pipelines.

With the price of gas rising by four to six times in the last few months, the price of electricity has also risen sharply. But as only a fraction of the electricity is powered by gas, all other sources of energy—wind, solar, nuclear, hydro, and even dirty coal-fired plants—are making a killing. It is only now that the EU and the UK are discussing how to address the burden of high electricity prices on consumers and the windfall profits made by the electricity generators during this period.

It is not only the EU and UK consumers who are badly hit. It is also the European and British industries. Stainless steel, fertilizer, glass making, aluminum, cement, and engineering industries are all sensitive to input costs. As a result, all these industries are at risk of shutting down in the EU and the UK.

Former Greek Finance Minister Yanis Varoufakis in his article “Time to Blow Up Electricity Markets” writes, “The European Union’s power sector is a good example of what market fundamentalism has done to electricity networks the world over… It’s time to wind down the simulated electricity markets.” The rest of the world would do well not to follow the EU’s example.

Why then is Indian Prime Minister Narendra Modi’s central government rushing into this abyss? Did it not learn from last year’s experience when, after a coal shortage, the prices in the electricity spot market went up to Rs 20 ($0.25) per unit before public outcry saw it capped at Rs 12 ($0.15)? So why push again for these bankrupt policies of market fundamentalism in the guise of electricity reforms? Who will benefit from these market reforms? Certainly, neither the consumers nor the Indian state governments, which bear the major burden of subsidizing electricity prices for their consumers.

Newsclick, Globetrotter________________

Prabir Purkayastha is the founding editor of Newsclick.in, a digital media platform. He is an activist for science and the free software movement.

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The Ghosts of Gorbachev’s Energy Legacy

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The Ghosts of Gorbachev’s Energy Legacy
Mikhail Gorbachev with Vladimir Putin. REUTERS/ITAR-TASS/Kremlin Press Service

Mikhail Gorbachev, the former Soviet leader who died last month at 91, was famous in the West for perestroika and glasnost. But three other Russian words also familiar in English were even more consequential for his reign and the resulting Soviet downfall: gaz, neft (oil), and atom. Gorbachev’s approach to these pillars of the Soviet economy continue to shape Russia’s relations with the world.

The most dramatic event of Gorbachev’s tenure, before the failed coup d’état that proved the coup de grâce for the Soviet Union, was the 1986 nuclear accident at Chernobyl. The cost of the cleanup was colossal, estimated at $68 billion in today’s money and involving some 500,000 people. 

After the accident, plans to switch from oil and gas power to nuclear power were abandoned. Even more damaging, the Soviet system’s technical incompetence, dishonesty, and callousness were revealed to the world by the 

undeniable accusations of Geiger counters.

The rapid exploitation of the giant West Siberian oil fields kept the Soviet Union’s economy alive through the oil price boom of the 1970s but became its albatross during the late-1980s. Wasteful operational practices and a lack of modern technology led to over-hasty depletion, driving up production costs. Oil exports had risen solidly up to 1983 but then flattened out.

Petroleum was essential to feed energy-inefficient Soviet industries, subsidize its client states in Eastern Europe, and to earn foreign currency to buy technical goods and even wheat. Tensions grew between the Soviet Union and the other members of its economic sphere: they wanted cheap oil while Moscow preferred to sell to the West for dollars and Deutschmarks. Winters in Poland and Romania became cold and hungry.

American President Ronald Reagan has been credited in some quarters with driving down oil prices to undermine the Soviet economy. But while prices did crash in 1986, plummeting from $30 a barrel to $10, this alleged masterstroke was hatched in Riyadh, not Washington. Saudi Arabia had belatedly realized that its policy of cutting back production to defend prices was unsustainable in the face of “cheating” – overproduction by its OPEC colleagues – and rising non-OPEC output.

As Saudi Arabia flooded the market to drive out its competitors, American Vice President George H.W. Bush, a Texas oilman himself, traveled to Saudi Arabia to request restraint on production. He wanted higher prices to protect domestic drillers in the United States.

Bush’s efforts failed but the drop in oil revenues did fatally undermine the Soviet economy. As former Russian Prime Minister Yegor Gaidar explained, the Soviets couldn’t pay their bills or import food without Western credits, and those credits would be cut off if Gorbachev repressed the pro-democracy movements in Eastern Europe, as his predecessors Nikita Khrushchev and Leonid Brezhnev had done. This led speedily to the fall of the Berlin Wall, then to the disintegration of the Soviet Union itself.

But this is where gaz comes to the fore.

The USSR had first agreed to sell gas beyond the Iron Curtain in 1968, to Austria. The US repeatedly expressed worries about Europe’s growing reliance on Soviet gas, minor though its share was at first. Under Reagan in particular, as detente was replaced by confrontation, Washington applied sanctions and diplomatic and trade pressure to try to stop new Russian pipelines.

Under Gorbachev, who assumed power in 1985, gas exports to Western Europe grew dramatically – from 29 billion cubic meters in 1983 to 63 billion cubic meters in 1990 – even as the Soviet imperium crumbled. But this gas trade was not as one-sided as it would become during Russian President Vladimir Putin’s reign.

After 1991, Russia remained tied to Western Europe by pipelines. These crisscrossed newly independent states, notably Ukraine and Belarus, and were one of the few tools the weak Russia of the 1990s had to coerce former Soviet republics. A very different character from Gorbachev or his Kremlin inheritor Boris Yeltsin, Putin turned that tool into a weapon and extended it to Germany and other states beyond the former Iron Curtain.

Gazprom, successor of the Soviet Ministry of Gas, was rebuilt as the state champion. The Russian share of European gas consumption tripled, reaching 184 billion cubic meters in 2021. A chink in the armor became an Achilles’ heel.

Similarly, the pipeline monopoly, Transneft, and Rosneft, the vehicle of Putin ally Igor Sechin, made the petroleum oligarchs of the 1990s into exiles or tame servants of the Kremlin. Russia, rival and sometimes victim of OPEC throughout the 1980s and 1990s, became a partner with the launch of the OPEC+ alliance in 2016. Higher oil prices helped Russia build a war chest, which prevented the West from wielding loans against it.

Russia’s energy reach extends even further afield through Rosatom, the state’s nuclear energy corporation. Today it offers technically-superior solutions to the RMBK reactor that exploded at Chernobyl. In fact, Rosatom has been one of a small group of leading exporters of civil nuclear power, building plants at Bushehr in Iran, Akkuyu in Turkey, and El Dabaa in Egypt, to name a few. Russia is also an important exporter of nuclear fuel.

Rosatom has so far escaped sanctions levied by the West because of the war in Ukraine, but may face financing challenges as customers become wary of deepening their energy dependence on Russia. The Russian shelling around the Zaporizhzhia nuclear plant in Ukraine, and its disconnection from the grid, also carry the threat of another radioactive cloud drifting over Europe.

Gorbachev had only five years to solve intractable energy and economic problems, and he broke the state trying. If he had enjoyed Putin’s luck with rising oil prices, history might have been different. Instead, the Kremlin’s current occupant wields a brittle energy dominance that is based largely on a blueprint Gorbachev helped to write.

Syndication Bureau ________________

Robin M. Mills is CEO of Qamar Energy, and author of “The Myth of the Oil Crisis.”

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Food Insecurity Heats Up With Rising Temperatures

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Food Insecurity Heats Up With Rising Temperatures
Amina, 50, arrived in the Gunagado displacement camp in search of food and water after the drought killed her cattle and an outbreak of disease endangered her family. Pastoralist communities in the Somali region have been suffering 4 years of erratic rains and millions of people have lost their livestock. Photo: Pablo Tosco/Oxfam

To understand the globalized nature of our food system, look no further than your morning cup of coffee. That jolt of caffeine comes to your table via an elaborate network of some 25 million coffee farmers from Brazil to Vietnam linked to the world by a far-flung supply chain of traders, roasters, financiers, shippers, grocery stores, cafes, and, eventually, to your cup. 

Coffee is the second most traded commodity in the world after crude oil, and it comprises a $466 billion industry, landing at your table in no small part due to the fossil fuels that power the ships and create the packaging. Coffee is globalization in a mug.

But coffee is not alone. Our food system comprises a world of ever connecting supply webs crisscrossing seas and continents, bringing Mediterranean olive oil and California almonds, Ukrainian wheat and Indian rice, and West African cocoa and Brazilian soybeans to markets worldwide. Our ecosystem of food is relentlessly global, creating an abundance the likes we have never seen before in human history.

That same abundance fueled by globalization has a flip side: Sudden disruptions can wreak havoc, leading to food insecurity and mass hunger. We’ve experienced three major disruptive events in the past two and a half years: the COVID-19 pandemic, Russia’s invasion of Ukraine, and, more recently, ongoing droughts and historic heat waves from the US West Coast to Europe and China.

The latter problem, driven by rising temperatures, could prove to be the most disruptive over the long term. Consider the havoc in Europe today. Spain, Portugal, France, and Italy have all recently suffered historic heat waves and some of the worst droughts on record dating back five centuries. This one–two punch of heat and drought has lowered river levels, withered crops, taxed electricity grids, and slowed manufacturing.

Lower river levels has meant less hydropower. Diminishing hydropower capabilities have come at a very challenging time for Europe’s energy infrastructure given the meteoric rise in natural gas prices. Germany is using more coal – the most polluting fossil fuel – to get by. However, lower river levels have even complicated coal usage: Ships that carry the coal on the Rhine River are paralyzed.

European governments have deeper buffers and stronger supply chain safeguards than most countries worldwide. While the current disruptions will be painful, we will not see mass levels of food insecurity or hunger. Not so for the Horn of Africa. The most extreme drought in four decades has left some 18 million people across Somalia, Kenya, and Ethiopia struggling to find enough food to eat, and tens of millions face varying levels of food insecurity. We are witnessing a humanitarian catastrophe unfolding, driven in part by the exogenous shocks to our food system over the past two and a half years. The Horn of Africa is a vivid example of the climate-food nexus.

As for the Middle East and North Africa region, the World Food Program of the United Nations has issued a stark warning: A major crisis is growing across the region with 73 million people across 14 countries lacking access to sufficient food supplies. While some of the worst-hit countries are plagued by factors beyond climate, such as war, mismanagement or corruption, the climate-food nexus will play a prominent role in the region’s future. 

A recent IMF report noted that climate disasters displace 7 million people a year across the Middle East and Central Asia. On average, climate disasters also lead to 2,600 deaths and $2 billion in damage annually. These IMF numbers only tell the story of disastrous events. They fail to capture the long-term health effects of everyday air pollution or bouts of inadequate food consumption for children.

Further exacerbating the problem, the MENA region is the most water-scarce  region in the world, according to the Population Reference Bureau. As PRB notes, the region is home to only 1.4 percent of the world’s renewable fresh water despite hosting some 6.3 percent of the world’s population. Demographic pressures on the water supply are set to persist over the next two decades.

Droughts have also hit China. Several Chinese provinces have experienced the worst dry spells in more than six decades. This has slowed manufacturing, disrupted supply chains, and dented Chinese demand. China has been a major demand engine for Arabian Gulf oil and gas over the past two decades. Any signs of faltering demand can weaken oil prices.

Extreme weather volatility should now be considered the norm, not an outlier. Our food systems should not be surprised by such volatility. The climate-food nexus needs better safeguards. As the next two global climate gatherings are scheduled to take place in the MENA region – in Egypt in 2022 and the UAE in 2023 – the climate-food nexus should be at the top of the agenda. 

This is about more than just a rising price for your morning latte. For many in the world, the climate-food nexus is about life or death.

___________________________

Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins School of Advanced International Studies and editor and founder of the Emerging World newsletter. Twitter: @AfshinMolavi

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