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Main Takeaways for the week of March 2, 2022

Russia invades Ukraine, opening up a bloody and horribly unnecessary conflict in Europe. The Western World imposes sanctions on Russia with carve-outs for energy, but Western banks and energy companies go even further to combat risk, potentially causing de facto energy sanctions. New world energy order in the cards, as Europe looks for ways to remove its dependence on Russian energy. IEA steps in to try to stabilize oil markets, but WTI punches through $100/bbl regardless. JCPOA deal close. OPEC+ shows no cracks as Gulf states consider war in Ukraine immaterial.


Featured Article

Preparing for the First Winter Without Russian Gas, by Ben McWilliams, Giovanni Sgaravatti, Simone Tagliapietra, and Georg Zachmann for Breugel


Headlines

Global Petroleum Liquids

Global LNG

Global Coal

North American Energy Infrastructure

U.S. - China Energy Relations

  • No significant developments

EU – Russia Energy Relations

China – Russia Energy Relations

U.S. - Canada Energy Relations

Middle East Energy Geopolitics

Central Asia Energy Geopolitics

  • No significant developments

Canadian Oil and Gas

Electricity

Renewables

Copper

Lithium

Nickel

Cobalt

  • No significant developments

Carbon/Graphite

  • No significant developments

Hydrogen

Nuclear

  • No significant developments

Biofuels


Quotes

Over the next 12 months, there is little that can be done to remove hard physical bottlenecks. Without Russian gas, there will remain a gap between supplies and a ‘normal’ year’s demand. Exceptional measures are possible to reduce demand. They would send a signal of united European defiance and stop billions of euros currently flowing from west to east.

From Preparing for the First Winter Without Russian Gas, by Ben McWilliams, Giovanni Sgaravatti, Simone Tagliapietra, and Georg Zachmann for Breugel

 

Still, getting through the current winter without further Russian imports is one thing. It will be far more difficult to run the European economy for several years without Russian gas. On the supply side, some states might be able to scrounge up spare import capacity from Qatar and the United States. Allies such as Japan and South Korea might also be able to divert some of their excess seaborne gas shipments. But completely replacing Russian gas would be very expensive and might prove physically impossible.

From The Kremlin’s Gas Wars, by Niclas Poitiers, Simone Tagliapietra, Guntram B. Wolff, and Georg Zachmann for Foreign Affairs

 

Russia would not be able to afford this war were it not for the fact that oil and gas prices are ratcheting up. They’ve got enough in the war chest for now. But over the longer term, this will not be sustainable without the investment that comes into Russia and all of the Russian commodities, not just oil and gas, that are being purchased on world markets. And, our international allies, like Saudi Arabia, should be increasing oil production right now as a temporary offset. Right now, they are also indirectly funding war in Ukraine by keeping oil prices high.

From an interview with Fiona Hill for POLITICO

 

Germany will now shed the accusation of free-riding on others’ security spending. When Scholz announced a one-off investment of 100 billion euros in the German military and the intention to make defense spending exceed two percent of overall economic output—the goal set for NATO member states—he stunned the foreign policy community, the country, and even many in his own parliamentary group who were not privy to this snap decision.

From A New Germany, by Sudhe David-Wilp and Thomas Kleine-Brockoff for Foreign Affairs

 

All major Iranian state-owned enterprises, including the National Iranian Oil Company, are also under full blocking sanctions. Critically, the United States has also used the threat of so-called secondary sanctions—measures targeting third parties that transact with sanctioned entities—to drastically reduce Iran’s oil exports and isolate Tehran almost entirely from the global economy. No such sanctions are currently in place against Russia.

From The New Russian Sanctions Playbook, by Edward Fishman and Chris Miller for Foreign Affairs

 

Western countries that import Russian energy should require all payments placed into escrow accounts that will only be settled once the crisis is resolved. This would put additional risk on energy markets—an outcome Western governments want to avoid—but could be an escalatory tactic if necessary.

From Rapid Response: The future of European energy security, by Lee Beck, Randy Bell, Reed Blakemore, Andrew Bochman, Charles Ellinas, David Goldwyn, Ameya Hadap, Robert F. Ichord, Jr., Irina Markina, Jonathan Maxwell, Richard Morningstar, John Roberts, Paddy Ryan, Brenda Shaffer, Andras Simonyi, and Ellen Wald, for the Atlantic Council

 

For European countries wanting alternatives to Russian gas, the US is an obvious place to find suppliers. The US has the gas resources, the infrastructure, and the construction capabilities to achieve a significant increase in LNG exports relatively quickly. It cannot be an answer to any immediate shortages — US LNG export facilities are already running at full capacity — but in a few years’ time it could make a significant contribution to reducing Europe’s dependence on Russian gas.

From Europe looks for alternatives to Russian energy, by Ed Crooks for Wood Mackenzie

 

Infrastructure, including transportation, water, sanitation and energy systems have been compromised by extreme and slow-onset events, with resulting economic losses, disruptions of services and impacts to wellbeing (high confidence)

From the AR6 Working Group 2 Report for The Intergovernmental Panel on Climate Change


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