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Daily Mail 12 October, 2021 - 11:05am

Russian President Vladimir Putin said Wednesday that his country is not using energy as a weapon against Europe and that Russia stands ready to help the region as its energy crisis continues.

"We are not using any weapons," Putin told CNBC in Moscow on Wednesday, according to a translation. "Even during the hardest parts of the Cold War Russia regularly has fulfilled its contractual obligations and supplies gas to Europe," he said.

Describing reports that Russia has withheld gas supplies to Europe, Putin called such accusations as "politically-motivated blather" and there was "nothing to support it [the idea] that we use energy as a kind of weapon." On the contrary, he said, Russia was "expanding its supplies to Europe."

Putin's comments came as he participated in a panel moderated by CNBC's Hadley Gamble at the Russian Energy Week. Speaking ahead of the panel, which includes the CEOs of ExxonMobil, BP, TotalEnergies and Mercedez-Benz, Putin said Europe should "not deal in blame-shifting" over the energy crisis in the region and that European countries had not done enough to replenish gas reserves in the summer.

"Higher gas prices in Europe are a consequence of a deficit of energy and not vice versa and that's why we should not deal in blame shifting, this is what our partners are trying to do," he told delegates at Russian Energy Week, an annual event in Moscow which is now in its 20th year.

"The European gas market does not look to be well-balanced and predictable" he said, with the main reason being, he added "that not everything in this market depends on the producers, no lesser role is played by the consumers of gas."

Nonetheless, Russia said it was ready to meet its contractual supply obligations and to discuss additional actions and cooperation with its European partners, Putin said, stating that Russia had already increased its gas supplies to Europe by 15% so far this year.

Putin laid the blame for Europe's gas shortages at its own door, as well as blaming a lack of renewable energy generation this summer and reduced supplies from other partners, including the U.S.

"You see the problem does not consist in us, it consists in the European side, because, first, we know that the wind farms did not work during summer because of the weather, everyone knows that. Moreover, the Europeans did not pump enough gas into their underground gas facilities ... and the supplies to Europe have decreased from other regions of the world."

"So we have increased our supplies but others, including the U.S., have reduced their supplies and this is the cause of the panic." Russia can supply more, he said, "but we need requests to do that."

Russian energy week is known to be where the president lays out his energy agenda for the Russian economy and features experts discussing politics, pipelines, investment and climate change as well as risks to global growth and security.

His comments come as Europe continues to grapple with a natural gas crisis following weeks of rising prices and concerns ahead of the winter season.

Last week, Putin offered to increase gas supplies to the region, a move that helped to stabilize prices. However, critics of the Kremlin said that Russia had purposefully undersupplied the market in order to manufacture the crisis in order to accentuate and highlight Europe's dependence on its supplies, an accusation Russia denies.

Experts believe Russia has been restricting gas supplies to Europe in an attempt to put pressure on Germany to speed up the certification of the now-completed Nord Stream 2 gas pipeline, which will boost gas supplies to Europe via the Baltic Sea.

The pipeline has a number of prominent critics, including the U.S. as well as eastern European countries Poland and Ukraine, who say the pipeline increases Europe's dependence on Russian energy supplies and weakens the region in terms of energy security.

Fast forward to today, and Kremlin spokesperson Dmitry Peskov said on Wednesday that Russia was supplying gas to Europe at maximum levels under existing contracts, according to the TASS news agency. He noted that Moscow was ready to increase gas transit through Ukraine if the EU increased its purchases.

Russia is the third largest producer of fossil fuels globally and it accounts for just over 40% of the EU's gas imports every year, according to the latest data from Eurostat.

Given Russia's position as one of the world's main energy exporters, it is in a position of both strength and weakness. While Russia can (and does) use its resources to bolster government revenues, the global transition away from fossil fuels to greener energies and technologies means that it could find increasingly smaller demand for its resources in future.

Read more: 5 charts show Russia's economic highs and lows under Putin

Putin, who has been in power in Russia for over 20 years, alternating between the role of president and prime minister, finds himself at the helm amid this wider global transition.

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5 things you should know about Europe's energy crisis.

World Economic Forum 13 October, 2021 - 06:55am

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The reasons behind the European energy crisis are far from straightforward and illustrate how complex and interconnected the global energy market is. Here are five key points to help explain some of the issues fueling the energy crisis.

In 2020, demand for natural gas fell by 1.9%. That was partly because of changes in energy use during the worst periods of pandemic disruption. But it was also the result of a mild winter in the northern hemisphere.

In its Global Gas Security Review, the International Energy Agency (IEA) says gas demand is likely to rebound by 3.6% across 2021. If left unchecked, by 2024 global gas consumption could have grown 7% higher than pre-pandemic levels.

Although gas demand growth is expected to slow - despite a switch from coal to gas - the IEA says governments may need to legislate to ensure gas-related emissions growth does not become a problem. “More ambitious policies are needed to shift to a net-zero path,” the organization says.

This leaves Europe increasingly dependent on gas imports, primarily from Russia and Norway.

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

Additionally, the Mission Possible Platform (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

The IEA has called for Russia to send more gas to Europe to help alleviate the crisis, with concerns being raised that Russian-controlled underground gas storage facilities in Europe are stocked lower than in previous years.

“Based on the available information, Russia is fulfilling its long-term contracts with European counterparts – but its exports to Europe are down from their 2019 level. The IEA believes that Russia could do more to increase gas availability to Europe and ensure storage is filled to adequate levels in preparation for the coming winter heating season. This is also an opportunity for Russia to underscore its credentials as a reliable supplier to the European market,” the IEA said.

At one point in early October there was a 37% spike in UK wholesale gas prices in just 24 hours. Surging prices prompted a lobby group representing steel, chemical and fertilizer businesses to call on the UK government to provide help against spiralling costs.

The price of wholesale gas has caused several smaller energy providers in the UK market to collapse, and has halted production in some industries. The UK’s Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, said: "Our exposure to volatile global gas prices underscores the importance of our plan to build a strong, home-grown renewable energy sector to further reduce our reliance on fossil fuels."

Another very cold northern winter would put additional pressure on a gas system that is already stretched and struggling.

Responding to rising demand during cold weather won’t only be challenged by low gas stocks. Chartering ships to transport LNG around the world has been affected by a lack of shipping capacity, making responses to spikes in demand both difficult and expensive. “Daily spot LNG vessel charter rates have spiked above $100,000 in each of the last three northern hemisphere winters,” the IEA says. “And hit an all time high of well above $200,000 during the unexpected cold spell in northeast Asia in January 2021 – amid physical shortages of available shipping capacity.”

The International Energy Agency (IEA) describes gas as: “A major source of emissions that needs to be reduced – especially in mature markets where much of the growth and substitution potential has already been tapped.”

Natural gas is predominantly made up of methane, which is a strong GHG. The US Energy Information Administration says that almost one-third of methane emissions are caused by “natural gas and petroleum systems and from abandoned oil and natural gas wells.”

Although the overall increase in global demand for gas between 2020 and 2024 is expected to be “rather modest”, the IEA says, it will be too high to meet key environmental objectives.

The IEA forecasts a 9% increase in annual gas demand between 2020 and 2024, significantly higher than the demand growth that would need to be maintained to stay in line with the target of net-zero emissions by 2070.

Decarbonizing the gas system will need to be a priority to hit net zero emissions targets by 2050, the IEA says, involving the widespread use of low-carbon gases: “This deployment must be supported by policies enacted in the short to medium term to prepare for such a massive transition for gas systems and industry. In this regard, policy makers should take into consideration new security of supply challenges that are likely to emerge in this transition.”

Sean Fleming, Senior Writer, Formative Content

The views expressed in this article are those of the author alone and not the World Economic Forum.

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