Oil and Gas - Atlantic Council

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

As it expands, Ukraine’s drone bombing campaign is exposing the weaknesses of Russia’s air defenses. Defending a territory as vast as Russia against air strikes would be problematic even in peacetime. With much of Russia’s existing air defense systems currently deployed along the front lines in Ukraine, there are now far fewer systems available to protect industrial and military targets inside Russia.

During the initial stages of the war, this shortage of air defense coverage was not a major issue. However, Ukraine’s broadening bombing offensive is now forcing Russia to make tough decisions regarding the distribution of its limited air defenses.

In addition to strategically important sites such as airbases, the Kremlin must also defend prestige targets from possible attack. In July, CNN reported that air defenses had been significantly strengthened around Russian President Vladimir Putin’s summer residence. Protecting Putin’s palace from attack is necessary to avoid embarrassment, but it means leaving other potential targets exposed.

Ukraine’s drone program is the biggest success story to emerge from the country’s vibrant defense tech sector, and is helping Ukraine to even out the odds against its far larger and wealthier adversary. The country’s partners clearly recognize the importance of drones for the Ukrainian military, and have formed a drone coalition to increase the supply of drones from abroad. This combination of international support and Ukrainian ingenuity spells trouble for Russia. It will likely lead to increasingly powerful and plentiful long-range strikes in the months ahead.

Marcel Plichta is a PhD candidate at the University of St Andrews and former analyst at the US Department of Defense. He has written on the use of drones in the Russian invasion of Ukraine for the Atlantic Council, the Telegraph, and the Spectator.

Global China Hub Indo-Pacific Security Initiative

Australia Democratic Transitions

The post Novak quoted in Petroleum Australia on strategic petroleum hubs in Timor-Leste appeared first on Atlantic Council.

Donovan and Nikoladze cited by Washington Post on sanctions evasion

cfalkenek — Wed, 10 Jul 2024 13:54:51 +0000

The post Donovan and Nikoladze cited by Washington Post on sanctions evasion appeared first on Atlantic Council.

NATO needs a strategy to address Russia’s Arctic expansion

David Babikian and Julia Nesheiwat — Tue, 09 Jul 2024 17:07:40 +0000

This week, NATO will hold its landmark seventy-fifth anniversary summit. The Washington, DC, event is expected to focus on trade security, the war in Ukraine, and the organization’s greatest adversary, Russia. This comes on the heels of news that a record twenty-three out of thirty-two NATO countries will reach the Alliance’s defense spending target of 2 percent of gross domestic product this year, according to NATO statistics published on June 17. This increase in spending is in large part a direct response to Russia’s full-scale invasion of Ukraine.

At the same time, the danger Russia poses extends well beyond Eastern Europe. The Washington summit provides the Alliance an opportune moment to develop a strategy to address Russia’s growing, and unsettling, Arctic presence, which is connected with Moscow’s complex cooperation with China in the region and with new sea lanes opening due to accelerated ice melting in the region.

Russia has long viewed the Arctic as a crucial source of income, national pride, and strategic importance. The Russian military has continued to establish an outsized Arctic presence even during its war in Ukraine, now consisting of the Northern Fleet, nuclear submarines, radar stations, airfields, and missile facilities. A large share of this presence is concentrated in the Kola Peninsula, near NATO allies Finland, Sweden, and Norway. According to the International Institute for Strategic Studies, Russia operates one-third more military bases in the Arctic Circle than all NATO members put together.

Moscow’s interest in securing its trade routes in the High North has been boosted by Russia’s alignment with Beijing.

NATO members should note that Russia has outpaced the Alliance in its establishment and usage of trade corridors in the Arctic region, funded heavily by Chinese investment. Transporting energy and mineral commodities via the Northern Sea Route (NSR) presents strong advantages to Russia: staying within its territory and circumventing the Suez Canal shortens Russian tankers’ trips to China by about ten days per journey. As climate change warms the Arctic at a pace far exceeding other parts of the world, the viability of the NSR will increase and the region’s strategic importance will continue to grow. Historically, Russian energy in the High North has been dispatched using ships specially built to navigate sea ice, but in September 2023, the first shipment was sent using a conventional, non-ice class oil tanker due to high levels of summer ice melt, an increasingly common phenomenon.

“The energy crisis that has emerged from the Ukraine war has been building for decades,” Paul Sullivan, an energy and international relations professor at Johns Hopkins University, told us. “Russia’s development of Arctic LNG [liquefied natural gas] and usage of the NSR should be of top concern to NATO countries with concerns about the precarity of energy sources and trade routes, respectively.”

Russia’s economic dependence on exporting its extensive energy and mineral resources has led to strengthened cooperation with China, an imperfect relationship based on mutual need. Chinese state-owned energy enterprises have in the past five years invested billions of dollars in Russian oil and gas ventures and mineral projects in the Arctic. Since facing Western sanctions, Russian reallocation of its crude oil supply to a discounted Chinese market cemented the partnership between the two nations. Since then, this infrastructure investment for ports, pipelines, mines, and railways has surged. Moscow’s interest in securing its trade routes in the High North has been boosted by Russia’s alignment with Beijing, which has affirmed its own involvement in the region as a “near-Arctic state.” For example, Russian and Chinese vessels were spotted in August 2023 conducting joint military exercises near Alaska’s Aleutian Islands. That said, NATO members rethinking Arctic strategies should take a clear-eyed approach as to the extent of the “no limits” partnership between Moscow and Beijing. At the beginning of June, the Russian gas market announced a pause of the Power of Siberia 2 pipeline to China. The deal has reportedly stalled over monopsonistic Chinese demands to pay drastically lower prices for lower quantities of gas.

NATO’s Arctic member states—the United States, Canada, Norway, Sweden, Denmark, Finland, and Iceland—remain intent on maintaining free and navigable Arctic shipping lanes and are exploring their own energy and mineral resource projects in the region. Jennifer Spence, the project director of the Arctic Initiative at the Harvard Kennedy School’s Belfer Center, explained to us that “in these remote areas, military and economic infrastructure development go hand in hand—securitization of the Arctic can help facilitate investments in a more diversified economy for Arctic states.”

Recent European Parliament legislation to facilitate the construction of new mines to secure critical minerals has been a boon to Swedish mining companies, which have discovered mineral resources in the country’s north. In the United States, the ConocoPhillips Willow project is set to commence in northern Alaska’s National Petroleum Reserve, and in Canada, the federal government recently announced new investments in Arctic defense. Separately, the province of Alberta has worked with the state of Alaska to promote energy development ties. Per Spence, “commercial progress in the North American Arctic is comparatively more rhetoric than action, though signals of permanent infrastructure investment seem to be not too far behind.”

NATO’s Arctic member states have increasingly focused on the region as an important operational theater—and this trend should continue. Nordic countries have announced major NATO exercises in the High North as well as training events with the United States. Canada is procuring and deploying new Arctic-proof military aircraft and ships, and recently conducted joint exercises with the United States, demonstrating an independent investment in regional security. The United States has also increased its Arctic presence. This has included an initiative by the US Coast Guard and the US Navy, which built three Polar Security Cutters, upgraded versions of heavy-duty icebreakers replete with advanced sensors and equipment.

As of now, Russia’s pause in its Arctic developments reflects the status of commercial investment progress in the region. International sanctions, most of which were initiated by countries that are also NATO members, have taken a major toll on Russian Arctic commercial expansion (for example, Russian energy behemoth Novatek suspended production at its Arctic LNG 2 project in the spring due to sanctions and a shortage of ice-class gas tankers). As for NATO progress, according to Sullivan, the Johns Hopkins expert, the accession of Sweden and Finland “increases NATO’s Arctic footprint massively and thereby significantly improves its position.” With a vastly larger Arctic footprint and record levels of military spending, the time is ripe for NATO to further address the looming security consequences of Russia’s Arctic expansion. The NATO Summit in Washington provides the perfect moment for the Alliance to forge an even more unified approach to the future of security in the High North.

David Babikian is a graduate from Princeton University in economics. His research practice spans from work with policymakers, investment firms, and nongovernmental organizations, pertaining to climate resilience, commodities, and critical minerals. He is a fellow at Climate Cabinet.

Julia Nesheiwat is a distinguished fellow with the Atlantic Council’s Global Energy Center, a member of the Atlantic Council board of directors, vice president for policy at TC Energy, and the former US homeland security advisor.

The post NATO needs a strategy to address Russia’s Arctic expansion appeared first on Atlantic Council.

Russia’s flagship international forum showcases Putin’s pariah status

Edward Verona — Fri, 21 Jun 2024 13:18:28 +0000

Not so long ago, the annual St. Petersburg International Economic Forum (SPIEF) was widely seen as one of the “be there or be square” events for the world’s business elites, political leaders, and global influencers. Often called Russia’s Davos, SPIEF takes place every June in Russia’s second city, which also happens to be Vladimir Putin’s hometown. Throughout Putin’s reign, it has served as a showcase for the country’s economic, scientific, and technological achievements.

For years, multinational corporations by the score would pay handsomely to be partners of the forum, and would invest heavily in state-of-the-art exhibition stands. Participation was by invitation only, with careful vetting of those who were to have, once inside the entrance gate, virtually unrestricted access to the senior Russian government officials, CEOs, and other notables in attendance. The evening social and entertainment agendas were replete with over-the-top extravaganzas featuring many of the luminaries of Russia’s cultural beau monde.

SPIEF was also seen as a measure of Russia’s standing in the world as an economic and geopolitical power, and a reflection of the esteem in which world leaders held Vladimir Putin. Typically, no less than half a dozen heads of state or government from the world’s most important industrial and emerging market economies would typically join Putin on stage during the keynote address.

Most VIP political guests at SPIEF were democratic leaders, reflecting a desire to embrace Russia as a new member of the democratic club, albeit one that did not yet fully abide by the rules. Some leaders of a more authoritarian hue would also attend, but diplomatic politesse ensured that everybody was well behaved. The long days and mild weather, combined with the undeniable beauty of St. Petersburg, created an upbeat atmosphere and friendly spirits. As one who attended five SPIEFs, I can attest to the enchantment of it all.

While the weather and the venue have remained the same, SPIEF has experienced a gradual and then abrupt decline in status over the past decade. This process first began in 2014 after the annexation of Crimea. It has accelerated dramatically following the full-scale invasion of Ukraine in 2022, and was all too evident in June 2024.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Prior to 2014, SPIEF attendance had been regarded as more or less obligatory for the CEOs of all the largest international oil and gas companies. This year, however, the picture was strikingly different, with SPIEF attracting virtually no business leaders from G7 or EU member countries. Instead, there was only a relatively small contingent representing state-owned enterprises from other countries, mostly those that trade in sanctioned Russian oil and gas.

As far as can be gleaned from the official SPIEF website (personal attendance is now out of the question), the only partners and exhibitors at this year’s event were Russian companies, mostly state-owned or controlled. SPIEF claims to have attracted 21,200 participants, but this figure likely includes offsite events open to the public.

Eurasia Center events

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

The most striking thing about the 2024 SPIEF program was the absence of high-level international political participation. Indeed, it must have been particularly painful for Vladimir Putin to share a stage with the presidents of Bolivia and Zimbabwe. Having lived in Bolivia, I do not mean to disparage that beautiful country; nor do I harbor any ill will toward Zimbabwe. Nevertheless, there is no escaping the fact that Putin most certainly does not see those leaders as peers. Nor do they compare to the global heavyweights who traditionally participated in previous SPIEFs.

The only other “heads of government” in attendance in St. Petersburg this June were the leader of Georgia’s Russian-occupied Abkhazia region, and the head of Republika Srpska, a sub-national entity in Bosnia-Herzegovina. This underwhelming international guest list at Russia’s flagship annual economic forum speaks volumes about Putin’s pariah status.

The reasons for the absence of democratic leaders at SPIEF are obvious and require no further explanation. At the same time, it is interesting to note that numerous putative allies of Russia also gave the event a miss. Perhaps Chinese President Xi’s recent visit to the Shangri-La Conference in Singapore was too close in timing. Significantly, Iran chose not to send any senior officials. The leaders of Venezuela, Nicaragua, and Cuba similarly stayed away.

The absence of Syria’s Bashar al-Assad came as no surprise as he rarely travels. But what about Russia’s BRICS partners Brazil, South Africa, and India? Meanwhile, the most glaring absence of all was Belarusian dictator Alyaksandr Lukashenka. No other head of state is as personally indebted to Putin, who saved Lukashenka in 2020 after anti-regime protests erupted across Belarus following a sham presidential election.

Russia’s remaining partners are clearly in no hurry to engage in public demonstrations of support for Moscow. Nor can the Kremlin necessarily count on Putin’s fellow pariahs. If SPIEF is Russia’s showcase, then the glass evidently needs a thorough cleaning.

Edward Verona is a nonresident senior fellow at the Atlantic Council’s Eurasia Center covering Russia, Ukraine, and Eastern Europe, with a particular focus on Ukrainian reconstruction aid.

On February 22, Ankara and Mogadishu signed a memorandum of understanding (MOU) establishing the Turkish Armed Forces as a partner in Somalia’s maritime security and law enforcement for the next ten years. Per reports about the MOU, Turkey will reconstruct, equip, and train the Somali Navy while receiving 30 percent of the revenue from Somalia’s exclusive economic zone. Proponents say that the stability and security brought to Somalia’s seas outweigh the costs. Somalia loses $500 million dollars annually to illegal fishing, for example to Iranian and Chinese fishermen, while Somalia’s oil and gas reserves of up to thirty billion barrels remain largely untapped since civil war broke out in 1991. A brief period of stability has led oil and gas companies to cautiously return to Somalia. In 2019, ExxonMobil and Shell indicated a potential return to the country, and in 2022, Coastline Exploration struck a seven-block exploration deal, though an increase in fighting once again prevented any major steps forward. Shortly following this agreement with Turkey, Liberty Petroleum announced that it had secured three offshore blocks for exploration.

Shortly after reaching the maritime defense and security deal, Ankara and Mogadishu announced another MOU, establishing Turkey as a partner in Somalia’s exploration, appraisal, and extraction of petroleum blocks, with the possibility of Turkey taking over sales and distribution. Though the first agreement of its kind for Turkey, Ankara is increasingly factoring hydrocarbons into its diplomatic efforts, including in Libya.

Guns and roses

Turkey’s reaching out to Somalia has been in the making for nearly two decades, though then Turkish Prime Minister (and current president) Recep Tayyip Erdoğan’s visit to Somalia during a devastating famine in 2011 was the watershed moment. The first non-African head of state to visit Somalia in twenty years, Erdoğan toured refugee camps and hospitals, pledging aid and drawing international attention to the crisis. His visit was warmly received by the Somali people, many of whom felt abandoned by the global community.

In the years since Erdoğan’s visit, Turkey has integrated deeply into Somali affairs, in everything from its security to its garbage collection and wastewater treatment to its management of seaports and airports. According to Erdoğan, Turkey provided more than one billion dollars in aid to Somalia between 2011 and 2022. Though Turkey’s presence has not been entirely without controversy, evidence of its popularity is widespread, whether through popular fundraising efforts for Turkish earthquake relief in 2023 or in day-to-day life—“Istanbul” is now a common girl’s name in Somalia.

Turkey receives major attention for the aid it provides, especially considering that it is in the middle on the list of providers of official direct aid to Somalia. This is likely because of Turkey’s tendency to heavily brand its projects, its willingness to operate in dangerous areas of the country, and the close political ties between the two countries. The Turks often capitalize on shared cultural and religious ties to legitimize and optimize their operations, while the Turkish Directorate of Religious Affairs (also known as the Diyanet) facilitates some projects.

At the heart of the Turkey-Somalia relationship is military cooperation, which began in 2015. In 2017, Turkey established its first African military base, Camp TURKSOM in Mogadishu, and it has reportedly trained up to sixteen thousand troops. Alongside the United States, Turkey has conducted drone strikes against the terrorist group al-Shabaab, with at least nineteen confirmed strikes since 2022. In April 2023, Ankara sold Bayraktar TB2 drones to Mogadishu as part of counterterrorism efforts (a sale for which the United Nations accused Ankara of violating an arms embargo). Turkey also plays an important role in training and arming the Haramcad paramilitary unit and Gorgor commando brigade— one of two major elite units in the Somali National Army (SNA), with the other being the Danab brigade, which is trained by the United States. In collaboration with the Danab brigade, the Gorgor has played an important role in combatting al-Shabaab, particularly in renewed fighting in 2021 and 2022.

Turkey turns southward

Ankara’s presence in Somalia is part of a Turkish push toward Africa that started in 1998, with the creation of the Africa Action Plan. By 2008, Turkey had been declared a strategic partner of the African Union and opened at least a dozen embassies across the continent. When Turkey made its successful bid to become a nonpermanent member of the United Nations Security Council in 2009, it was supported by fifty-one of the fifty-three African states. In 2013, Turkey became a member of the African Development Bank Group. Turkey has varying interests in Africa, including ideological motivations, economic and trade priorities, and a desire to build up Ankara’s own defense industries and capabilities. Now, Turkey has a large presence in the region in the areas of humanitarian aid and military cooperation. As of 2022, some thirty African states had signed security cooperation agreements with Turkey, nineteen of which included troop training.

The Horn of Africa is critical for Turkish interests because of its its geographical position, rich mineral resources, and development potential. The region has seen increasing great-power competition involving a diverse cast of characters including Iran, the United Arab Emirates (UAE), Russia, China, and the United States. Since 2001, at least eighteen foreign military bases have been constructed in the region, primarily for counterterrorism and counterpiracy operations.

Over the past two decades, Ankara has developed a complex web of economic and military ties with the region, including by leasing the Sudanese island of Suakin, selling drones to Ethiopia, and participating in a decades-long anti-piracy mission off the Horn of Africa under NATO’s Combined Task Force 151. In 2017, Djiboutian officials invited Turkey to establish a military base near the critical Bab el-Mandeb Strait in an effort to promote freedom of navigation and regional stability. On February 20 this year, Djibouti and Turkey signed a military training cooperation agreement.

The Emirati angle

Turkey is far from the only power involved in Somalia. As recently as mid-February, Mogadishu signed an MOU with Washington to open five new military bases in the country and increase training for its Danab brigade. Qatar and the United Kingdom are also players in Somalia. Turkey’s primary competitor in Somalia, however, is the UAE, which has historically seen the region as critical to its strategic interests.

Flush with cash, the Emiratis have embarked on a campaign of infrastructure projects and security agreements across the region, including building major ports in Somaliland (an unrecognized republic in the north of Somalia that self-declared independence in 1991), Eritrea, and Djibouti. It also armed the Rapid Support Forces (RSF) of Sudan and the Ethiopian government during conflicts in those countries. In November 2022, according to Middle East Eye, Somalia reportedly signed a secretive deal with the UAE to train ten thousand Somali troops and police officers in Egypt. However, frustration among officials with the terms of the agreement, as well as continued Emirati projects in Somaliland, have complicated the UAE-Somalia relationship. On January 1, Ethiopia (also close with the UAE) announced it had reached an MOU with Somaliland exchanging recognition for sea access and the lease of a military base. Following the two major Turkey-Somalia agreements of 2024, the Emiratis severely cut their support for the SNA, which included providing an additional $256 in monthly salary for the 14,400 soldiers trained by the UAE.

The Emirati factor carries two major risks for Turkish ambitions in Somalia. First, Abu Dhabi has played a critical role in the fight against al-Shabaab, including through air strikes. Manpower shortages have plagued the SNA for decades, an issue that Emirati coffers have helped alleviate. The withdrawal or reduction of Emirati support in the fight against terrorism will have a compounding effect as the African Union’s Transition Mission in Somalia (ATMIS), abiding by a request from Somalia, plans to withdraw its forces by the end of 2024. The withdrawal of both ATMIS and the UAE risks Turkey becoming further burdened by the region’s fight against terrorist groups. Second, the UAE has faced several setbacks across the region as the number of players continues to grow, and its attempts to reinforce its position will create effects that will impact Turkey. The UAE is entering increasing competition with China in Djibouti, especially now that Djibouti’s government nationalized the Doraleh Deep Water Port, which was previously owned by an Emirati company; meanwhile, in Sudan, the Emirati-backed RSF has seen its first major setbacks in months with the loss of Omdurman to the Sudanese Armed Forces, who have purchased weapons from Iran. As the UAE seeks to reassert itself and reinforce its position in the region, it will likely double down on its already substantial investments in Puntland, Somaliland, and Ethiopia. Whether the emboldening of Somalia’s rivals and the geopolitical balancing in the Horn will have a stabilizing or destabilizing effect remains to be seen, but it will likely be closely watched by Turkey.

Known unknowns

Though Somali and Turkish officials maintain that the recent agreements are unrelated to the major deal between Somaliland and Ethiopia, the timing is difficult to ignore. The Somali cabinet labeled the Somaliland-Ethiopia MOU as a “blatant assault” on its sovereignty and said it was an example of Ethiopian “interference against the sovereignty of [Somalia].” Unsurprisingly, Somalilanders reacted similarly to the Turkey-Somalia agreements that followed. Though the regional backlash to the MOU may in part steer Ethiopia and Somalia to dissolve it, this is far from certain. It remains unknown if Turkey’s enforcement of Somali maritime security will extend to Somaliland waters, which Ankara recognizes as part of Somalia. In May, Somaliland’s foreign minister explicitly stated that Turkish naval vessels would not be welcome in its territorial waters. This issue will be particularly important if Ethiopia proceeds with its plans to build a naval facility in Somaliland. Despite a strong Turkish-Ethiopian relationship, the Turkish Navy supported joint Somalia-Egypt naval exercises days after the January 1 agreement was signed. It is also unclear how the Turkish Navy will interact with the Puntland Maritime Police Force, which has received funding support from the UAE. Though the semi-autonomous Somali region of Puntland does not claim total independence, it pulled recognition of the Somali federal government in March.

Equally uncertain is how Ankara will react should the Houthis attack a ship transiting through the Somali waters that it will be charged with protecting. Handcuffed by the group’s connection to the war in Gaza, Turkey has balanced a precarious relationship with the extremist group, quietly opposing them over the last seven years while refusing to label them a terrorist organization and shying away from joining the US-led Operation Prosperity Guardian.

A winding path forward

It is uncertain how Turkey and Somalia will deliver on the major agreements and continue the upward trajectory in their bilateral relations. Turkey faces a complex and challenging Somali political landscape. Both MOUs were quickly ratified by the Somali parliament (members perhaps had little choice in the matter, according to one Somaliland-based researcher), though the deal is not without detractors. Beyond concerns over sovereignty, Mohamud is in need of an influential patron as he faces allegations of consolidating power. For Mohamud, Turkey may be the answer, as Turkey largely disregards Somalia’s domestic politics and offers near unconditional support for Villa Somalia, which has led some analysts to describe Turkey as an “all-weather friend.” Mohamud recently proposed a series of constitutional changes, including transitioning to a presidential system, arguing that it would combat clan politics and unite the country. The reforms have prompted protests and polarized the parliament. The Puntland region declared on March 31 that it would be withdrawing from the federal government until a new constitution was put in place. Days later, the Daily Somalia reported that Puntland President Said Abdullahi Deni traveled to the UAE and Ethiopia.

Furthermore, Mohamud’s government lacks unity. The same day that the Liberty Petroleum deal was signed by Somali Minister of Petroleum and Mineral Resources Abdirizak Omar Mohamed, Somali Prime Minister Hamza Abdi Barre expressed concerns and called for revoking the deal. Similarly, the Somali government lacks a clear strategy toward al-Shabaab. Following a successful first phase of “total war” in 2022, both battlefield and political gains have slowed, and al-Shabaab has struck back with a series of horrific attacks. Barre declared his support for peace talks with al-Shabaab in direct opposition to Mohamud, garnering public and private support from within a fractured cabinet.

Moreover, the recent battlefield gains by al-Shabaab undermine the legitimacy of Turkey’s military presence in the country. The concessions required for a peaceful settlement with the terrorist group may include ejecting Turkey’s military, the presence of which al-Shabaab has condemned harshly.

As Turkish officials and lawmakers consider ratification and implementation, they will no doubt look to the past decades of Turkish engagement with Somalia—but also the challenges that lay ahead. The difficulties posed by external influences, great-power competition, tumultuous domestic politics, widespread corruption, high costs, and continued conflict in Somalia will make Turkey’s enormous promises extremely difficult to fulfill. The future of these agreements and thus the future of Turkey’s relations with Somalia and position in the Horn of Africa, though built upon a strong foundation, remains to be seen.

Kiran Baez is a young global professional at the Atlantic Council Turkey program. Add him on LinkedIn.

The views expressed in TURKEYSource are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

The post Turkey signed two major deals with Somalia. Will it be able to implement them? appeared first on Atlantic Council.

Seven ways to reboot G7 sanctions on Russia

Daniel Fried — Tue, 11 Jun 2024 13:17:17 +0000

At the St. Petersburg International Economic Forum on June 7, Russian President Vladimir Putin was defiant about the Russian economy. “Despite all the obstacles we are facing and the illegitimate sanctions imposed against us,” he declared, “Russia remains one of the key participants in global trade and is rapidly expanding the new logistics and geography of cooperation.” This is especially the case with non-Western countries, he indicated. Putin glossed over the difficulties, but the Russian economy has thus far been able to sustain his war of aggression in Ukraine.

At this dangerous moment, with air assaults continuing and a renewed land offensive likely in Ukraine, both sides of the Atlantic need to put their backs into support for Kyiv, whose success in its war of survival is critical to transatlantic security and remains possible. The most important part of that work is for the United States and European countries to provide more and better weapons with fewer caveats—a process that is already underway. But it also means exerting more economic pressure on Russia’s wartime economy.

Sanctions and other forms of economic pressure alone are not going to force Putin to abandon his war objectives. But they can continue to weaken the Russian economy, lower Russian income, complicate production, and intensify the distortion of a rapidly militarized economy with an increasingly starved civilian sector. The Russian economy, like the Soviet economy, has little natural resilience. Nor does it allow space for entrepreneurship on a large scale. Under sustained pressure and extreme military spending, it will be prone to decay, like its Soviet predecessor. Group of Seven (G7) countries imposed sanctions against Russia after its initial invasion in 2014 and much stronger measures after Russia launched its full-scale war in 2022. Both sets of sanctions have had an impact. But as recent Russian economic statistics show, the impact of these efforts is plateauing as Russia gets better at evading and mitigating them. Sanctions are a dynamic game, and the United States and its G7 partners need to be as agile in addressing Russia’s responses to existing sanctions as Russia has been in adapting to the sanctions themselves.

“Sanctions are like antibiotics: Repeat usage builds up resistance,” Deputy National Security Advisor Daleep Singh explained in remarks on May 28. The necessary and appropriate response, then, is to intensify them to produce the desired effect. Happily, there are viable options to intensify the economic hit on Russia. None is without some risk or complication—options that promise all gain and no pain don’t actually exist. But the United States and the European Union (EU) should follow and choke off the money, show they mean it when it comes to enforcement, and hold sanctions evaders accountable.

Steps to do this could include:

1. Give the Russian oil price cap more teeth

Oil remains Russia’s number one export earner. The Russian oil price cap sought to limit the price of Russian oil sold on world markets to sixty dollars per barrel while not limiting the quantity of sales. The price cap was designed to reduce Russian income without spiking world oil prices, which would have happened if sanctions took Russian oil off the markets. And it worked, especially in the first year, lowering Russian revenues from oil sales by about 40 percent in the first nine months of 2023. The enforcement occurred through banning Western services, such as insurance and shipping, to oil shipments above the price cap.

Over the past year, however, Russia has adapted to the sanctions, procuring a “ghost fleet” of tankers to transport oil at prices above the price cap and offering its own insurance and other services to buyers. This ghost fleet has enabled Russia to demand its buyers pay prices closer to market value—and above price cap prices—because buyers cannot cite the price cap as an impediment to their paying higher prices.

It is time for the G7 to adapt the price cap accordingly. The G7 should back the price cap with the threat of secondary sanctions on those companies engaged in or supporting sales of Russian oil above the price cap by, for example, purchasing Russian oil above the price cap or shipping it. These secondary sanctions could be announced with a grace period of, for example, four months. During this time, current customers of Russia that are buying above-cap oil could rework their purchasing agreements with Russian suppliers, and US and EU enforcers could gather material on potential targets should they not do so. It’s also time to curtail the ability of banks, wherever they are based, to support the sale of Russian oil above the price cap. This can be done by narrowing the scope of licenses intended to facilitate financing for oil trade.

Any steps to check Russian revenue through oil sales would have to be gamed out to lower the risk of unintended consequences, such as a spike in prices. The Biden administration has been sensitive to any such steps, going so far as to press the Ukrainians not to strike at Russian oil refineries. This was an ill-considered admonition and was badly received by the Ukrainians, who rightly regard Russian refineries as legitimate military targets and have conducted effective attacks on them.

But the principle that informed the initial price cap still applies: As long as the price cap is significantly above Russia’s cost of production, Russia will have an incentive to keep up exports and will suffer a major loss of revenue if it does not. Russia’s cost of production can be estimated in various ways, but generally is regarded at well under sixty dollars per barrel. The risk of spiking world oil prices by more aggressively enforcing a cap on Russian oil exports thus seems acceptable.

2. Cut off Russia’s energy future

Russia has also been adapting to the sanctions by developing new capacities to help export oil and gas that don’t rely on its traditional pipeline network. This includes liquefied natural gas (LNG), where the Biden administration late last year sanctioned Russia’s Arctic LNG 2 project as a particular target. While Russia is the world’s fourth-largest LNG exporter, global production (and US production in particular) is rising. LNG supply shortages seem unlikely in the near term.

Russian officials have also discussed building new pipelines in the country’s east, particularly to China. US sanctions should push back on these efforts to develop new energy export avenues. Measures could include forcing all LNG service companies out of the sector, using the threat of secondary sanctions, and imposing additional sanctions on new export flows. As with increases in oil sector sanctions, these might have to be phased in and accompanied by licenses to avoid unintended consequences—for example, with Japan’s interest in LNG kept in mind.

3. Push Western firms to crack down on diversion of their products to Russia

Many Western companies have fully withdrawn from the Russian market, and even those that remain have generally adopted programs to comply with Western sanctions. However, reporting continues to find Western component parts pervasive across Russia’s military machinery: One recent study found that 95 percent of the non-Russian components in Russian weapons recovered in Ukraine were from Western firms, with only 4 percent from Chinese firms. Many of these Western components were likely produced in China and other manufacturing hubs and then disappeared into a network of shadowy middlemen.

After the 9/11 terrorist attacks, the US government pushed global banks to overhaul the way they complied with sanctions, and the banks generally developed an extensive infrastructure to spot and stop terrorist and other rogue money moving through the financial system. The United States and its partners should undertake a similar effort with the manufacturing and tech sectors, working collaboratively to strengthen compliance and reduce the diversion of Western-made components flowing to Russia. Through warnings and public enforcement actions, such as civil and criminal penalties that make examples of selected companies that show flagrant irresponsibility, the United States and Europe could put pressure on firms to take seriously the “Know Your Customer” (and “Your Customer’s Customer”) principle.

4. Drop the hammer on third-country evaders

Reports abound of exports of banned technologies to Russia through third countries, including through Georgia, Central Asian countries, and Turkey. US officials have been traveling widely and urging greater cooperation, and the United States has for some time sanctioned third-country evaders. Beyond getting Western companies to strengthen their export controls compliance protocols, the United States should increase pressure on countries that serve as platforms for re-exports to Russia, including an aggressive campaign of secondary sanctions on firms that re-export prohibited goods to Russia.

5. Consider a shift to “embargo-minus” rather than “targeted sanctions-plus”

Since the initial Russian invasion in 2014, the United States and Europe have gradually imposed financial sanctions on Russia’s big state banks and some selected private banks, along with a large number of sectoral sanctions and sanctions on Russian companies. This creates a complex sanctions regime where a lot of trade is banned but a lot of other trade remains allowed, leaving gray areas and loopholes for Russia to exploit and complicating enforcement.

The United States and Europe should consider imposing a general embargo on both trade and financial transactions with Russia, except for defined categories of white-listed trade, such as medicine, permitted energy, and other transactions. Such a system—phased in with grace periods and perhaps starting with a general financial embargo—would have to be flexible enough to account for unanticipated problems by issuing supplemental licenses.

6. Face the China challenge

While apparently not directly sending weapons to Russia, China has emerged as Russia’s greatest economic backer since its full-scale invasion of Ukraine, providing general economic support and dual-use equipment and technology to support Rusia’s war effort. These efforts have weakened the impact of—and could undermine—US and European sanctions. Aware of this, the Biden administration has imposed sanctions on smaller Chinese companies engaged in sanctions violations, hoping for a change in Chinese policy but to little apparent avail. During his trip to Beijing in late April, US Secretary of State Antony Blinken reportedly pressed his Chinese interlocutors to back off their economic support for Russia, and the administration may hope that a frank warning will result in China changing course.

If not, the United States should take action, such as imposing sanctions on a larger Chinese bank or company involved in supporting Russia’s war machine. Chinese financial transactions with Russia are likely happening outside the reach of US sanctions, meaning outside of the US dollar and US financial system. Therefore, these sanctions would initially serve more as a messaging tool than a mechanism to immediately turn off the transactions.

But messaging is important, especially when dealing with China. Sanctions targeting a large Chinese financial institution or significant company facilitating material support to Russia would lead other countries and companies to de-risk from these sanctioned entities to reduce their sanctions exposure. It would mean US secondary sanctions in China. Such steps risk Chinese retaliation or unintended consequences. But a sanctions carve-out that allows China to back up Russia’s military machine, which is what a lack of action effectively amounts to, would pose a bigger risk: that of failure of US and European support for Ukraine and a message that the West is not serious about its own policy.

7. Take Russia’s money to pay for Russia’s war

In a bold move immediately after the full-scale invasion, the G7 immobilized around $300 billion of Russian sovereign assets. It has since debated what to do with the funds and has been slow to get beyond general agreement that they will remain immobilized. Many in the United States have advocated seizing all the immobilized funds and using them for Ukraine (the passage of the REPO Act gives the US legal backing to do so with the funds in its jurisdiction, which is reportedly at least five billion dollars). The EU, where the vast bulk of the Russian assets are located (in Belgium), had limited itself to using the interest on the immobilized Russian principal for Ukraine. While a welcome step, that interest comes to around three billion dollars per year, an inadequate amount given the scale of Ukraine’s needs in the face of Russia’s ongoing war.

The G7 now seems to be closing in on a compromise proposal to take the interest on the Russian assets for twenty years rather than just one year, a proposal that could provide a pot of $53 billion. Those funds could be used as collateral for a loan or grant to Ukraine from the United States or a group of willing countries. Meanwhile, efforts to capture agreement on using the entire principal would continue.

That seems to be a smart compromise that provides one way to have Russia rather than European or US taxpayers pay to help Ukraine. The upcoming G7 summit in Italy would be the time and place to reach agreement. That will not be easy: Some Europeans seem stuck in a mode of thinking that has not yet internalized Russia’s war of aggression against Ukraine and its ongoing aggression against other European countries through disinformation, assassination, and sabotage.

Seizing sovereign assets is a big step. But the G7 crossed the line of absolute immunity for sovereign assets when it immobilized the Russia’s assets more than two years ago. While other countries, such as China and Saudi Arabia, may have hated that step and may be privately warning of retaliation should Europe or the United States go further and take Russian assets or proceeds, they have not pulled funds out of US, European, or UK financial markets. The G7 needs to see through what it began in February 2022 and find a way to use Russian funds to pay for Russia’s war of aggression and national extermination against Ukraine.

Neither these nor any serious economic steps against Russia are risk-free or simple; if they were, they would have been introduced already. Each will require resources to identify targets, anticipate potential risks, and enforce. Manufacturers won’t like the scrutiny or demands that they monitor their products’ ultimate destinations. Third countries will not appreciate the pressure to cut down on diversion of exports to Russia. The United States and allied governments should consider their choices not as alternatives to a zero-risk ideal but against the backdrop of the considerable stakes and their own repeated and accurate statements of how important it is to help Ukraine defeat Russia in this war.

Daniel Fried is the Weiser Family distinguished fellow at the Atlantic Council. His last position in the US government was as sanctions coordinator at the Department of State. Peter Harrell, a former State Department and National Security Council senior director, contributed to this article, for which the author gives thanks.

The post Seven ways to reboot G7 sanctions on Russia appeared first on Atlantic Council.

Wald quoted in AFP on foreign purchases of Saudi Aramco shares

ydeng — Sun, 09 Jun 2024 18:55:00 +0000

I. The impact of sanctions: A brief overview

The post Wald quoted in AFP on foreign purchases of Saudi Aramco shares appeared first on Atlantic Council.

Oil, gas, and war: The effect of sanctions on the Russian energy industry

Vladimir Milov — Thu, 23 May 2024 13:00:00 +0000

Russia’s full-scale invasion of Ukraine in February 2022 challenged much of the common Western understanding of Russia. How can the world better understand Russia? What are the steps forward for Western policy? The Eurasia Center’s new “Russia Tomorrow” series seeks to reevaluate conceptions of Russia today and better prepare for its future tomorrow.

download pdf

Introduction

II. Gazprom in limbo: No substitutes for the lost European market

Chart 1: Gazprom’s self-reported losses.

III. The oil industry: Surviving in difficult Asian markets

IV. The G7 oil-price cap is not working

V. LNG: A lifeline for Putin

VI. The Russian budget: No more super profits

Table 1: Oil and gas revenues of the Russian federal budget

VII. The Global South and the limits of cooperation

VIII. Russia’s diminished ability to use energy as a weapon

Chart 2: Russia’s share of EU energy imports

IX. What is to be done? Recommendations for policymakers

X. Conclusions

About the author

In the two-plus years since Russia’s full-scale invasion of Ukraine, the United States and its allies have imposed approximately two thousand sanctions on Russian corporations, financial institutions, and individuals. But while the sanctions have been broad, sweeping, and in some cases unprecedented, the discussion about their level of efficacy is still ongoing.

This is particularly true for the industries that comprise the lifeblood of the Russian economy—the oil and gas sectors. While Russia’s hydrocarbon revenues have been significantly affected by Western sanctions, this impact has varied significantly across sectors.

Assessing the real impact of sanctions on these vital industries, and calibrating them to have the maximum impact on Vladimir Putin’s ability to continue financing and waging his war of aggression, will require policymakers to understand these nuances—to understand what has worked, what has not, and why.

Primarily, this requires an understanding of how the effect of sanctions has varied between the oil and gas industries. It also requires an examination of other relevant factors, most notably the role of China, other Asian markets, and the Global South in mitigating the negative impact of sanctions. It also requires an understanding of the role liquified natural gas (LNG) has played in Putin’s efforts to evade sanctions.

The impact of sanctions: A brief overview

The impact of Western sanctions differs not only between the oil and gas industries, but also between natural gas and LNG. There is also a significant divergence between the negative impact of sanctions on the Russian oil and gas industries on one hand, and the impact on state budget revenues on the other.

It should be stressed that the decoupling of Gazprom from the European gas market was mostly caused not by the Western sanctions—the European Union (EU) did not introduce an embargo against Russian natural gas as such—but, rather, by Gazprom’s self-imposed cutoff of piped-gas supplies to most EU member states.¹

The Russian natural-gas industry, primarily Gazprom, has struggled with the consequences of decoupling from the EU market, as it lacks a viable business model to compensate for the loss. The oil industry, on the other hand, has managed to weather the sanctions better, albeit with significant loss of revenue due to heavy price discounts in Asian gas markets and sharp increases in the cost of shipping oil to Asia.

The party that has suffered the most from Western sanctions, however, is Russia’s state budget, which saw its revenues from oil and gas decline 24 percent in 2023 compared to 2022.

This has forced the authorities to consider serious tax hikes on the oil and gas industry to compensate for the losses and enable Putin to finance the war in Ukraine. Such a move would hurt investment and could result in subsequent output decline.

While piped-gas exports to Europe have decreased dramatically, Russia continues to export significant amounts of LNG to the EU unabated, resulting in significant revenue. Unlike Gazprom’s piped-gas exports, however, LNG exports are largely untaxed, meaning the government does not receive direct revenues from them. But for reasons that will be discussed in greater detail below, the Russian state has other means to extract rents from LNG exports to finance the war—notably through windfall taxes.

Sanctions and decoupling from European oil and gas markets have also significantly reduced Russia’s ability to use energy as a tool of political pressure against Western democratic countries. However, as will be discussed in greater detail below, this capability has not been eliminated entirely.

In what follows, this report will discuss each of these trends in greater detail, beginning with Gazprom, which has suffered the most serious consequences from Russia’s standoff with the West and faces nothing short of a full reinvention of its entire business model.

Gazprom in limbo: No substitutes for the lost European market

Russia’s natural-gas giant Gazprom has suffered enormously from cutting ties with Europe, formerly its largest market. As noted earlier, the termination of gas supplies to Europe happened not because of sanctions, but due to voluntary actions by Russia. In mid-2022, Gazprom cut off gas supplies to Europe through most of the export-pipeline routes, clearly aiming at creating political and economic problems for EU countries ahead of the 2022–2023 winter season.

The Kremlin’s hopes didn’t materialize. Despite rising gas prices, the EU managed to successfully navigate the winter and, in the process, find alternative long-term sources of gas imports. This allowed Europe to free itself from most Russian piped-gas imports, without even imposing sanctions on Gazprom.

Gazprom’s lost revenue and profits turned out to be enormous.

According to the company’s own reporting, Gazprom’s revenue fell by 41 percent year-over-year in the first half of 2023, while sales profits fell by 71 percent and gas production by 25 percent. In the first quarter 2024, Gazprom reported a net loss of almost $7 billion in 2023, marking its first annual loss in more than 20 years. Moreover, Gazprom’s upstream gas-production base is now isolated because infrastructure connecting its main western Siberian fields with alternative Asian markets is lacking. Gazprom also failed to build any LNG plants in western Siberia, which, before the imposition of sanctions, would have enabled the company to reroute natural gas to alternative markets.

Gazprom does not disclose the estimated construction costs of new pipeline infrastructure to China, but it would probably require at least $100 billion given the company’s experience constructing the existing Power of Siberia pipeline. That pipeline, which connects western and eastern Siberia and also delivers gas supplies to China, is considerably shorter than a proposed new pipeline, known as Power of Siberia-2, which would pipe gas from western Siberia to China. That raises the fundamental question of whether Russian gas supplies to China will ever be profitable.

Gazprom refuses to publish any data on gas-supply prices to China via Power of Siberia, but data published by Reuters, citing obtained internal materials of the Russian government, suggests that the average annual price of piped gas supplied to China was $297.30 per thousand cubic meters (tcm) in 2023 and will be $271.60 in 2024. Prices for 2023 were also not published, but the officially disclosed volume of supply was 22.7 billion cubic meters (bcm), and the cost of Chinese imports of piped gas from Russia was $6.4 billion. Thus, the average 2023 gas-supply price from Russia to China was $282/tcm (in 2020–2022, the price was well below $300/tcm).

This means that Russia is, in fact, most likely selling gas to China at a significant loss. When the contract to deliver gas to China via the Power of Siberia pipeline was signed in 2014, the average gas-supply price was set in the range of $350–380 per tcm. Even at that price level, Gazprom had requested that the Russian government effectively zero out all major taxes for the Power of Siberia project—claiming that the project would not be profitable unless near-total tax exemptions were provided. The exemptions were granted and, as a result, the mineral-extraction and property taxes were forgiven for fifteen years until 2035. In reality, the price of gas supplies to China via Power of Siberia never even reached $300/tcm, and many analysts believe they do not generate any profits.

That suggests that Russian gas supplies to China may not become profitable for the foreseeable future. China is clearly not expected to need additional gas supply until after 2030, and that appears to explain why Beijing is not interested in granting Gazprom any kind of price premium for new gas-supply contracts. Moreover, China has alternatives: domestic Chinese gas production, LNG, and imports of piped gas from Central Asia.

Speaking at the Eastern Economic Forum in September 2022, Vladimir Putin admitted that “our Chinese friends are tough bargainers,” which is why agreeing with Beijing on gas-supply price parameters “is never so easy.” More than a year later, there is still no indication that an agreement on gas supplies via the proposed new Power of Siberia-2 pipeline project is imminent. This is despite Putin’s promise made in September 2022 (and reiterated in March 2023 during a summit with Xi Jinping in Moscow) that Russia and China are “close” to signing a gas contract for Power of Siberia-2.

The lack of agreement on Power of Siberia-2 reflects the fundamental dilemma Gazprom faces: China is just not ready to buy Russian gas at a price that will be profitable for Moscow.

Moreover, the shipment distance for gas produced in western Siberia and shipped via the proposed Power of Siberia-2 pipeline will be significantly lengthier than that of Power Siberia-1, which means that Gazprom would need a significantly higher sales price than even $350/tcm to make any money from gas exports to China. At the very least, gas exports to China will not deliver any notable revenues to the Russian state budget.

Gazprom’s overall business model has been shattered by its decoupling from the European gas market. Most of the company’s profits came from the EU and, with its significantly lower gas prices, Russia’s domestic gas market just can’t deliver comparable profits. Building new gas-pipeline infrastructure to China, as discussed above, would require enormous capital investments, without offering obvious profits. Building a pipeline to deliver gas to India and other South Asian countries doesn’t seem viable given the complicated mountainous terrain and geopolitical challenges with potential transit countries like Afghanistan. Moreover, Gazprom suspended the construction of planned new LNG projects due to lack of access to critical Western technology.

In this situation, Gazprom attempted various measures aimed at containing gas output, expanding domestic gas demand, and seeking customers elsewhere, but with marginal results. It is not difficult to cut gas production given that the bulk of output comes from matured western Siberian fields, with a significant share of low-pressure gas from depleted reservoirs that require booster measures to increase well productivity. In many cases, it is simply enough to cancel additional booster activities to minimize production.

But finding alternative gas markets with comparable profitability to that of the lost European market will inevitably prove challenging. Russian Deputy Prime Minister Aleksandr Novak has formulated an ambitious program aimed at boosting Russian domestic natural-gas demand, including an accelerated program of gasification for Russian regions, the expansion of small-scale LNG, and boosting natural-gas use as engine fuel for the transport sector.

At the same time, Gazprom, through its lobbyists in the State Duma, is actively lobbying for the full liberalization of natural gas prices for domestic Russian consumers, with an exemption for households. But even with such a policy change, Russia’s domestic gas market is not capable of delivering profits even remotely comparable to those Gazprom received from the EU in the past. Also, significant growth in domestic gas prices will impede Russia’s fragile economic recovery, which is why the government will most likely intervene and cap Gazprom’s domestic gas price if it goes too far.

Gazprom is also actively trying to find new export consumers or to boost exports through existing pipelines. But these efforts have also met with little success. For example, Gazprom has signed a new contract with Uzbekistan, but it amounts to just 3 bcm per year, with scant prospects for growth. Since the full-scale invasion of Ukraine in February 2022, Gazprom has also been trying to set up a “gas hub” scheme with Turkey. This is effectively a “gas laundering” operation that involves mixing Russian gas with Azerbaijani or Iranian gas and then reselling the rebranded product to Europe via Turkey. But the project has been stalled due to wrangling between Moscow and Ankara over who would control the hub and trading schemes, as well as over concerns about the EU’s response.

All this leaves Gazprom in limbo for the foreseeable future. The domestic gas market and potential alternative piped-gas export markets will not be able to make up for those lost from the EU market, and the development of LNG exports so far remains blocked due to lack of access to critical Western technology.

This has ramifications for Russia’s budget, as Gazprom was a major source of tax revenue before the invasion of Ukraine. In 2021, the last year when Russia published detailed reporting on budget revenues, Gazprom’s share of federal budget revenues exceeded 7 percent, but it was estimated to be only about half of that share in 2023.² These revenues are not recoverable in the foreseeable future, as Gazprom’s “super profits” from the European gas market were taxed heavily and LNG exports are largely exempt from taxation.

The oil industry: Surviving in difficult Asian markets

The Russian oil industry has weathered sanctions much better than Gazprom has, largely because it doesn’t suffer from the infrastructure limitations that exist in the gas industry. Russian oil can still be shipped via seaports to Asian markets, albeit with discounts and at a higher cost. Additionally, the industry is benefiting from a lighter tax burden that was introduced in response to falling oil prices. However, the government is planning to gradually raise taxes.

Oil output has contracted only slightly as compared to the pre-war period, by 1–2 percent. Russia currently produces about 10.5 million barrels per day (mbd) of crude oil, as opposed to just over 11 mbd before the war.

However, it should be noted that there are no verifiable and detailed public data on actual Russian oil output. We are therefore forced to rely on official aggregated figures. The general assumption among experts is that Russia has reduced its oil output in the past year by approximately 500,000 barrels per day (kbd) according to an agreement on oil-supply cuts within the Organization of Petroleum Exporting Countries Plus (OPEC+), which includes ten non-OPEC members including Russia. The exact figures remain unknown because the Russian government classified oil-production data following the full-scale invasion of Ukraine. But generally, in contrast to the gas industry, Russia has continued to produce oil more or less at pre-war levels.

The Russian oil industry has, however, suffered from significant revenue and profit losses due to the EU oil embargo. From December 2022 through March 2023, for example, Russia’s average monthly Urals crude-export prices have fallen to $48–50 per barrel due to the steep price discounts demanded by Asian consumers.

Russian oil exporters have managed to reduce these Asian discounts. In the second quarter of 2023, Urals oil prices rebounded to $55–58 per barrel. They exceeded $60 per barrel in July 2023 and reached $80 per barrel in September 2023. Overall, Asian price discounts for Urals oil have been reduced to $10–12 per barrel. Since November 2023, after the US Government has exerted some sanctions enforcement pressure on oil shippers and traders, discounts for Russian oil shipped to Asia grew again – they now stand at about $17 per barrel, but the average price of the Russian Urals oil export crude was around $68 per barrel in April 2024, well above the G7 oil price cap .

Oil-price level is not the only parameter influencing the profitability of Russian oil exports to Asia. Another is the significantly higher cost of shipping oil to Asian markets. For instance, there’s a reason why Russia barely exported any crude-oil volumes to India before the full-scale invasion of Ukraine. It takes approximately a month for an oil tanker to travel from Russia’s Black or Baltic Sea ports to India. In contrast, it takes just a few days to ship oil to Genoa or Rotterdam. Shipping oil to India also involves passing through additional bottlenecks, such as the Suez Canal or Bab al-Mandeb Strait, where tankers risk delays due to traffic and incur additional demurrage and insurance costs. Per the author’s estimates (as exact figures are unavailable), the extra costs of shipping Russian oil from Novorossiysk or Primorsk to India vary in the range of $10–15 per barrel, significantly reducing the efficacy of exports to India and other Asian destinations.

Russia has also established a so-called “shadow fleet” of oil tankers with obscure ownership and jurisdiction. It also sought to use third-country intermediaries and traders to sell oil to Asian destinations or even resell it to Europe, circumventing sanctions. But while such schemes may yield revenues for some Russian-affiliated shell companies, these revenues are not very large (just a few dollars per barrel). These profits also do not add revenues to the Russian state budget because oil exports are taxed according to officially available crude-oil price numbers and these shadow operations abroad are not visible to the Russian tax authorities.

A gasoline delivery of Russian energy company Rosneft in northernmost well of Russia. (Rosneft handout via EYEPRESS)

In 2023, Russia adopted a new mechanism of gradually increasing the oil-export price used for taxation, in an apparent effort to force oil companies to negotiate lower discounts with consumers. However, all these accounting tricks do not change the fundamentals of the situation, and paying too much attention to them is a distraction. Russian oil-export revenues throughout 2023 have largely been determined by the overall dynamics of the international market, and the declining discounts for Russian crude resulted from markets becoming significantly tighter due to the Saudi-led OPEC+ oil-output cuts announced in the spring of 2023.

Due to rebounding export prices, Russian oil revenues have normalized in the third quarter of 2023, following a sharp plunge early in the year. Nevertheless, it is also clear that rerouting oil exports to Asia has created additional cost burdens for Russian oil exporters. Another significant issue involves the relations between Russian oil majors and the Western oilfield-services companies working in oil-reservoir management, such as Baker Hughes, Halliburton, Weatherford, and SLB. Some of these announced they were leaving Russia following the full-scale invasion of Ukraine.

It is beyond the scope of this report to discuss which of these oilfield-services companies have kept their word and actually left Russia. What is important is that they possess unique technologies for oilfield-reservoir management and enhancing the productivity of oil wells, which can’t be substituted by Russian, Chinese, or other third-party technologies and know-how. Most of the oilfield stock of Russian oil companies is matured and depleted fields with difficult reservoirs in western Siberia, the Urals, and other regions. Therefore, using cutting-edge Western technology remains critical to maintaining the productivity of oil wells and overall levels of oil output.

At the end of the 1990s and the beginning of the 2000s, the massive outsourcing of Russian oilfield services to these Western companies led to dramatic increases in productivity. For example, the average Russian oil well increased production from approximately fifty-five barrels per day in 1995 to more than seventy-five barrels by the mid-2000s, a productivity growth of more than one-third. Should Western oilfield services completely depart Russia, this may result in comparable loss in average well productivity and, as a result, overall oil production. There are, however, strong indications that at least some of the Western oilfield-service companies continue to work with the Russian oil industry, reneging on their promises to leave.

The G-7 oil-price cap is not working

It is clear that the oil-price cap the Group of Seven (G7) imposed on Russia in September 2022 is not working. Russia has continued to easily sell oil exported via the Eastern Siberia-Pacific Ocean oil pipeline to China at a price well above the $60-per-barrel limit, effectively ignoring the price cap. Moreover, the Russian Finance Ministry reports that even the price of Urals crude shipped through Black and Baltic Sea ports has exceeded $60 per barrel. As said above, as of March 2024, Russia continued to export crude oil priced well above the $60 cap. When the oil-price cap was introduced, the G7 countries lacked sufficient capacity and legal authority to monitor the thousands of shipping, trading, and insurance transactions Russian oil-exporters use—particularly those outside the G7’s jurisdiction.

As a US Treasury Department press release put it, the Treasury Department simply hoped that “nonparticipating countries’ goal is to get the lowest price for buying oil, and the price cap will give them additional leverage in their negotiations with Russia.” However, this did not happen. When market prices went up, Russia was able to sell its crude above the price cap, switching mostly to traders, shippers, and insurers operating outside the G7 regulatory jurisdiction. Widespread price-cap evasion schemes are thriving due to a loose regulatory framework that does not require insurers and shipowners to know any pricing information about the oil shipped.

It is questionable whether the G7 will be able to enforce its oil-price cap at all, given these circumstances. At the very least, G7 countries will need to significantly beef up their sanctions-enforcement capacity. Hundreds of additional employees will be needed to monitor the thousands of transactions related to Russian crude-oil exports to ensure compliance with the oil-price cap. Unless these additional staffing measures are taken, and are accompanied by relevant legal action against companies involved in breaching the oil-price cap, enforcement will just not happen. It remains an open question whether the G7 countries will ever be able to do anything about Russia’s “shadow tanker fleet” or other shell companies engagement in trading, shipping, and insurance transactions, which are operating fully outside the G7 regulatory jurisdiction. It was the EU oil embargo, and not the price cap, that truly worked against Russian oil exports.

LNG: A lifeline for Putin

While the EU nearly stopped purchasing piped gas from Gazprom following the full-scale invasion of Ukraine in February 2022, Russia’s LNG exports to Europe in 2023 surged by about 38 percent as compared to the pre-war year of 2021; the EU imported about 22 bcm of Russian LNG in 2023. Remarkably, after the United States, Russia is Europe’s largest supplier of LNG.

Despite Russia’s increasing presence on the LNG market, Gazprom is not involved. The key Russian LNG exporter is Novatek, the country’s second-largest natural-gas producer. In 2022, Novatek exported more than 76 percent of the LNG produced by its Yamal LNG project to Europe. Overall, Russia currently exports more than 50 percent of its LNG to Europe, compared to just 39 percent in 2021.

These exports are not a major source of budget revenue for Russia as Novatek’s LNG production and exports are largely untaxed, enjoying a twelve-year exemption from mineral-extraction taxes and export duties. Nevertheless, such massive LNG exports to Europe are a major source of revenue for Russia, totaling up to 10 billion euros per year, and can be used by Putin to finance the war against Ukraine. For example, the Russian government has raised the profit tax on Novatek from 20 percent to 32 percent for 2023–2025. The draft budget for 2024 also contains hints that the authorities may impose certain one-time payments on oil and gas companies, including Novatek, in 2024. The European Union is not currently considering sanctioning Russian LNG, which means that the revenue flow will likely continue uninterrupted in 2024.

Novatek also managed to continue with a massive project called Arctic LNG-2 (ALNG-2), despite some initial difficulties accessing critical Western technology due to sanctions. Western companies such as Linde, Technip, and Baker Hughes left the project after February 2022, but Novatek managed to either assure the supply of previously contracted equipment or to find alternative Chinese suppliers. However, after sweeping US sanctions were introduced against the ALNG-2 project in November 2023, the project was effectively brought to a halt, which undermines Russia’s plans to expand LNG exports in the coming years and show the effectiveness of individual sanctions against specific oil and gas projects.

The Russian budget: No more super profits

Despite rebounding oil prices and the G7 oil-price cap not working, Russian oil and gas budget revenues were significantly down in 2023, contracting by 23.9 percent year-over-year. By comparing pre-war figures from 2021, the contraction of oil and gas revenues becomes even more visible. While the average oil price in 2021 and 2023 is comparable, oil and gas budget revenues have fallen precipitously. In 2021 they were 6.8 percent of GDP and accounted for 35.6 percent of total budget revenues; in 2023 they were just 5.3 percent of GDP and 30.9 percent of total budget revenues (see Table 1).

While oil-export revenues recovered in the second half of 2023, as discussed above, gas-export revenues appear lost for the foreseeable future. LNG revenue exports are not sufficient to compensate for the loss of piped-gas exports to the EU. Moreover, rerouting of oil shipments to Asia reduces the profitability of oil exports. It is, therefore, reasonable to expect that Russian oil and gas revenues will be significantly depressed due to Western sanctions and Gazprom’s decoupling from the European gas market. And barring a sharp rise in oil prices, these super profits will not return.

Russian budget revenues from oil and gas fell 55–58 percent in the first two quarters of 2023 as compared to the same period in 2022. In the third quarter of 2023 they recovered to nearly 2022 levels, although this is largely due to higher international prices resulting from output cuts announced by Saudi Arabia in the spring of 2023. Had Saudi Arabia maintained its previous levels of oil production, Russian revenue losses would have been significantly higher.

According to the 2024 federal budget projections, Russian government is nevertheless forecasting 29.8-percent year-over-year growth in oil and gas revenues in 2024, despite not projecting a significant rise in oil prices. The draft budget projects average oil prices for 2024 at $71.30 per barrel. The government has hinted that it may impose a one-time windfall tax on the oil and gas industry, although the nature of this tax remains unclear. Such a tax, combined with the increased cost of oil shipments to Asia and the loss of productivity due to the lack of access to Western technology, will have a negative impact on upstream capital investments, putting additional pressure on the industry.

The Global South and the limits of cooperation

After February 2022, Russia placed a lot of hope in developing energy cooperation with China, India, and the Global South. More than two years in, these hopes appear to be in vain. Investors do not appear interested in entering the Russian oil and gas sector, and the switch to Chinese technology and equipment has proven significantly more costly than working with Western companies.

Russia had high hopes that exiting Western oil and gas majors would be replaced by investors from the Global South. But thus far, there have been no significant oil and gas investments from China, India, or the Middle East since February 2022. This is largely due to fears of secondary sanctions and excessive wartime regulations, which increase the risks of investing in Russian assets.

Notably, Chinese and Indian companies were not rushing to invest in Russia even before the full-scale war. According to data from the Russian Central Bank, the total accumulated foreign direct investment (FDI) in Russia from all Chinese investors across all sectors totaled just over $3 billion at the end of 2021. For investors from India, the total was just $600 million. And no new FDI from the Global South has been recorded since.

Moreover, some Chinese companies even suspended certain operations in Russian oil and gas and related industries. The Chinese petroleum and chemicals firm Sinopec, for example, suspended talks with the Russian petrochemical company Sibur regarding a major investment and gas-marketing venture in the spring of 2022.

Switching to Chinese technologies and equipment to replace the departing Western technology companies has also proven costly. Novatek, for example, has reported a 17-percent (nearly $4-billion) increase in capital expenditures for the Arctic LNG-2 project due to switching from Baker Hughes turbines to Shanghai Electric equipment. Similar cost increases and losses in productivity can be reasonably expected across the Russian oil and gas industry.

China, India, and the countries of the Global South seem more interested in taking advantage of the current situation and buying Russian energy at a discount than they are in investing in Russia’s oil and gas industries.

Russia’s diminished ability to use energy as a weapon

Decoupling of Western markets from Russian oil and gas has seriously undermined Moscow’s ability to use energy as a weapon against Western democracies. According to the European Commission, the Russian share of EU imports of petroleum oils fell to 3.5 percent in the fourth quarter of 2023, down from 24.8 percent in the fourth quarter of 2021. The share of piped natural gas fell to 12.7 percent from 48.0 percent across the same period. This all significantly reduces Russia’s leverage over European countries through oil and gas supplies.

Some EU countries, most notably Hungary and Slovakia, continue to buy Russian oil and gas. Not surprisingly, these countries remain the least favorable to keeping sanctions against Russia and aiding Ukraine. In Slovakia, this became even more visible when the pro-Putin politician Robert Fico became prime minister after the October 2023 elections, but Hungary and Slovakia remain outliers in the EU.

Central Asian energy exporters, on the other hand, are much more vulnerable to Russia’s energy blackmail. Kazakhstan, which exports about 80 percent of its crude oil through Russian territory and seaports via the Caspian Pipeline Consortium, is particularly vulnerable. Establishing an alternative export route to Europe will be difficult for Kazakhstan, as it would require investing in and developing a tanker fleet in the Caspian Sea. In 2022, Russia threatened to shut down the Caspian Pipeline Consortium on regulatory grounds in an apparent effort to assure Kazakhstan’s loyalty amid the international backlash over Ukraine.

What is to be done? Recommendations for policymakers

How can Western policymakers make sanctions against Russia’s oil and gas industry more effective?

First, it is important to understand that Russian oil-export revenues have been rebounding recently not because the EU oil embargo is ineffective. In fact, the embargo is working. It has led to a sharp increase in costs of shipping Russian oil to consumer markets in Asia (more than $10 per barrel, according to the author’s estimate). It has also led to price discounts, which remain at levels above $10 per barrel. The key factor contributing to increasing Russian revenues from oil exports is the spring 2023 OPEC+ decision to cut oil output. Therefore, one key focus for Western policymakers should be to put diplomatic pressure on OPEC members and other oil-producing states to increase oil output.

The EU should also tighten sanctions against Russian oil transshipment through its territorial waters. This would further complicate the logistics of rerouting Russian oil to Asian markets. This matters, because the bulk of Russian oil is still exported via Baltic and Black Sea ports, as direct pipeline infrastructure to Asia is insufficient and its expansion requires huge investments.

The G7 oil-price cap on Russian oil is clearly not working. Several steps would, at least partially, increase the efficiency of the price cap, including

increasing the number of professional staff permanently dedicated to monitoring Russia’s export-oil shipments (currently, the job is mostly done by outside experts, journalists, and investigators, while the tens of thousands of transactions involved require regular monitoring and analysis to uncover price-cap evasion schemes);
introducing secondary sanctions against third-country insurers, traders, and shippers who are helping Russia evade the price cap; and
improving the mechanism of “attestation” of transactions ensuring compliance with the price cap. This involves assuring that shipowners and insurers are provided with sufficient pricing information by the buyers and sellers of the Russian crude to make sure that the oil is sold below the price cap.

Regarding piped-gas imports from Russia, the European Union should keep asking the EU member states that are still buying gas from Russia for specific plans to phase out Russian imports. Countries like Italy, which continue to receive certain volumes of Russian piped gas, are promising to end Russian gas imports quite soon, others, like Hungary and Austria, continue unrestricted imports of Russian gas, reaching and even exceeding pre-war import levels. At the same time, these countries have made little progress in renewable-energy production or reducing gas demand. EU unity on singling out Gazprom’s gas supplies is essential to continue minimizing Putin’s export revenues.

The EU should also unequivocally reject the import of natural gas from the so-called “energy hub in Turkey.” This project is nothing more than an attempt to launder Russian gas supplies by mixing them with gas from other producers like Azerbaijan and Iran. Turkey should be sent a clear message that laundering Russian gas will not be tolerated. Any contracts for gas supplies via Turkey to the EU should be concluded directly with suppliers, and not through opaque intermediary schemes that might assist Russia.

The EU also needs a comprehensive policy on LNG imports from Russia. These imports may be necessary in the short term to fill the gap left by the cessation of Russian pipeline-gas imports. Nevertheless, the surge of Russian LNG imports to the EU in 2022–2023 is not normal and generates significant revenues for Russia (which may also be used to finance the war through emergency windfall taxation). The EU needs a clear schedule to phase out Russian LNG imports. It should also accelerate its efforts to develop offshore natural-gas production, particularly in the Mediterranean and Black Seas, as an alternative to Russian gas in the medium and longer term.

The G7 countries should also conduct a comprehensive critical oil-and-gas technology review. Such a review would identify critical technologies Moscow still has access to that may assist Russia in sustaining its oil and gas exports and evading Western sanctions. It could also provide policy recommendations for additional sanctions, including secondary sanctions against third countries where appropriate.

Conclusions

It is reasonable to conclude that sanctions have had a significant impact on the Russian oil and gas industries and the budgetary revenues that come from them. And it is wrong to conclude that sanctions are not working—they are. However, much more work must be done to enhance the effectiveness of sanctions.

Also, for the purpose of setting realistic goals and expectations, it is important to understand that the Russian oil and gas industries and Russia’s public finances are too strong and resilient to simply collapse under the weight of sanctions. They haven’t collapsed yet, and probably won’t in the foreseeable future. But they are suffering enormous difficulties due to sanctions and decoupling from the Western energy markets. Over time, this is likely to result in further loss of investment, output, efficiency, and revenue.

About the author

Vladimir Milov is a Russian opposition politician, publicist, economist, and energy expert, and recently served as an economic and international affairs adviser to the late Russian opposition leader Alexey Navalny. He is also vice president of the Free Russia Foundation, an international organization supporting civil society and democratic development in Russia based in Washington, D.C. From 1997 to 2002, Milov had worked with the Russian Government, including as Deputy Energy Minister in 2002. He was the author of the concept of breaking up and unbundling Gazprom vetoed by Vladimir Putin. Later, Milov became one of the major public critics of Vladimir Putin, working closely with late opposition politician Boris Nemtsov, and later with Alexey Navalny. He is a research associate at the Wilfried Martens Centre for European Studies in Brussels, vice president of the Free Russia Foundation (Washington, D.C.). Milov is currently based in Vilnius, Lithuania.

The Eurasia Center’s mission is to promote policies that strengthen stability, democratic values, and prosperity in Eurasia, from Eastern Europe in the West to the Caucasus, Russia, and Central Asia in the East.

Learn more

Experts react: What will Putin and Xi’s ‘new era’ of cooperation mean for the world?

Atlantic Council experts — Thu, 16 May 2024 17:31:28 +0000

Keep your “friends” close. On Thursday, Russian President Vladimir Putin and Chinese leader Xi Jinping met in Beijing to celebrate a “new era” of cooperation in an increasingly “multipolar world.” Putin’s visit comes as Russian forces are ravaging Kharkiv, and just after the Russian president reshuffled his military leadership ahead of an expected summer offensive in Ukraine. Putin is relying on his “dear friend” in China to continue supporting his country’s wartime economy, including through oil purchases. At the same time, Xi is looking to lock in a junior partner for China as its economy faces de-risking by Europe and new tariffs from the United States. Below, Atlantic Council experts delve into what to make of the duo’s meeting and what to look for next.

Click to jump to an expert analysis:

John E. Herbst: Putin and Xi are drawn together by hostility to the United States

Michael Schuman: Xi is decoupling from the US and deepening ties to Russia. It’s a bad deal for China.

Matthew Kroenig: Putin and Xi are afraid the US will join an arms race they already started

Kimberly Donovan: China is the axis of sanctions evasion

Andrew A. Michta: The Putin-Xi meeting shows the ‘axis of dictatorships’ is getting stronger

Shelby Magid: Putin and Xi are masquerading as peacemakers

Markus Garlauskas: Putin and Xi are allies. Their statement should be a wakeup call.

Putin and Xi are drawn together by hostility to the United States

The Putin-Xi bromance’s latest episode comes live from Beijing, where Putin arrived with a largish entourage hoping to persuade his elder brother to offer more support for his still-not-successful aggression in Ukraine. His visit proceeds as his forces continue to make incremental, if casualty-heavy, gains—facilitated by the six-month delay in approving new US aid for Ukraine, inspired by the populist right—and pound Kharkiv with an Aleppo-brutal air bombardment. But they still have achieved no battlefield breakthrough.

The two strongmen and their teams have conducted talks on the state of the international system and enhancing cooperation in their “no limits” partnership. The problem for Putin is that the “no limits” in their partnership appears confined mainly to the rhetorical sphere. The two leaders blasted the United States as a “hostile and destructive” hegemon, declining but still dangerous. They issued a joint statement that talks about a deepened strategic partnership and a “new era.” Yet as they talked about growing cooperation, and even as Russian-Chinese trade flows have grown substantially in recent years, Chinese exports to Russia have declined in recent months. This may well reflect the recent warnings from the United States about providing military aid to Moscow and flouting sanctions policy on Russia. It is well understood that Chinese oil and gas purchases from Russia have helped it weather Western sanctions, but perhaps the Chinese hosts did not want to unduly antagonize the West and, therefore, the head of Gazprom was not part of the Russian delegation to China.

It is noteworthy, too, that Putin praised China’s peace proposals for Ukraine. This is likely part of his bid to persuade China not to attend the mid-June Swiss conference on Ukrainian President Volodymyr Zelenskyy’s peace formula. Moscow was unhappy when China attended the last conference in Saudi Arabia.

Bottom line: This summit is more of the same. Overall, the two countries are drawn together by hostility to the United States. In a difficult war, Putin is looking for greater Chinese help, both economic and military. China would like Russia to win, but is still wary of provoking the United States and the West with greater support.

—John E. Herbst is the senior director of the Atlantic Council’s Eurasia Center and a former US ambassador to Ukraine.

Xi is decoupling from the US and deepening ties to Russia. It’s a bad deal for China.

We got a good look at the changing global order this week, and it’s not a pretty sight. Two days after US President Joe Biden announced steep new tariffs on a range of Chinese products, Xi welcomed Putin in Beijing, where the two leaders pledged to deepen their countries’ cooperation. A half century ago, China forged ties with the United States after decoupling from the Soviet Union. Now, as China decouples from the United States, it is reconnecting with Russia. Xi thinks this is a good trade for China. He’s exchanging a United States he can’t control with an isolated, declining Russia that he can. And he gets a partner who shares his authoritarian values and mission to create an alternative, illiberal bloc to roll back the dominance of the West.

The problem is that Xi is exchanging ties to a twenty-five trillion dollar economy with the advanced technology China needs for a two trillion dollar economy that’s not much more than a gas station. It’s not a great bargain. That Xi is willing to make it shows how thoroughly he has replaced the pragmatic pursuit of economic development with an anti-Americanism that will potentially jeopardize that development.

—Michael Schuman is a nonresident senior fellow at the Atlantic Council’s Global China Hub and a contributing writer for the Atlantic magazine.

Putin and Xi are afraid the US will join an arms race they already started

At the geopolitical level, the China-Russia “new era” partnership shows that the world is tightening into geopolitical blocs with growing ties among the revisionist autocrats against the United States and the rules-based order. The autocrats supported each other’s most important revanchist priorities. Putin backed Xi’s position on Taiwan. Xi made oblique statements in support of Russia’s war in Ukraine, endorsing Russia’s efforts to “ensure security” and opposing “outside interference in Russia’s internal affairs.”

They joined together in criticizing the United States for undermining the strategic balance, but we would need Freud to disentangle this level of projection. They accused the United States of deploying “global missile defense” even though China and Russia are building air and missile defenses against the United States, and even though Washington has no such defenses for China and Russia. They accused the United States of building weapons for “potential decapitation strikes,” but China’s fractional orbital bombardment weapon is the best weapon ever invented for this purpose—and is, again, a capability that Washington lacks. Finally, they criticized Washington for planning to deploy short- and intermediate-range missiles in Europe and the Indo-Pacific. Currently, Russia and China have thousands of these missiles, while the United States has deployed zero. Moscow and Beijing seem worried that Washington will decide to run the arms race that these dictators are thrusting upon it.

—Matthew Kroenig is vice president and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security

**China is the axis of sanctions evasion**

Putin and Xi’s latest meeting further confirms our assessments that China has become the economic lifeline for Russia in the wake of Western sanctions. Over the past two years, China has become Russia’s primary trading partner and continues to import Russian commodities, especially oil. The two countries are trading in Chinese yuan and Russian rubles, which allows them to circumvent Western sanctions because the transactions are taking place outside of the US dollar, euro, and other Group of Seven (G7) sanctions coalition currencies. We assess that China is moving this activity to its smaller regional banks to protect its largest financial institutions with Western ties from direct sanctions exposure and the threat of US secondary sanctions. However, these transactions are still taking place and providing the revenue Russia needs to continue its war in Ukraine.

It is becoming clearer that China is the axis of sanctions evasion. China continues to prop up Russia, Iran, and North Korea, among other adversarial regimes to challenge US leadership and the global order. Countering Russian aggression in Ukraine is no longer a strictly Russian problem. Policymakers must consider China, Russia, and even Iran and North Korea together—and specifically their financial linkages—when developing sanctions and other measures to address the range of nefarious and destructive activity these regimes are executing.

—Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center and a former senior official with the US Treasury Department’s Financial Crimes Enforcement Network.

The Putin-Xi meeting shows the ‘axis of dictatorships’ is getting stronger

The Putin-Xi meeting is another indication that the Russia-China alliance, the core of the new “axis of dictatorships,” which also includes Iran and North Korea, is getting stronger. China has been instrumental in throwing Russia an economic lifeline in the aftermath of its full-scale invasion of Ukraine in 2022. Xi’s recent visit to Europe underscored the two countries’ shared objective to fracture the Atlantic alliance and bring about a fundamental power realignment across the globe.

Xi will likely be briefed by Putin on Russia’s prospects for success of his spring/summer offensive in Ukraine. Russia’s need for continued supplies and further support from China will likely be high on the agenda as well. An important deliverable from the Sino-Russian summit will be the public message that the two states are closely aligned and are cooperating on a host of defense and economic issues in opposition to the United States and its allies.

—Andrew A. Michta is director of the Scowcroft Strategy Initiative and senior fellow at the Atlantic Council.

Putin and Xi are masquerading as peacemakers

As Russia continues a relentless campaign of aerial attacks pummeling Kharkiv, and its forces push into northeastern Ukraine, Putin and Xi used the Beijing summit to masquerade as peacemakers and discuss their alleged focus on resolving what they call, incorrectly, the “Ukrainian crisis.”

While Russia’s war in Ukraine persists largely due to China’s enabling, Beijing claims to have a neutral position in the conflict and seeks to paint itself as a good faith actor and potential mediator. Speaking alongside Putin, Xi said China will continue to play a constructive role toward the return of peace and stability in Europe.

Last year, China presented its vision for peace—a Kremlin-friendly, twelve-point statement with broad principles for ending the war with a political settlement. It notably neglected to call for Russia’s withdrawal from occupied parts of Ukraine. The plan was widely rejected by Ukraine and the West, save for a few Russia-friendly leaders such as Hungarian Prime Minister Viktor Orbán.

One day before heading to China, Putin declared his support for China’s peace plan. This declaration also comes a month ahead of an alternate initiative working to pave a way to end the war—the high-level Global Peace Summit to be held by Ukraine and Switzerland. The summit aims to lay the groundwork for a comprehensive and lasting peace in Ukraine, on starkly different terms than the Russian-endorsed Chinese plan.

The Ukrainian-Swiss summit is gaining momentum, with at least fifty countries confirmed to participate and 160 invited. While Russia has not been invited, Chinese participation is a key focus in the goal of getting a broad turnout, especially from the Global South. China has not yet agreed to attend, though in line with its stated focus on resolving the conflict, China’s ambassador to Switzerland previously said that Beijing may take part in the summit.

Following the Xi-Putin summit’s declarations on peace, the question remains whether China will attend and try to play a part in any efforts for peace that aren’t just squarely on Russia’s terms.

—Shelby Magid is the deputy director of the Atlantic Council’s Eurasia Center.

Putin and Xi are allies. Their statement should be a wakeup call.

Today’s formal Putin-Xi statement describes a shared worldview and aims, along with specific strategic cooperation measures to support them. It is a comprehensive statement of a de facto alliance, and it does not even cover everything China and Russia are already doing to support each other. Beijing and Moscow are unlikely to sign a document as clear as Nazi Germany and Fascist Italy did with the “Pact of Steel” or the “Tripartite Pact” that added Imperial Japan—at least not anytime soon. They do not need to.

Russia is currently engaged in an active war of aggression against Ukraine that would have long since sputtered out into clear defeat without the tremendous diplomatic, informational, technological, and economic support China has provided. That Russian-, North Korean-, and Iranian-made weapons, rather than Chinese-made ones, are striking Ukraine is missing the forest for the trees. China has provided aid that is vital to Russia’s sustainment of its offensive against Ukraine, and China provided what was needed to enable Russia’s stubborn defense against Ukrainian counterattacks. Further, by enabling sanctions evasion, China has created the international conditions that make it possible for Iran and North Korea to provide such weapons to Russia with near-impunity. In practical terms, China has done far more to sustain Russia’s war effort against Ukraine than Imperial Japan ever did to sustain Nazi Germany’s, or vice versa.

For years, we have been in a new strategic era where Xi’s China and Putin’s Russia are increasingly aligned and cooperating closely, and this has only been accelerated by Putin’s war against Ukraine. Observers should not be reassuring themselves that Putin and Xi are not really allies because they have not signed a formal mutual defense treaty or because Chinese weapons and forces have not joined Russia’s aggression against Ukraine. The actions are there; the formal statements are there. Let us call this relationship what it is: an alliance.

Even if this Xi-Putin alliance is not built on foundations as strong as those of the US alliance system, Washington and its own allies and partners around the world should not fail to see this alliance for what it is—and they should adjust their plans, policies, and strategies accordingly.

—Markus Garlauskas is the director of the Indo-Pacific Security Initiative at the Scowcroft Center for Strategy and Security. He is a former senior US government official with two decades of experience as an intelligence officer and strategist.

The post Experts react: What will Putin and Xi’s ‘new era’ of cooperation mean for the world? appeared first on Atlantic Council.

Shaffer quoted in S&P Global on US sanctions on Iran

smeadows — Wed, 24 Apr 2024 15:15:46 +0000

Jason Marczak: The US must ensure sanctions carve outs benefit the Venezuelan people, not just elites

The post Shaffer quoted in S&P Global on US sanctions on Iran appeared first on Atlantic Council.

Natural gas and the energy transition: Security, equity, and achieving net zero

Phillip Cornell — Wed, 24 Apr 2024 13:00:00 +0000

DOWNLOAD PDF

Executive summary

Within the short span of three years, the global economy has needed to contend with the COVID-19 pandemic, subsequent inflation, the Russian invasion of Ukraine, and the impact of that conflict on commodity shortages, rising energy costs, and declining energy security. As a result, short-term reliance on fossil fuels has increased, fewer resources are available for the energy transition, and coordination among regional and global partners has become more complicated. In the longer term, the crisis underscored the dangers of reliance on fossil fuel imports and exposure to price volatility.

All of this augers broadly for accelerating the energy transition. But narrow approaches to the transition run the risk of curtailing existing energy sources before viable alternatives are sufficiently scaled and integrated.

In their crudest form, policies to incentivize investment into decarbonization are based on categorizing energy sources as either “clean” or “dirty”—despite a wide range of emissions implications depending on the particular energy source. In the case of natural gas, the reality is that there are gradations of “clean.”

Alternatives also matter. Gas replacing coal or upgrading older gas-fired turbines to highly efficient modern ones are major wins. But greenfield unabated gas-fired generation will not be sustainable and will often be more costly than the renewable alternative.

Even under a credible net-zero scenario, gas demand will likely persist, both for technical reasons and to create low-carbon fuels like blue hydrogen. In the medium term, natural gas can be part of a solution in which sustainable economic development is a corollary (or prerequisite) to climate action. In developing countries where industrial activities are a source of growth and are particularly effective at addressing poverty, such development can equip societies with the resources and space to address climate concerns.

About the author

Phillip Cornell is a nonresident senior fellow at the Atlantic Council’s Global Energy Center. He is a specialist on energy and foreign policy, global energy markets and regulatory issues, critical energy infrastructure protection, energy security strategy and policy, Saudi Arabian oil policy, Gulf energy economics, and sustainable energy transition policy. He currently leads the global practice for energy and sustainability at Economist Impact, part of the Economist Group.

Experts react: The US just reimposed sanctions on Venezuela. What does this mean for energy markets and Venezuela’s election?

Atlantic Council experts — Thu, 18 Apr 2024 15:43:49 +0000

From Barbados to the ballot box, things got bumpy. On Wednesday, the United States announced plans to reimpose oil sanctions on Venezuela—though with opportunities for exemptions—faulting Nicolás Maduro’s government for failing to uphold an agreement signed in Barbados in October 2023. The agreement was intended to put Venezuela on the path to holding a competitive presidential election in 2024, but Maduro’s government has cracked down on its political opponents ahead of the July 28 vote, including banning leading opposition candidate María Corina Machado. Companies now have until the end of May to apply to the US Treasury for an individual license or wind down their business with Venezuela, most notably with state-run oil company Petróleos de Venezuela S.A., or PDVSA. So where does this leave Venezuelan politics and global oil markets? Our experts share their insights below.

Click to jump to an expert analysis:

Geoff Ramsey: The US balances democracy promotion with a ‘complex geopolitical reality’

David Goldwyn: The US is seeking a Goldilocks solution to sanctions on Venezuela

Ellen Wald: With US sanctions waivers withdrawn, expect China to dominate Venezuela’s oil exports

Jesse Sucher: Sanctions should change behavior. The US chose to reinforce that principle.

The US must ensure sanctions carve outs benefit the Venezuelan people, not just elites

Maduro’s ban on Machado is unjustified and unconstitutional, and left the US government with very little choice but to snap back the sanctions. But the truth is that, amid turmoil in the Middle East and the war in Ukraine, Venezuela policy is running up against a desire to avoid further upending delicate geostrategic balances. Washington is interested in allowing US and European energy companies to continue to operate in Venezuela, while also promoting competitive elections and ensuring that the money does not end up directly in Maduro’s pocket. As the United States offers a new path for consideration of specific licenses to energy companies interested in operating in Venezuela, it will be essential to work to ensure that dollars from oil and gas transactions are circulated among everyday Venezuelans, not kept in the hands of the elite. Any successful approach to Venezuela will have to find ways to address global energy concerns and undercut Russian and Chinese influence, while still advancing a democratic solution.

—Jason Marczak is vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

The US balances democracy promotion with a ‘complex geopolitical reality’

Yesterday’s announcement represents a compromise approach. By snapping back sanctions on Venezuela while still carving out space for Western energy companies to maintain operations, the Biden administration is trying to adjust its approach to promoting democracy and human rights in Venezuela to an increasingly complex geopolitical reality. This is a recognition that it is simply not in the US interest to sit back and watch as Russia and China deepen their footprints in the country with the largest oil reserves on the planet. At the same time, it will be crucial for the Biden administration to continue to find ways to incentivize lasting political agreements in ongoing negotiations between the opposition Unitary Platform coalition and the Maduro government. Fortunately, the US government continues to retain a degree of leverage. The White House can loosen or tighten the sanctions regime moving forward, and can float diplomatic recognition and other incentives as carrots ahead of Venezuela’s election on July 28.

—Geoff Ramsey is a senior fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.

The US is seeking a Goldilocks solution to sanctions on Venezuela

The United States made a subtle and constructive diplomatic step on Venezuela sanctions on Wednesday. It has allowed General License 44 to lapse, ending the period of open access for Venezuelan crude to reach the market, including the United States, through multiple modalities. For now, Venezuela has been punished for its abrogation of the Barbados agreement.

But the US Treasury Department was clear that it welcomes, within the next forty-five days, requests for specific licenses that serve US interests. This leaves a bureaucratically cumbersome but clear path for companies to request the ability to swap Venezuelan crude for debt they are owed, for diluent or other products to relieve humanitarian distress in Venezuela, and under conditions similar to Chevron’s existing license, which minimizes the fiscal return on exports to PDVSA.

So the path remains open to ensuring that the Maduro government is punished, but a relief valve for migration pressure inside Venezuela is available. The new policy does not discriminate against US allies by imposing harsher conditions on them than on US companies, as was the case before General License 44. In the event that there is progress on a framework for free and fair elections from Maduro in the days ahead, the potential for a further general license remains open.

The impact on the global oil market remains to be seen. Much depends on how many private companies apply for debt or product swaps and on whether the small but significant oil projects in Venezuela apply for licenses as well. (If they do not, then we will return to the destructive “maximum pressure” policy, which had the impact of providing cheap oil for China, a product market for Iran, and humanitarian distress leading to illegal migration to the United States and elsewhere in the region.)

Much also depends on the ability of the US Treasury to respond to those license requests swiftly. But with this one move, the United States has avoided blame for interference in the Venezuelan elections, preserved diplomatic capital for a future day, and this time managed to punish the aggressor more than the victims. Given the grim circumstances, this was the best outcome available.

—David L. Goldwyn served as special envoy for international energy under President Barack Obama and assistant secretary of energy for international relations under President Bill Clinton. He is chair of the Atlantic Council’s Energy Advisory Group and a nonresident senior fellow with the Council’s Global Energy Center.

With US sanctions waivers withdrawn, expect China to dominate Venezuela’s oil exports

Biden’s decision to withdraw the sanctions waiver for Venezuelan oil comes at a time when crude oil prices are coming off the highest prices seen this year. Just last month, Venezuela’s crude oil and petroleum product exports hit a four-year high. However, the amount of oil in question is relatively minor on the global scale and should not impact oil prices. In September 2023, the month before the Biden administration issued the waiver, Venezuela exported a total of 797,000 barrels per day (bpd) of crude oil, fuel oil, and methanol (according to TankerTrackers.com). More than 50 percent of its petroleum went to China. Other notable customers included the United States, Spain, Indonesia, and Cuba. By March 2024, Venezuela’s total exports had only increased by about one hundred thousand bpd, but it had significantly diversified its customers. Chinese exports dropped to 39 percent and notable cargoes went to India, the Netherlands, Singapore, Brazil, and Bonaire, Sint Eustatius, and Saba. (Note: Data on oil exports comes via TankerTrackers.com.)

Now that the waivers have been withdrawn, we should expect China to dominate Venezuela’s oil exports. US oil supplies should not be impacted since the total amount of Venezuelan oil and oil products imported by the United States before and after the waivers were issued was nearly identical. Venezuela will probably continue to export at the 895,000 bpd level because China will probably purchase additional cargoes that other nations stop buying now that sanctions are back in place. Overall, Venezuelan revenue may drop slightly as China will likely negotiate lower prices now that the competition for Venezuelan oil is significantly reduced.

—Ellen Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the co-founder of Washington Ivy Advisors.

Sanctions should change behavior. The US chose to reinforce that principle.

When the US Office of Foreign Assets Control (OFAC) issued General License 44 in October 2023, the Biden administration warned that Maduro would need to show concrete steps toward democratic elections for the license to be extended. Evidently, there was insufficient progress, meaning the Biden administration has effectively decided that preserving sanctions’ integrity and US credibility are as important as the outcomes for Venezuela. Given the centrality of sanctions to numerous US foreign policy objectives, I’m not surprised to see a choice that reinforces the principle that the goal of sanctions is to change behavior.

International oil companies must now decide how much they enjoyed the fleeting access to Venezuelan crude. Venezuela had stood to gain an estimated $8 billion more in oil revenue in 2024 over the previous year’s earnings. One must wonder if Maduro can replicate that figure without the United States offering sanctions relief.

Companies that do not wind down previously authorized transactions by the end of May expose themselves to US sanctions risks, and we could see a crackdown on third parties evading the reimposition of these sanctions. Some key players to watch are Indian and Chinese oil companies. OFAC is no doubt learning from its parallel enforcement efforts with respect to the Russian oil price cap.

—Jesse Sucher is a former official at the US Department of the Treasury, where he was a deputy director of the Office of Investment Security, and a section chief and investigator for the Office of Foreign Assets Control. The views and opinions expressed herein are those of the author and do not reflect or represent those of the US government or any organization with which the author is or has been affiliated.

The post Experts react: The US just reimposed sanctions on Venezuela. What does this mean for energy markets and Venezuela’s election? appeared first on Atlantic Council.

Wald featured in Bloomberg: JPMorgan makes the case that high rates are actually driving inflation

nsinha — Mon, 08 Apr 2024 14:34:19 +0000

The post Wald featured in Bloomberg: JPMorgan makes the case that high rates are actually driving inflation appeared first on Atlantic Council.

Ukraine’s allies divided over drone campaign targeting Russian refineries

Giorgi Revishvili — Wed, 03 Apr 2024 23:42:23 +0000

Ukraine carried out one of the longest range drone strikes of the war so far on April 2, hitting an oil refinery in Russia’s Tatarstan region approximately 1300 kilometers from the Ukrainian border. The attack was the latest in an expanding campaign of drone strikes that have inflicted significant damage on Russia’s oil and gas industry, while also revealing divisions among Ukraine’s international partners.

The first signs of international unease over Ukraine’s air offensive emerged in late March, with the Financial Times reporting US officials had urged Ukraine to halt drone strikes on Russian refineries amid concerns about global oil prices and possible retaliation. Days later, Ukrainian President Volodymyr Zelenskyy confirmed the US reaction to Ukraine’s airstrikes was “not positive,” but stressed Ukraine would not accept limitations on the use of domestically-produced weapons. “We used our drones. Nobody can say to us you can’t,” he commented.

Ukraine’s other key allies have yet to voice similar concerns over drone strikes inside Russia. This apparent split was on display during US Secretary of State Antony Blinken’s April 2 visit to Paris. While Blinken reiterated that the US has “neither supported nor enabled strikes by Ukraine outside its territory,” French Foreign Minister Stéphane Séjourné struck a different note. “The Ukrainian people are acting in self-defense and we consider that Russia is the aggressor,” he commented. “In such circumstances, there is hardly anything else to say. I think you understood me.”

The French position was welcomed by Ukrainians, who view the war with Russia as existential for their country and believe they should have the freedom to fight without artificial constraints. This means leveraging Russian vulnerabilities and capitalizing on emerging opportunities, both within occupied Ukrainian territory and inside Russia itself.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Ukraine has bombed more than a dozen Russian oil refineries since the air offensive began in early January 2024, including some of the biggest plants in the country. Many of the attacks have taken place far from the Ukrainian border, highlighting the increasingly long-range capabilities of Ukraine’s drone fleet.

Since Ukraine is restricted from employing Western-provided weapons against targets inside Russia, the production of long-range drones has become a top priority for Kyiv. This has led to a surge in investment and a spike in output. Drones are significantly cheaper to produce in large quantities than long-range missiles and require less infrastructure.

Ukraine’s partners have also backed Kyiv’s focus on drone warfare. In January 2024, the United Kingdom pledged to spend at least $250 million to rapidly procure, produce, and deliver 1000 one-way attack drones to Ukraine. Although precise details regarding Ukraine’s drone stockpile remain undisclosed, the rhetoric of Ukrainian senior officials and the ongoing strikes suggest the current bombing campaign inside Russia is likely to continue gaining momentum.

Eurasia Center events

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

Ukraine has defended its attacks on Russian refineries by noting that oil revenues are at the heart of the Russian war economy, making oil facilities legitimate targets. Ukrainian military planners expect their expanding drone offensive to have military, economic, and political repercussions for the Kremlin.

In the military sphere, the past three months of attacks have confirmed that Russia’s oil facilities are inadequately defended. Russian demand for air defense systems already appears to be growing in response, with indications including delays in delivering promised systems to India. Further Ukrainian drone attacks might compel Moscow to redeploy existing air defense systems to safeguard refineries. This could potentially create opportunities for Ukraine to strike other high-value targets inside Russia and in occupied Ukrainian regions.

Ukrainian commanders hope drone strikes can undermine Putin’s ability to wage war. The Russian military relies heavily on refined oil products such as gasoline, diesel and jet fuel. Reducing Russian oil refining capacity might have implications for military fuel supplies in the long run, creating logistical challenges for the Russian army in Ukraine and hampering preparations for a major new offensive in summer 2024.

Ukraine’s strategy is also economic and aims to reduce Russian oil revenues. Drone strikes have already disrupted at least 10% of Russian oil refinery capacity, according to Britain’s Ministry of Defense. The process of repairing damage from drone strikes is further complicated by the fact that Russian refineries are heavily reliant of Western technologies. With sanctions limiting Russian access to critical parts and equipment, resuming operations at targeted refineries is likely to be a costly and time-consuming process.

There are already some signs Ukraine’s drone strikes are impacting Russia’s energy industry. On March 1, the Kremlin imposed a six-month ban on gasoline exports in an effort to avoid shortages and prevent price spikes on the domestic market. Nevertheless, gasoline prices have gone up in Russia.

Rising fuel prices could lead to mounting discontent within Russian society. Since the onset of the full-scale invasion, the Kremlin has maintained an unspoken agreement with the Russian public to keep any war-related disruption to an absolute minimum. Indeed, this is one of the main reasons why the invasion was officially termed a “Special Military Operation” rather than a war. The impact of higher fuel prices would be felt throughout Russia, particularly in regions with struggling economies, potentially creating instability.

The economic consequences of Ukraine’s drone strikes are also evident beyond Russia, with Brent crude up nearly 13% this year. With the US currently in election mode, this appears to have alarmed many in Washington DC. For now, Ukraine’s leaders are unmoved by such concerns. On the contrary, they are unwilling to rule out anything that might help secure national survival and believe attacks on Russia’s oil and gas industry are fully justified.

Giorgi Revishvili is a Fulbright Scholar at Texas A&M University’s Bush School of Government and Public Service and a former senior advisor to the Georgian National Security Council.

Navigating outside interests

Historically dependent on Russian fossil fuels, CEE now plays a crucial role as the eastern flank of NATO and a logistics hub for Ukraine aid. Additionally, China has been active in CEE trade and investment through its 14+1 format (formerly 17+1), which includes battery, wind, and solar energy supply chains, while the United States promotes close cooperation with its gas and nuclear industries.

As the largest inter-governmental organization in the region, the Three Seas Initiative (3SI) is uniquely positioned to define CEE’s role among these interests. It includes member countries Estonia, Latvia, Lithuania, Poland, Czechia, Slovakia, Hungary, Slovenia, Croatia, Bulgaria, Romania, Austria, and Greece with the participation of Ukraine and Moldova as partners. However, despite 3SI’s original goal of enhancing North-South collaboration and connectivity, of its forty-one energy priority projects, only one is dedicated to cross-border electricity interconnection and one to an offshore wind farm grid connection, while twenty are linked to gas infrastructure expansion.

CEE’s appetite for gas is no longer growing

Enabling natural gas in CEE is becoming increasingly untenable. Data suggest that by 2025, LNG import capacity across 3SI countries is likely to exceed historical imports of Russian pipeline gas. To use this expected growth in supply, LNG consumption in the region would have to grow well beyond past demand.

Furthermore, evidence is mounting regarding the adverse climate and environmental impacts of LNG. Reflecting global concerns along these lines, the Biden administration suspended approvals for liquified natural gas (LNG) exports, in an effort to better align US foreign policy with its climate ambition.

The potential for stranded assets

Forecasts by European power and gas grid operators estimate that total gas demand in 3SI countries will stabilize around the 2023 level of 70 bcm and reach between 61 and 73 bcm by 2030, depending on the scenario and the displacement of coal in the power sector. Over the same period, LNG import capacity in 3SI countries is expected to reach 53 bcm (by 2030), complemented by 17 bcm from the Baltic Pipe, Balticconnector, and Trans Adriatic Pipeline, as well as 15 bcm of domestic gas production (16 bcm in 2023), reaching 85 bcm in total. This means that by 2030, across 3SI members, the sum of domestic production and gas import capabilities through LNG terminals and pipelines from North and South directions will exceed demand of 3SI countries by 17-40 percent (12-24 bcm).

The outlook varies at the country level, but outsized gas facilities funded by EU taxpayer money in Poland or the Baltic States in particular risk becoming stranded assets. By 2040, demand is expected to decrease due to intensified energy efficiency measures and growth in heat pump installations replacing gas boilers.

The energy security risks of LNG reliance

While LNG has played an indispensable role filling the Russian supply gap, security concerns remain for certain landlocked CEE and 3SI countries with unequal access to market-based LNG. The reality is that all importers and consumers of LNG face risks from global fuel price fluctuations, contract renegotiations, and competition from buyers willing to spend more. Pakistan’s experience in 2022 and 2023 highlights these challenges. Whenever China’s economic recovery arrives, it will have major ramifications across the global LNG market. The EU’s gas import bill ran close to €400 billion in 2022 alone—more than three times the level in 2021, showing how high the price of energy security can be.

The Three Seas Summit is an opportunity to pivot from gas to renewables

This year’s Three Seas Summit provides a unique opportunity for CEE governments to articulate a long-term vision pivoting away from fossil fuel interests toward clean, affordable, and local renewables, enabled by an expanded interconnector network. The new pro-Europe and pro-climate government in Poland, the largest 3SI member, could lead the charge for 3SI to transition away from gas use.

The opportunity to implement this change is significant, especially for the Lithuanian 3SI presidency and its Baltic Sea neighbours, which are on track to deploy 15 GW of offshore wind by the early 2030s. Capitalizing on the wind and solar potential would increase the share of renewables in 3SI’s electricity generation from 39 percent today to 67 percent by 2030, and lead to a 27 percent reduction in power prices compared to a current policy scenario.

Realization of this renewable potential would bring major economic and security benefits. The expansion of offshore wind in the region is already creating hundreds of jobs, and lower electricity prices will attract further manufacturing and industry investments. Examples from Ukraine show that distributed energy generation and interconnection provides better resilience in times of war than a traditional, centralized power system.

However, grid expansion and upgrades have to keep pace with the electrification of the economy. The European Commission estimates that by 2030, €584 billion in investments are necessary to modernize the aging grid infrastructure, making it fit for variable renewables and new demand from electric vehicle charging points and residential heat pumps. This presents a vast investment opportunity for the next phase of the Three Seas Initiative Investment Fund, especially in the area of cross-border interconnection.

With the expansion of wind and solar, the CEE region can become a model for reduced dependency on fossil fuel imports—and transform into a European clean energy hub.

Pawel Czyzak is Central and Eastern Europe lead at Ember.

Nolan Theisen is a senior research fellow at Slovak Foreign Policy Association.

EnergySource

EnergySource is the Global Energy Center’s (GEC) online publication providing commentary and analysis on developments in the energy and climate sector from a wide-array of thought leaders, politicians, and experts.

EnergySource Oct 4, 2023

What’s next in the two-front war against climate change and energy insecurity?

By Robert F. Ichord, Jr.

Electrification is a powerful weapon in the battles against climate change and the weaponization of energy supply. To improve overall system reliability and resilience, the United States and European Union must decarbonize, meet new consumer and industrial demands, and expand transmission capacity.

Climate Change & Climate Action Energy & Environment

EnergySource Aug 31, 2023

A Three Seas Chamber of Commerce could enhance energy diversification across Central and Eastern Europe

By Olga Khakova, Paddy Ryan, and Bailee Mathews

The Three Seas Initiative (3SI) Summit in Bucharest takes place next week. To catalyze investment and diversify away from Russian energy, the summit should establish a Three Seas Chamber of Commerce, capable of sustaining progress and unleashing the region’s full potential.

Central Europe Eastern Europe

EnergySource Feb 21, 2024

Escalating Middle East conflict means North America must bolster global energy security

By Julia Nesheiwat

The Houthi attacks on ships in the Red Sea have raised shipping costs and caused delays for certain traded goods. While global energy supply has remained uninterrupted, the threat of a broader conflict in the region raises the chances that there will be disruptive attacks on energy and transport infrastructure, putting energy security at risk.

China Energy & Environment

Learn more about the Global Energy Center

The post Central and Eastern Europe needs to rethink its approach to energy security appeared first on Atlantic Council.

The axis of evasion: Behind China’s oil trade with Iran and Russia

Kimberly Donovan, Maia Nikoladze — Thu, 28 Mar 2024 16:52:01 +0000

Oil revenue is a lifeline for the Iranian and Russian economies, but Western sanctions have jeopardized both countries’ ability to ship oil and receive payments. In response, Iran and Russia have redirected oil shipments to China—the world’s largest importer of crude oil. In 2023, China saved a reported ten billion dollars by purchasing crude oil from sanctioned countries such as Iran and Russia.

Over the years, Beijing and Tehran have developed an oil trade system that bypasses Western banks and shipping services. Russia adopted Iran’s methods for exporting sanctioned oil after the Group of Seven (G7) allies capped the price of Russian crude oil at sixty dollars per barrel in December 2022.

As a result, Iran, Russia, and China have created an alternative market of sanctioned oil, wherein payments are denominated in Chinese currency. This oil is often carried by “dark fleet” tankers that operate outside of maritime regulations and take steps to obscure their operations.

Oil revenue from China is propping up the Iranian and Russian economies and is undermining Western sanctions. Meanwhile, the use of Chinese currency and payment systems in this market restricts Western jurisdictions’ access to financial transactions data and weakens their sanctions enforcement efforts.

How China manages to import sanctioned Iranian oil

China has developed a way to import Iranian oil while bypassing the Western financial system and shipping services. Iran ships oil to China using dark fleet tankers and receives payments in renminbi through small Chinese banks. The dark fleet tankers operate without transponders to avoid detection. Once oil shipments reach China, they are rebranded as Malaysian or Middle Eastern oil, and bought by “teapots” in China. “Teapots” are small independent refineries that have been absorbing 90 percent of Iran’s total oil exports since Chinese state-owned refiners stopped transacting with Iran due to the fear of sanctions.

“Teapots” are believed to be paying Iran in renminbi using smaller US-sanctioned financial institutions like the Bank of Kunlun. This strategy allows China to avoid exposing its large international banks to the risk of US financial sanctions.

How Iran could make use of the renminbi payments from China

Once Iran gets paid in renminbi, it has two options for using Chinese currency: It can either buy Chinese goods or park assets in a Chinese bank. Iran cannot spend much in renminbi outside of China because the currency is not entirely freely tradeable, and is therefore less desired by other countries as a store of value or unit of account. The role of the renminbi in international trade has increased in the past few years, but it’s driven by China’s renminbi-denominated trade with its partners. The currency is rarely used for transactions by two countries when one is not China.

Consequently, in 2022, Iran bought $2.12 billion worth of machinery from China, as well as $1.43 billion worth of electronics. While data on financial transactions between Iran and China is not accessible, there is a high probability that Iran’s imports of Chinese technology are denominated in renminbi.

Another use Iran could find for the Chinese currency is building up foreign exchange reserves in renminbi. In October 2023, the deputy chief of the Central Bank of Iran said that Iran’s foreign reserves are increasing because of the growth in oil and non-oil exports. If oil revenues are a significant contributor to the growth of Iran’s foreign exchange reserves, and if China is buying Iranian oil in renminbi (trade data indicate that around 90 percent of Iran’s oil exports are going to China), then a considerable share of Iran’s reserves could be denominated in renminbi.

Additionally, Iran’s willingness to find alternative currencies and diversify away from the US dollar is coinciding with Beijing’s internationalization ambitions for its currency. Thus, Beijing may also have an interest in paying Iran in renminbi and building Iran’s renminbi reserves. (The Central Bank of Iran does not publish data on the currency composition of its international reserves. The absence of data makes it difficult to confirm this theory.)

Russia has been copying Iran’s methods for circumventing sanctions

Russia’s full-scale invasion of Ukraine and subsequent imposition of sanctions have put Russia in a similar situation as Iran. Russia also started using a “shadow fleet” to ship oil to China and has resorted to the use of the renminbi for trade to circumvent the oil price cap. It must be noted that Russia’s situation is not as dire as Iran’s when it comes to sanctions: Trading in Russian oil is tolerated as long as buyers pay sixty dollars or less per barrel, while buying Iranian oil is banned regardless of the price. This gives Russia more flexibility to ship oil to other destinations and, by extension, more bargaining power in price negotiations with China.

Nevertheless, Russia is now heavily dependent on China and has a similar model of trade with China as Iran: Russia exports oil to China and imports technology. In 2022, Russia received $88 billion from Beijing from energy exports and paid $71.7 billion for Chinese goods. Since Russia and China have switched to the use of national currencies, ruble-renminbi trade increased eighty-fold between February and October 2022.

But China helps Russia only to the extent that it does not harm its own interests. For example, after the United States created a new secondary sanctions authority in December 2023, three out of the four largest Chinese banks stopped accepting payments from sanctioned Russian companies. Russian officials claim that they are working with their Chinese counterparts to resolve the issue, but Beijing is unlikely to go back to transacting with sanctioned Russian entities as long as the sanctions threat prevails. Thus, while secondary sanctions did not directly target oil payments from China, this shows that if the West were to threaten to sanction large Chinese companies for importing Russian oil above the price cap, Beijing would likely comply.

How the West can begin to respond

The effectiveness of sanctions against Iran, Russia, and other heavily sanctioned regimes should not be analyzed in silos, because these countries don’t operate in silos. Knowledge sharing on evasion techniques and economic cooperation with China have allowed both Iran and Russia to mitigate the effects of sanctions.

Western authorities should start looking into financial linkages between heavily sanctioned regimes, as well as their economic cooperation with China, and consider how evasion techniques developed by previously sanctioned regimes can be used by newly sanctioned countries. This will help Western sanction-wielding authorities improve the design of sanctions and close loopholes before they can be exploited. Such analysis would also help the West develop an understanding of what sanctions can and cannot achieve, and what unintended consequences they could result in.

Kimberly Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @KDonovan_AC.

Maia Nikoladze is the assistant director at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center. Follow her at @Mai_Nikoladze.

The post The axis of evasion: Behind China’s oil trade with Iran and Russia appeared first on Atlantic Council.

Ralby quoted in the Washington Post on the Baltimore bridge collapse

smeadows — Wed, 27 Mar 2024 13:50:17 +0000

The post Ralby quoted in the Washington Post on the Baltimore bridge collapse appeared first on Atlantic Council.

Ellinas in Financial Mirror: Egypt’s natgas woes continue

smeadows — Tue, 26 Mar 2024 16:35:00 +0000

The post Ellinas in Financial Mirror: Egypt’s natgas woes continue appeared first on Atlantic Council.

Ellinas in Financial Mirror: Oil prices to keep on rising

smeadows — Mon, 25 Mar 2024 19:22:00 +0000

The post Ellinas in Financial Mirror: Oil prices to keep on rising appeared first on Atlantic Council.

Goldwyn quoted in S&P Global Commodity Insights on Venezuelan sanctions

smeadows — Mon, 25 Mar 2024 13:56:08 +0000

The post Goldwyn quoted in S&P Global Commodity Insights on Venezuelan sanctions appeared first on Atlantic Council.

Peacemaking through curbing Russian oil and gas exports

Svitlana Romanko and Oleh Savytskyi — Wed, 20 Mar 2024 13:22:59 +0000

Ukraine seems to have found an effective asymmetrical response to the massive waves of deadly missile attacks that Russia has unleashed against Ukrainian cities since early January. A number of Russian oil refineries and oil terminals have been hit with precision strikes, attributed to new Ukrainian long-range drones.

By targeting fossil fuel exports—the financial lifeline of the Kremlin’s regime—this response has had an impact. In January Russia’s seaborne oil product exports fell 8.6 percent from a year earlier and 2 percent from the previous month to 10.8 million metric tons, owing to lower processing capacity and unplanned repairs.

Drone strikes at critical processing and export facilities bring financial pain to Russia. Repairs are costly and time-consuming, especially because of sanctions that limit access to Western technology, which is making the replacement of destroyed equipment difficult.

STAY CONNECTED

Sign up for PowerPlay, the Atlantic Council’s bimonthly newsletter keeping you up to date on all facets of the energy transition.

However, Ukraine’s efforts to repel Russian attacks would be made less challenging if Europe and the United States did even more to throttle Moscow’s oil and gas exports by utilizing the full power of sanctions.

The tragic loss of human life in Ukraine, including hundreds of children, is still too often paid for by cash that Russia receives from the export of oil and gas enabled by loopholes that persist in the sanctions regime imposed on Moscow by the United States and the European Union. Amid the ongoing struggle for peace and sovereignty in Ukraine, governments that believe in the rule of international law must do more. The United States, EU, and the Group of Seven (G7) industrialized nations should be consistent and strict in enforcing sanctions against Russian fossil fuels.

Western governments have strong tools to dry up the Kremlin’s war budget. They can do this by plugging the gaps in sanctions against Russian oil and gas exports, strengthening them further, and thereby severing the critical revenue stream supporting the Kremlin’s oppressive regime and its brutal war machine.

There are five specific actions that the G7 and EU can take in this direction: enforce price caps on Russian oil and oil products; prevent the expansion of Russia’s shadow fleet of oil tankers; close the refining loophole; fully ban Russian liquefied natural gas (LNG) imports; and take decisive actions to reduce demand for oil and gas in the long-term.

Civil society organizations are urging Western leaders to take these steps. More than 290 groups from across the globe addressed the G7 and EU leaders with this call in February, as Ukraine marked the tragic two-year anniversary of the full-scale invasion.

There is an urgent need to eliminate loopholes in sanctions against Russian fossil fuels to prevent further escalation of the Kremlin’s aggression in Europe outside of Ukraine.

The shadow of Russia’s military plans looms ominously. This is evident in the 2024 federal budget, with a staggering allocation of resources to the military-industrial complex, not seen since Soviet times. This is a startling shift in budgetary focus, with a third dedicated to the army. This militarization signifies a perilous path toward conflict intensification, threatening regional stability. In 2024, Russia’s “national defense” budget will expand to 10.8 trillion rubles ($110 billion), marking a 70 percent increase from 2023 and more than doubling from 2022. It is three times higher than the pre-war 2021 allocation.

Regrettably, Europe and the United States inadvertently contribute to this war chest. The refining loophole in Western sanctions against Russian oil exports, meticulously highlighted by Global Witness, remains a massive funding source feeding Russia’s aggression, a fact that should not be overlooked.

While Western governments have banned the imports of crude oil, petrol, diesel, and jet fuel that originate in Russia, their countries can still import refined oil products produced from Russian crude in other nations, like India, China, Turkey, or the United Arab Emirates. In 2023 sales of Russian crude oil to refineries in India went through the roof. These Indian refineries capitalized on selling the refined products to G7 markets, where direct supplies of Russian oil were banned. The refining loophole increases the demand for Russian crude oil and enables higher sales in terms of volume, while keeping its price up. As a result, the price of Russian crude oil does not collapse in the global market even with the Western sanctions.

OPEC members’ decision to restrict exports of additional volumes of oil to world markets benefits Putin, and contributes to Russia’s strategy to weaponize energy supply. The refining loophole also creates a space for cooperation between Russia and OPEC countries, which can import Russian oil to refine or mix it with other blends of crude to conceal origin and profit from it.

Similarly, Europe still buys significant volumes of Russian natural gas, not so much through pipelines, but increasingly in the form of LNG. Key Russian LNG importers such as France, Spain, and Belgium have little excuse for continuing to do business with Russia. The gas storage in Europe is ample, and projections indicate an energy surplus bolstered by record-breaking clean energy expansion and alternative LNG supplies set to come online in 2024.

In total, since the start of the full-scale invasion in Ukraine on February 24, 2022, Russia has amassed more than $650 billion in profits from fossil fuel exports. Yet, if international sanctions on Russia’s fossil fuel industry are maintained and rigorously enforced, the International Energy Agency projects that the Kremlin’s profits from oil and gas could plummet by 40 to 50 percent by 2030.

The West has to act collectively to cripple the Kremlin’s fossil fuel export lifeline to help end the war in Ukraine faster. The future of Ukraine’s security and human dignity hinges on this critical moment of action, and world leaders must take action now to stop funding Russia’s aggression.

Svitlana Romanko, Founder and Director of Razom We Stand

Oleh Savytskyi, Campaigns Manager at Razom We Stand

EnergySource

EnergySource Feb 21, 2024

Two years on, what the Russian invasion of Ukraine means for energy security and net-zero emissions

By Atlantic Council experts

Experts from the Atlantic Council’s Global Energy Center offer perspectives on navigating global energy security and charting a course towards a more secure and sustainable energy future two years after Russia’s full-scale invasion of Ukraine.

Energy & Environment Energy Markets & Governance

EnergySource Dec 13, 2023

The US and NATO must clamp down on Russian fossil fuels to end the war in Ukraine

By Svitlana Romanko and Oleh Savytskyi

The US and its EU allies have made several attempts to diminish Russia’s fossil fuel exports, with mixed results. the West must do more to staunch the flow of Russian oil and gas—and restore peace for Ukraine.

Energy & Environment Energy Markets & Governance

EnergySource Sep 14, 2023

What to do about Russia’s energy trojan horse

By Olga Khakova, Charles Lichfield

The future of Gazprom’s piped deliveries to Europe looks bleak. However, Europe has no binding timeline for phasing out Russia’s growing LNG exports. Reducing these import will be critical to bringing Ukraine closer to victory and for securing Europe’s energy system.

Economic Sanctions Economy & Business

Learn more about the Global Energy Center

The post Peacemaking through curbing Russian oil and gas exports appeared first on Atlantic Council.

Shaffer joins Strait Talk to discuss the Turkmenistan/Turkey gas deal

smeadows — Mon, 11 Mar 2024 20:06:35 +0000

The post Shaffer joins Strait Talk to discuss the Turkmenistan/Turkey gas deal appeared first on Atlantic Council.

With Operation Aspides, Europe is charting its own course in and around the Red Sea

Léonie Allard, Cinzia Bianco, and Mathieu Droin — Thu, 07 Mar 2024 16:49:43 +0000

On February 19, the European Union (EU) launched its own naval operation in the northwest Indian Ocean. EU High Representative for Foreign Affairs Josep Borrell called the decision to launch the mission “a fast and robust reaction to the attacks of the Houthis, who are attacking commercial ships in the region.” That is true, but the decision was also, in part, a reaction to a first round of US and UK strikes on the Houthis’ inland capabilities on January 11. The only EU country actively contributing to the strikes was the Netherlands, led by Mark Rutte, the outgoing prime minister and aspiring future NATO secretary general. While several European countries continue cooperating with Prosperity Guardian, the EU operation was set up as a sign of dissociation from the US-led operation against the Houthis, which some European governments perceive as escalatory in the fragile and tense broader regional context.

The EU operation, called EUNAVFOR Aspides (the ancient Greek word for “shields”), has initial contributions from seven member states: Belgium, Denmark, France, Germany, Greece, Italy, and Spain. It is headquartered in Greece, while Italy is in charge of its operations. Already, four multipurpose frigates are part of the mission: one each from France, Germany, Italy, and Greece. In launching Aspides, the EU seems intent on asserting European agency, with its own assets and rules of engagement, in line with its own interests rooted in confidence-building with regional states.

The shipping industry is increasingly impatient for action to protect shipping lanes, and the urgency will only increase after the March 6 attack on the cargo ship True Confidence that killed two crew members and injured six. Now the EU has to deliver. Yet, whether the new operation will help Europeans achieve their goals, strategically and in terms of perception by international and local partners, remains unclear. Already, the United States is unhappy with Europeans signaling their willingness to proceed differently from Operation Prosperity Guardian. Conversely, some in the Middle East feel that Europeans are contributing to raising military stakes in the region for their own interests.

But there might be real value in the current European approach, for regional partners as much as for the United States. With a longstanding naval, military, and diplomatic presence around the Gulf of Aden, Europe has credentials and legitimacy to engage regional players more inclusively. Although the EU’s response to the current crisis could have come sooner, the new operation will provide an impetus to step up engagement, especially given the large operation area covering the Red Sea, the Gulf of Aden, the Arabian Sea, the Gulf of Oman, and the Gulf. If Europeans want to be taken seriously and have a positive impact, they must articulate a clear vision for the basis of their future diplomatic and security initiatives, in addition to investing in adequate means to implement their initiatives.

Europeans and the US in the face of increasing militarization of the region

The Red Sea has been of strategic interest as a central corridor for global trade and connectivity ever since the opening of the Suez Canal in Egypt in 1869. Nearly 15 percent of global seaborne trade passes through the Red Sea. This includes 12 percent of seaborne-traded oil and 8 percent of the global liquefied natural gas trade, as well as 8 percent of the world’s grain trade. Around 17 percent of the world’s submarine cables pass between the Mediterranean and the Indian Ocean. The impact of the recent cable cuts in the Red Sea, affecting 25 percent of data between Europe and Asia, highlights a sometimes overlooked vulnerability while shallow waters in the sea make them more prone to damage. The southern opening of the Red Sea around the strait of Bab el-Mandeb has long been affected by piracy issues, which peaked in the 2000s. Thanks to international efforts, the threat has been significantly reduced. The safety of Bab el-Mandeb and the Gulf of Aden is now primarily affected by overlapping local, regional, and international conflicts and tensions. These include pervasive terrorist threats in Somalia and Yemen; civil wars in Sudan, Ethiopia, and Somalia; and ongoing tensions among Ethiopia, Egypt, Eritrea, and Somalia.

This entrenched instability combined with the strategic significance of the Red Sea has led to a competition for influence and militarization. Regional powers such as the United Arab Emirates (UAE), Saudi Arabia, Iran, Turkey, and Qatar are actively developing strategies to assert their influence in the Horn of Africa by establishing outposts and conducting security, economic, and diplomatic engagement. The Red Sea has also suffered from the export of rivalries between Iran and Arab Gulf countries to the maritime domain. Iran has long shown its capability to disrupt vessels operating in and out of the crucial chokehold in the Strait of Hormuz. Since a coalition led by Saudi Arabia launched military operations against the Houthis in 2015, Iran has deepened its relations with the rebel group and expanded its disruptive activities to the Red Sea, too. In 2018, the Houthis launched a severe attack on a major Saudi tanker off the Yemeni coast using an Iran-made drone boat. A year later, they launched missile and drone attacks against two major Saudi oil installations. These incidents highlighted Iranian-Houthi capabilities, pushing Saudi Arabia to seek diplomatic solutions to the conflict.

Russia and China have also taken advantage of Red Sea instability to establish footholds in the region. China’s military has expanded its first overseas base in Djibouti since its opening in 2017, while Russia concluded an agreement with Sudan in February 2023 to build a base after years of persistent attempts. Despite the presence of China and Russia, however, the United States remains the main security player in the region. It maintains a robust military presence of approximately 45,000 permanent forces, centered at the Fifth Fleet based in Bahrain, at Al-Udeid air base in Qatar, as well as in Kuwait, Saudi Arabia, the UAE, and Djibouti.

Europe has been a player in the Red Sea

Europeans have consistently reinforced their presence in and around the Red Sea. France has unique stakes due to its overseas territories in the southwestern Indian Ocean (La Réunion, Mayotte, Scattered Islands). It also has two military outposts: a joint base in Djibouti and three bases for navy, air, and land forces in the UAE. Italy, a former colonial power in the Horn of Africa, has retained strong relations and influence in the region, too. Since 2013, Italy has also had a military base in Djibouti to provide logistical support to Italian military operations in East Africa and the Indian Ocean. Moreover, European investment in maritime security is important for a country such as Denmark, home of the Maersk Group, Denmark’s largest company by revenue. Finally, since 2018, Spain has held the command of the flagship naval operation mission of the EU: EUNAVFOR Atalanta.

Atalanta was set up in 2008 with a mandate to escort World Food Program vessels heading to Somalia and fight piracy off the coasts of that country. Another existing collective European effort is the European Maritime Awareness in the Strait of Hormuz, launched in 2020. It came amid a flare-up of tensions in late 2019 caused by a series of attacks by Iran on vessels in the Strait of Hormuz, to which the United States reacted by launching a coalition called “International Maritime Security Construct” and its task force “Sentinel.” Perceiving the US move as escalatory, France initiated another coalition, composed of European nations (Belgium, Denmark, Germany, Greece, Italy, the Netherlands, Portugal, and Norway) but outside of the EU framework, with the primary objective of providing surveillance capabilities in the Gulf, the Strait of Hormuz, and a part of the Arabian Sea.

Questioning of the US-led escalatory approach in the region

The wave of Houthi attacks created major strategic dilemmas for all Red Sea stakeholders. They need to mitigate the trade and economic costs of the disruption of maritime traffic caused by the Houthis. At the same time, they are wary of the political and security costs that could come from escalating tensions in Yemen and with Iran, in particular in the context of the ongoing Gaza war. The United States, given its regional clout and facing domestic pressures to show strength against Iran and its proxies, displayed a willingness to act. Regional countries, mindful of their public opinion rattled by the events in Gaza, preferred restraint, at least in public.

Europeans asserted their positions across this spectrum. Some EU members such as Denmark, Germany, and the Netherlands ended up publicly backing the US-UK attacks. The Netherlands in particular has been providing logistical and active military support to the US strikes on the Houthis. Other European countries, such as France, Italy, and Spain, preferred to keep some distance from the US-led military operations. From the onset, both Italy and France stated that their assets in the Red Sea and surrounding areas should not be considered to be following US orders and remained under national command, with their own rules of engagement. Their fear appears to be that supporting a more kinetic US involvement over Yemen will deteriorate the security situation in the region and drag external powers into a further escalation, while potentially metastasizing the Israel-Hamas conflict.

Therefore, when the United States and the United Kingdom launched their campaign of strikes against Houthi targets, the Italian government clarified that active involvement was conditioned on parliamentary approval, while French President Emmanuel Macron declared that the move was “escalatory” and that France would continue to enforce freedom of navigation, in coordination with—but not in subordination to—US-led efforts. France’s decision balances the country’s efforts to maintain leverage, particularly in defusing tensions between Hezbollah and Israel, while preserving some space for mediation in the region. It reflects the French government’s increasing concerns about perceptions of the country in the Middle East and North Africa, as well as domestic stability, with strong popular feelings regarding the situation in Gaza and Israel. Spain was probably the most straightforward in its refusal to join US-led efforts, presenting its choice of not intervening militarily in the Red Sea as a “commitment to peace,” consistent with Madrid’s stance on the war in Gaza, which has been critical of Israel.

A new, robust EU naval mission

After initial scattered operational responses from member states, the EU launched Aspides on February 19 for a one-year mandate. Protection of shipping is the mission’s only executive task, which will have to be defined and adapted, depending on the force flow and the number of requests for protection. The main distinction with the US-UK approach is that Aspides does not envision any participation in strikes against the Houthis and will only operate at sea with an escort, patrol, surveillance, and intercept mandate.

While Europeans seek to de-escalate and assuage their Arab partners’ concerns by showing that they diverge from the US-led approach, they might end up irritating their US partner but could also inadvertently be seen as fueling escalation, thus failing to score any points vis-à-vis regional actors. Avoiding such a scenario requires a massive strategic communication effort by Europeans to explain their approach and diplomatic finesse to convince their partners. Borrell has already visited Israel, Bahrain, Saudi Arabia, Qatar, and Jordan. Several EU member state leaders and ministers have traveled extensively in these countries, as well as in Egypt. The newly appointed Greek commander of Aspides, Commodore Vasileios Gryparis, has also started reaching out to regional partners.

A paper by France, Germany, and Italy to other EU members that was leaked to the press prior to the launch of the operation pointed to two main strategic objectives: building “trust and confidence with regional Arab States” and “never entering in a confrontational mode with Iran.” The Red Sea offers a promising opportunity for constructive cooperation between European countries and Arab Gulf states, which is an EU priority. While it is in the Gulf monarchies’ interest to secure the Red Sea waterways, the priority for Gulf capitals is to avoid escalatory incidents vis-à-vis Iran. Both Saudi Arabia and the UAE feel particularly vulnerable to an Iranian reaction, which could easily target their territories, strategic assets, or critical infrastructure. The UAE and Saudi Arabia—alongside Egypt—may find it politically easier to extend their support for the EU operation rather than the US mission, given the lesser emphasis on active deterrence. The UAE and Saudi Arabia have consistently demonstrated a keen interest in internationalizing maritime security to compensate for the United States’ perceived retrenchment from the region.

Over the next year, Aspides could potentially be extended to other like-minded contributors also interested in projecting a bigger maritime security role in global strategic chokepoints. A key partner could be India, which also enjoys deep relations with the Gulf monarchies, including maritime security cooperation. Moreover, Europeans should think strategically about the consolidation phase after this immediate crisis is placated. They should carefully consider the possibility of using Aspides as a platform for sustainable deconfliction. Doing so would be another way to demonstrate complementarity with the United States, while finally responding to long-standing US pressures for more burden-sharing by Europeans.

Léonie Allard is a visiting fellow at the Atlantic Council’s Europe Center.

Cinzia Bianco is a senior fellow at the European Council on Foreign Relations.

Mathieu Droin is a visiting fellow in the Europe, Russia, Eurasia Program at the Center for Strategic and International Studies.

The post With Operation Aspides, Europe is charting its own course in and around the Red Sea appeared first on Atlantic Council.

Shaffer quoted in S&P Global on Iranian oil exports

smeadows — Tue, 27 Feb 2024 20:14:37 +0000

The post Shaffer quoted in S&P Global on Iranian oil exports appeared first on Atlantic Council.

Goldwyn quoted in Bloomberg on Venezuelan oil

smeadows — Fri, 23 Feb 2024 18:29:04 +0000

The post Goldwyn quoted in Bloomberg on Venezuelan oil appeared first on Atlantic Council.

Ukrainian long-range drones target Putin’s war machine inside Russia

Victoria Vdovychenko, Alexander Khara — Thu, 22 Feb 2024 21:29:53 +0000

For the past two years, international support for Ukraine has been hampered by widespread fear of escalation among the country’s Western partners. This has prevented Ukraine from receiving the kind of long-range weapons that would have allowed the Ukrainian military to strike back against strategic targets inside Russia. Ukraine has responded to the West’s escalation paralysis by developing its own fleet of domestically produced deep strike drones, and is now deploying these long-range weapons against Russian targets with growing frequency.

In the first two months of 2024, Ukraine has launched a new campaign of air strikes inside Russia. Key targets have included the Ust-Luga fuel export terminal on the Baltic Sea close to St. Petersburg, and major oil refineries in Yaroslavl and Volgograd. These attacks against Russia’s energy industry infrastructure mark a new stage in the conflict, with Ukraine aiming to bring the war home to Russia and weaken Putin’s war machine from within.

As the full-scale invasion enters a third year, Russia has largely managed to circumvent sanctions imposed on the country’s oil and gas industry. Despite the loss of European markets and the imposition of price caps, Russia has been able to identify new customers while also finding creative ways of bypassing restrictions.

With Western sanctions failing to have the desired impact, Ukraine’s long-range drone strikes represent a far more direct approach that Kyiv hopes will create greater challenges for the Kremlin. If drone attacks succeed in causing significant disruption to Russia’s economically vital energy sector, this could negatively impact military operations in Ukraine and domestic stability in Russia.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

The Ukrainian air strike campaign targeting high-value energy assets inside Russia is likely to expand in the coming months. In addition to undermining the economic foundations of the Putin regime, Ukraine’s attacks aim to damage or destroy the Western equipment that is widely used throughout the Russian oil and gas industry. Much of this equipment is already subject to sanctions, making it problematic for Russia to import replacements.

Ukraine’s drone raids are creating dilemmas for Russian military planners and forcing them to make tough choices regarding the deployment of scarce air defense, anti-drone, and electronic warfare capabilities. Much of this is currently concentrated along the front lines in Ukraine, but attacks inside Russia are now fueling calls to transfer units to the deep rear. Given Russia’s vast size and extensive energy infrastructure, it will be extremely difficult to provide comprehensive coverage.

Ukraine’s drone strikes also have an informational aspect as they are difficult to conceal. As a result, they are making the Russian public more aware of the ongoing war in Ukraine and forcing them to acknowledge that it has now reached the home front. This is potentially important as the Kremlin has worked hard for the past two years to insulate Russian society from the invasion of Ukraine, and has sought to keep any negative impact from the war to an absolute minimum.

Another focus of long-range Ukrainian attacks is Russia’s military industrial complex. Over the past year, Ukrainian drones have targeted at least four missile and air defense production facilities in Smolensk, Bryansk, Tula, and Kolomna. There are some indications that these attacks are hampering Russia’s ability to supply its invading army. For example, Ukrainian military officials noted a substantial reduction in the number of lancet drones deployed on the front lines following an attack on a Russian production facility.

Eurasia Center events

Public Event Tue, February 13, 2024 • 1:30 pm ET

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

Determining the overall impact of Ukraine’s deep strike campaign on the Russian economy is difficult due to the Kremlin’s efforts to conceal evidence of any resulting damage. Nevertheless, international news reports indicate that the initial wave of drone attacks in early 2024 did manage to disrupt energy sector operations and force temporary stoppages at targeted facilities. This achievement underlines the potential of Ukraine’s strategy.

Future long-range operations inside Russia will be shaped by Ukraine’s recently formed Unmanned Systems Force, a new branch of the Ukrainian military dedicated to drone warfare established by President Zelenskyy in early February. While attacks are expected to continue, it will likely take some time for Ukraine to produce enough long-range drones to pose a more serious threat to Russia’s energy sector and military production facilities. Ukrainian officials are committed to producing one million drones in 2024, but this total includes large quantities needed for the front lines as well as additional marine drones to build on Ukraine’s success in the Black Sea.

While there are no wonder weapons or silver bullets in this war, correctly deployed drones in sufficient numbers are capable of making a meaningful difference, both on the battlefield and far beyond the front lines inside Russia. Ukraine’s strategy of targeting high-value energy assets using low-cost drones looks to be both effective and sustainable. It is also a sensible response to mounting concerns over the future of US military aid.

Ukraine’s new generation of long-range drones are comparatively easy to produce. They have also proven surprisingly difficult to intercept. Looking ahead, the key issue is likely to be quantity. If Ukraine can manufacture enough long-range drones, it may be possible to seriously degrade Russia’s essential military capabilities and impact the course of the war.

Victoria Vdovychenko is Program Director of the Security Studies Program at the Centre for Defence Strategies. Alexander Khara is a fellow at the Centre for Defence Strategies.

Atlantic Council — Fri, 16 Feb 2024 16:37:13 +0000

Watch the full event

Maroš Šefčovič on US-EU collaboration towards a transatlantic green marketplace

AN #ACFRONTPAGE EVENT— European Commission Executive Vice-President Maroš Šefčovič on building more resilient, green transatlantic economies.

Energy Markets & Governance Europe & Eurasia European Union Geopolitics & Energy Security

Event transcript

Uncorrected transcript: Check against delivery

Speaker

Maroš Šefčovič
Executive Vice-President for the European Green Deal, European Commission

Moderator

Ana Swanson
Trade and International Economics Reporter, the New York Times

Opening remarks

Landon Derentz
Senior Director, Global Energy Center, Atlantic Council

LANDON DERENTZ: Well, good afternoon. I’m Landon Derentz, senior director of the Atlantic Council Global Energy Center and Morningstar chair for global energy security. Very excited to welcome our in-person audience and those joining us around the world virtually to AC Front Page. The AC Front Page is the Atlantic Council’s premier platform for live conversations with world leaders tackling today’s greatest challenges.

To that end, it’s my distinct pleasure to introduce you to a leader that has been an absolute stalwart of the transatlantic relationship and, as we had an opportunity to discuss earlier, across many, many administrations (so bipartisan support, opportunities to build partnership for many years). Maroš Šefčovič is executive vice president for the European Commission for the European Green Deal, and today’s featured speaker. We’re also joined by Ms. Ana Swanson, trade and international economic reporter at the New York Times, who will be moderating this conversation.

Later this week, the Atlantic Council will launch its flagship energy publication, The Global Energy Agenda. It’s a moment for us to reflect on what’s been accomplished in the year prior, in 2023, and an opportunity for setting new ambitions for the year ahead. Moments like today help us inform and drive forward with that outlook. And while geopolitics weighed heavily on the prior year, the European Union, through policies like the European Green Deal, like Repower EU, has demonstrated that you can be a champion for climate ambition while also prioritizing energy security and competitiveness. It’s kind of a major balancing act.

Whether navigating joint procurement of natural gas supplies or elevating the EU’s greenhouse gas emissions benchmarks, Executive Vice President Šefčovič is a central figure in shaping and transforming the future of our energy system. In a year dominated by democratic elections, it’s critical that we leverage partnerships like this and forge forward our international relations in a way that strengthens the transatlantic cooperation and helps us achieve our shared energy and climate goals. Executive Vice President Šefčovič, we’re very thankful you joined us today.

And with that, it’s my pleasure to turn the floor over to our moderator, Ana Swanson, to begin this conversation. Ana, the floor is yours.

ANA SWANSON: Thank you so much. And, as Landon mentioned, I’m Ana Swanson. I’m the trade and international economics reporter for the New York Times. Really delighted to be here. And thank you so much for joining me.

MAROŠ ŠEFČOVIČ: Thank you. Thank you for the invitation and your always very kind remarks. That’s why I’m coming back all the time, you know?

ANA SWANSON: I do want to mention up top that this event is live and on the record, and for those in the audience watching virtually you can submit questions using the “Ask AC” function, or you can submit questions on X, formerly Twitter, using hashtag #ACFrontPage. For those in the live audience, you will have the opportunity to raise your hands and ask some questions later on in the program.

So let’s dive right in. This month the EU announced climate targets for 2040 that included a 90 percent reduction in greenhouse gas emissions from 1990. How does that build on or differ from previous goals? And, obviously, the conflict with Russia has forced a reexamination of some energy policy. How is the need to shift away from Russian natural gas influencing European plans?

MAROŠ ŠEFČOVIČ: Well, thank you very much for that question to open our conversation with, because it’s, I think, very fundamental for, it was really correctly said by Landon, to find that sweet spot to do this balancing act. So for us, we have it in our climate law we should be climate neutral by 2050. So we want to be the first climate neutral continent. I think we share that ambition also with the United States of America. But we kind of enshrined it in the law.

So what is—what was very important in this communication was to launch the debate, how to get from 2030, where we wants to reduce our greenhouse gas emission by 55 percent, to 100. So what is the trajectory? How can we get there? And we wanted to launch this discussion based on very thorough impact assessment, different scenarios. What do we need from the technological development point of view? How to factor in, I would say, this absolutely new situation if it comes to the—to the energy supplies, which was one of the, I would say, most fundamental energy shifts Europe did since probably the 1970s. That from one year to another you shift away from Russian gas, from 150 billion cubic meters to a little bit more than 40 [billion] right now.

And here, I want to really do think, appreciate it, and use it as a, I would say, pattern for the future that what that good allies should do to each other. I mean, we, of course, as you know very well, we carry really the burden of having two very serious military conflicts close to our borders. And, on top of it, on helping the almost ten million refugees, in certain point of time. On opening our markets, opening our labor market, providing health care, providing the schooling for the refugees, and also providing 150 billion euros of the financial and military assistance to Ukraine. On top of that, we had to shift away from Russian fossil fuels. And we did it with great success, thanks to the excellent, outstanding cooperation with the United States of America, and the fact that the LNG sector was able to supply us with 56 billion cubic meters, again, from one year into another.

And that will be of course, for us a top priority for the next years, because we want to be climate neutral by 2050. But we know that without gas, as a very important transitional fuel, it will not be possible for us. And I think that, speaking of the global responsibility of US—and US became, indeed, the global guarantor of energy security—the responsibility goes also beyond Europe. I mean, if you want to decarbonize Southeast Asian countries, like India, but also Africa, Latin America. So simply there will be a need for this half of the carbon intensity fuel, like gas, comparing to coal, and to phase out—phase out coal. So the cooperation here is very essential. And for us, it was absolutely crucial to get the US LNG in time, despite the fact that we paid a lot for it. But, of course, the crucial was to keep the lights on, economics powered on, and really focusing how to deal with the crisis which was generated by Russian invasion of Ukraine.

ANA SWANSON: I understand that some of your recent conversations in Washington have focused around President Biden’s recent executive order about natural gas exports. Tell me about those conversations. How do you think that, you know, this order—which obviously does pertain to US environmental concerns—could impact the European economy or US-EU relations?

MAROŠ ŠEFČOVIČ: I mean, we had very good conversations on this topic yesterday at the White House, State Department, Department of Energy. And I appreciated that it was very open and constructive discussions. And what was of course very important for me was reassurance that if it comes to the next two or three years there should be no impact whatsoever on the supplies of US LNG to Europe. Then I think my interlocutor has been quite clear that, despite this announcement, what is expected in US is that export capacity of the LNG would double between now and 2030. So they should be able to accommodate also the big demand from Europe. And on top of it, there is a kind of emergency clause that if things will really go, you know, in the wrong direction, that there is a possibility to kind of adjust the measures which are currently under the discussion.

I have also the understanding for the description of the situation as it was presented to me that when the last type of this, let’s call it, inventory was done by the US government, it was in 2019. And it was well before, I would say, this shale LNG revolution started. So, I mean, to check the pipelines’ capacity, the tankers traffic, the ports, the ability to transport all that, I think it’s important. At the same time, what I was underscoring, it’s also very important, how the US government now and also in the future would approach the fact that now, indeed, you have the responsibility for the global developments in energy security.

So if you kind of make the statement, something is said in Washington, DC, about the gas and LNG, immediately it’s kind of transmitted, in a sense. I would say this has a ripple effect all over the world. We kind of felt it a little bit for a couple of—for a couple of days now. I think it’s stabilized because, indeed, the contracts are there, supplies are coming, we increased dramatically our regasification capacity to more than 230 bcm per year. So, I mean, the conditions are there that everything should follow well. But, of course, we will be continuing our discussions with the US administration, but also with the LNG sector. And we had very good meeting this morning with all LNG managers of United States.

ANA SWANSON: Mmm hmm. The shift away from Russian gas has been, you know, such a huge undertaking. I was curious if you could share, you know, maybe an obstacle that you’ve seen firsthand in that process. And then, are there any, you know, opportunities that you’ve seen in there, too?

MAROŠ ŠEFČOVIČ: I think that obstacles—there have been many, of course. The first one was that for decades, and today we can say mistakenly, we believed that through trade and good relations you can democratize the society of Russian Federation. That was, I would say, a belief which was there for a very, very long period. Very often when I was responsible five years ago for the project which was called the Energy Union, we—in Central and Eastern Europe—we remembered extremely well the lessons of 2009, the gas crisis, when simply from one day to another the gas supplies had been switched. And in our countries, including mine, Slovakia, we just had the energy left for just couple of days, and we had to completely shut down the industry and channel the remaining parts of energy to hospitals and households.

So for me, a priority at that time was that we had to diversify our energy supplies, to have at least three different sources. And I was working a lot to get there, and to build that pipeline from Azerbaijan, from increasing the capacity for LNG, to work with the Norwegians, simply to have a more diverse portfolio. But, nevertheless, if you look at it, the major flows—the major flow has been clearly coming from the east to the west. And suddenly you’re now in a situation that is a big flow, which was like almost—at certain point, almost 40 percent of gas coming from Russia through Ukraine to Europe—you had to reverse these flows.

And the good thing was that we’d been investing over the last years a lot into building of interconnectors, LNG terminals and introducing the reverse flows. But still it was—at that time we, and also I, perceived it as an emergency capacity if something goes wrong. And it’s completely different thing. Like if you now tell the whole industry, OK. This huge quantity which was coming from the east will come from the west, from the north, from the south. And you figured out how to do it. So the major problem was infrastructure, to build and complete the regasification fleet.

And, here, I would say that Germany did miracles, I would say, in very short period of time. Poland’s been very strategic in building the Baltic connectors straight from Norway, with Azeri gas help as well. The Southern Europe also, the Balkan countries building up their regasification capacities. So we’ve been kind of dealing with that in a lightning speed, I have to say. But then you had the second problem where US came in.

When you came to the global markets, everyone was telling you: Market is tight. Meaning, there is no gas for you guys, yeah? So, I mean, and then it resulted, of course, in these very high prices in certain bottlenecks, when we were getting the LNG. But I think here, again, the decision of President Biden, and that agreement which was found with my boss, Ursula von der Leyen, the president of the Commission, to focus on 50 billion cubic meters from the US to Europe was absolutely crucial. And I’m very impressed that it was even exceeded to 50 billion, because it kind of sends that calming effect. And we could then, in a more peace, look for other supplies from other corners of the world, just to have the energy we needed. So the infrastructure and the tightness of the market, that was, I would say, the major, major challenges.

ANA SWANSON: I want to shift to asking a bit about critical minerals. What kind of transatlantic cooperation are you pushing for when it comes to critical minerals? I understand this was—you know, is always and was a topic of the US Trade and Technology Council meetings last month. You know, how do you see—you know, where are those initiatives right now, and how do you see things moving forward?

MAROŠ ŠEFČOVIČ: I think we have—we have quite, quite intense, I would say, diplomatic activity around the critical minerals or critical raw materials. But I think that we are still kind of waiting and working on how to translate the diplomatic activity into the concrete projects. Because I’m a project driven person. And I think the good thing is that we understand each other, that we cooperate. But I would like to see one or two major projects which we would execute together and show, you know, how can we kind of push for the common solutions, develop the mine, or get the critical raw materials to you and to us.

Because if it comes to critical raw materials, we in Europe are much more dependent on China that we’ve ever been on Russia, if it comes to the fossil fuels. And any future energy technologies, electrolyzers, wind turbines, photovoltaic panels, chips—I mean, for all that you need the critical raw materials, rare earth, magnets and all these things, which are—we need to kind of get from outside. And simply, we are concerned that any dependency could be weaponized. And therefore, we adopted this Critical Raw Material Act, through which we want to explore everything what we have in Europe, what we have in our neighborhood, and work with our friends like United States of America on the projects in the in the third countries.

My ideal solution would be that we would advance or eventually complete our agreements on the critical raw materials, because it would—it would set the framework. And we are discussing it. We are—hopefully, we will—we will find the solution for that. And I think it will also help from the perspective that EU would finally get the FTA status, as Japan did, and it will help us in many other aspects, kind of consolidate our EU-US relations. So yesterday we also discussed the fact that we have very similar philosophy if it comes to critical raw materials.

So what I want to say is that when we would be working on some projects in a third country, we would like to make sure that it would not just be extraction of the critical raw materials, putting it on the ship, leave with the raw materials and leave the mess behind. What we want to do is develop the project, create big value added in the country, create new jobs, share the revenues and profits, and make sure that all of us would benefit. Because I think that’s the approach we would like to see in cooperation with the third countries who have the critical raw materials, and need the funding, need the expertise to make sure that these critical raw materials would be not only available but also extracted according to the highest sustainability standards.

ANA SWANSON: You mentioned Europe receiving free trade agreement status from the United States. That’s been a hurdle to European companies have been benefiting under the Inflation Reduction Act, of course. Where do those discussions stand right now? And you were just mentioning, you know, a partnership with relation to third countries. I understand that that was kind of a major hurdle in those discussions so far.

MAROŠ ŠEFČOVIČ: Yeah. I mean, there have been—I mean, yesterday with Mr. John Podesta we kind of agreed that, of course, a lot of things is going on. And, I mean, this is, like, a very, I mean, difficult time. And obviously what’s happening on the global scale, I fully understand how overwhelmed we are with the dynamics of day-to-day management, and permanent crisis management. But we also agree that let’s have another look where our critical minerals agreement was struck, why it was stuck, and what we can do to kind of intensify this negotiation. So we’re going to do that. And we gave ourselves rather, let’s say, short term, you know, to looking into it.

And at the same time, with Amos Hochstein and Jose Fernandez, we also focused on, that would be my preference, let’s select two or three projects, maybe one per continent—Africa, Latin America, Southeast Asia—and try to put our experts, our financial institutions—like EIB, like World Bank, like IMF—our development agencies together so we can actually learn how to use our experience from these territories, our financial firepower, to execute one of these projects. Because it would create, I would say, the know-how, it would create, I would say, the teams which would be dealing with these issues. And this would be, I would say, such an important topic for the future economic development both in the United States and in Europe. That we simply need to learn how to work together and execute this project.

Maybe one more thing. I am very hopeful about potential of Ukraine, because I was there many times before the war started. I was—as you probably know, I was working on this EU-Ukraine-Russia negotiations at the time, on transit of gas through Ukraine. But we’ve been also signing together with the Prime Minister Shmyhal agreement on cooperation in the field of critical raw materials. So geological surveys, mapping up of the, you know, reserves, which they have there. And to put it simply, I think Ukraine has everything what we need and what we’ve been getting from Russia. So I see the potential for critical raw materials, but also potential for low-carbon energy in Ukraine as huge, as very, very, very complementary to us.

We are already today using the huge underground gas storage to kind of beef up the energy security on Central and Eastern European front. And that would be, I would say, the one area where, again, I think EU-US can come together as a part of our reconstruction efforts to kind of build this potential Ukraine clearly has.

ANA SWANSON: That’s interesting. You were talking about looking into projects in other parts of the world, in Africa, South America. Because, you know, I think the United States and the EU are clearly very aligned on values when it comes to critical minerals, but they both tend to be, you know, really kind of consumer—net consumers, right? Big consumers of these minerals, and will both have a large demand for it. So I was curious at what point you kind of bring other countries into the—you know, your conversation, your partnership. And then how you see that dynamic kind of working, you know, vis-à-vis China, and China’s efforts to move around the world for this industry as well?

MAROŠ ŠEFČOVIČ: I think that you’re right, from that perspective, that it’s not only, let’s say, to us talking to each other because there is lots of, I would say, movement in this front, under the [Group of Seven], even [Group of Twenty]. We set up different so-called clubs for cooperation in the field of mineral extractions. And so therefore, I would say that the understanding, the intent, and this diplomatic work is, to great extent, done. Now what we need are the, let’s say, most promising projects, and go through this planning, and hopefully execution phase. So we would see how this, let’s say, diplomatic understanding is translated into the concrete projects execution. So that’s, I think, what should be the next phase.

And I think if it comes to China, indeed, that’s a huge challenge. I think 80 percent of the global critical raw materials extraction and processing is with China right now. I think we in Europe, we have only 1 percent of critical raw materials for our economy from Europe. So clearly, we need to diversify. And how to do it? I think we have to be much more agile, and we have to offer the better alternative. And the alternative is that if you are with us, I mean, we are ready to create high value added, we are ready to share, and we are—we are ready to make sure that community where these projects are, and a country where these projects are, would clearly benefit.

And we in Europe are the biggest development aid providers. We are the biggest climate finance provider. I mean, just to put this, I mean, two figures on the table in climate finance, if we put together public and private financial transfers in the realm of more than forty billion euros. And more or less the same figure goes for development aid. So I believe that we have financial firepower to kind of support these projects, and to do it with philosophy of sharing, not just extracting and taking it away, and not even creating the local jobs, and leaving with a material, and lots of debt for the local government.

So, I mean, we started a project, which is called Global Gateway. We had huge turnout in Brussels, I think it was two months ago. And I have to say that it resonated well with the countries whom we invited. But I would say that it’s a success when I will see the first project is being executed, and that we are actually delivering on this political intention with practical, concrete projects.

ANA SWANSON: I know there had been a lot of, you know, sort of heartburn and upset in the EU with regard to the Inflation Reduction Act last year. What is the status of that now? I mean, are you still, you know, worried about the inflation Reduction Act worrying certain industries away? And have internal discussions in the EU—has there been kind of a resolution about how much to subsidize green industry in response to the Inflation Reduction Act?

MAROŠ ŠEFČOVIČ: I think—well, of course, our systems are different. And I have to say that Inflation Reduction Act came to us as a surprise. I understand that it was kind of surprising conclusion also for quite many people in US. But the fact is that because of Inflation Reduction Act, some of the projects—and several of them been projects upon which I was working, like building up the battery ecosystems in Europe, building up the gigafactories. All these projects being slowed down, or postponed, or transferred to US. And for us, it came at this difficult moment which I was referring to—the energy crisis, and coping with all the, I would say, consequences of the war in Ukraine.

Of course, we are discussing this with our American friends. Therefore, I think that if we can find a way through this mineral agreement to kind of look into what we can do better together, and also use this cooperation for the FTA status for the EU, I think that would be very welcome. Very welcome development. And the next stage, which is, let’s say, my proposition I’m pitching for in all the meetings I have in US, is that we should kind of move onto the next level of cooperation. And I call it creation of the transatlantic green tech market.

So I know that it’s not the free trade agreement. But I think that we would benefit hugely if we would create, I would say, this marketplace from the perspective of, you know, common standards, from the perspective that we would inform each other about, you know, the sort of subsidies policies, or as we call it in Europe, state aid. If we kind of would push for building bridges across the Atlantic in the form of joint venture mutual investment so we can use the economies of scale for these new technologies in a way that would be beneficial not only for US and EU, but also for the third countries.

Because if you want to be serious about really dealing with the climate change, and I think that fact that we are now over the 1.5 degrees Celsius is kind of telling that the time is pressing. So Africa, Southeast Asia, Latin America, all of them would need this clean and green technologies. And sooner we develop them, sooner we develop them at scale so they’re affordable, the better it would be for the planet. So I see this transatlantic marketplace as a recipe for making our cooperation even closer, stronger, but with a very positive impact it might have on, I would say, sharing these kind of technologies with the rest of the world, and helping us to also tackle overheating of our planet.

ANA SWANSON: One area I had been following with interest was the green steel negotiations, what the US calls the Global Arrangement on Sustainable Steel and Aluminum. I was curious, you know, what happened with that negotiation? Do you think that the United States has kind of an adequate methodology to measure carbon emissions? Was that an issue? And then just kind of more generally, do you think the United States is ready for the European Carbon Border Adjustment Mechanism to come into force? Or could that be a new source of trade friction in the future?

MAROŠ ŠEFČOVIČ: I think we have—we have, I would say, two different approaches and philosophies, which kind of stem from our traditions. So we—because we’re twenty-seven different member states. So for us to work together and for our single market to perform, we, of course, have to work a lot with the legal frameworks, with the regulation, with a uniform application of the laws. So there is a guarantee that when you produce something in Slovakia, it will be produced according to the same standards as in Denmark, or Italy, and nobody needs to check it anymore, because we are kind of following the same rules. So that’s, I would say, the tradition upon which you build the European Union.

So we use the same approach to the Green Deal. We kind of look at it comprehensively from all sectors, from energy, through industry, down to the agriculture. And I think that when I talk to my American friends, nobody questions that we have probably the most advanced and most sophisticated legal framework for the Green Deal. But the issue is that the parameters of the Green Deal has changed so much because of these two crises—COVID-19, war in Ukraine, this energy spikes, high inflation—that they need to work much harder on how to translate this legal framework into reality by creating business case for the Green Deal in Europe. Because you cannot fund everything with public money. And you need this entrepreneurial energy and entrepreneurial—I would say, this entrepreneurship to bring this, I would say, new project into fruition.

In US, I mean, the approach is different. Here you—I mean, we have the same goal, to be climate neutral, to tackle the climate change. But in US, you will drive more, I would say, the projects which generate the revenue. And whatever the technology who can do it, so they do because it’s good for business and, of course, if it’s good for environment, it’s a plus. And we just discussed yesterday that now we need more of this kind of attitude and business case from US, but probably in the frame of five to ten years. Also, yes, we would need some kind of regulatory framework to know how to push the—I would say, tackling the climate change to the next stage. So we had, I would say, the different cycles. But this is, I mean, where we are. And I think we can just only learn from each other.

And therefore, I think—again, coming back to this green marketplace—would be good bridge over the Atlantic and over these two different approaches to the policy, because we share the same goal. And on CBAM, we see it clearly as an environmental measure. It’s a mechanism which should prevent the carbon leakage from Europe. More or less what I want to say is that we are looking for the ways how to reward those companies which have low carbon footprint, which have sustainable production, which treat their employees decently. And we want to avoid the eventual punishment that because of the public procurement now we go for the cheapest alternative. Often, that is somewhere from faraway—Asian countries.

Because we want—the Green Deal will be, of course, linked with our growth strategy, with creating new jobs and, of course, with bringing economic advantage as well. And I think that if I look at also the figures, what would be the effect on US exports, I think it’s like 0.5 percent, something like that. But, of course, we are working on it. We are discussing that. For me—I know that we are running out of time, but this last point.

For me, the best solution for creating level playing field on the global scale would be to have the global carbon price. I know that it’s not going to happen tomorrow. So we are working very closely also with Canadians on linking up the carbon pricing mechanism. Because I think that would help us a lot to kind of have a level playing field, that carbon has a price. And if the price is the same everywhere, then lots of problems of this kind would be avoided.

ANA SWANSON: Great. It’s time to open it up for Q&A. I do have some questions submitted online. If you’d like to submit a question in the audience, I believe someone can bring over an iPad to you, or perhaps you can ask them in the room. So let me start with one of the online questions. Someone asks: How can Europe ensure the Green New Deal does not exacerbate or confirm fears regarding deindustrialization in the EU? What can the EU do to tame electricity prices? Is there a structural fix?

MAROŠ ŠEFČOVIČ: I think, I mean, it’s very clear. I can tell you that I’m—as was kindly highlighted by Landon, on the EU affairs for probably more than two decades. But I never seen such emphasis put by the European leaders—I’m talking about presidents and prime ministers and, of course, the institutional leaders—on the competitiveness as right now. Because I think that the two crises—war in Ukraine, high energy prices—and that fear of eventual deindustrialization kind of focused the minds of the leaders that this is under no circumstances are going to happen in Europe.

And therefore, now you see the flurries of activities focused on the competitiveness. I mean, we are working on energy prices. And I will tell you in a second how. We are having very intense interaction with the business leaders. We are talking, of course, to our agriculture sector, which is very, very restless these days, because they basically lost a lot of income over the last two or three days. And we are we are really working very closely with all the sectors of the industry which are the most affected by the by the green transition, how to help them to build on the advantages and pluses we have in Europe, and not to suffer from, let’s say, unfair competition from outside.

So for us, clearly we want Europe to be green and clean, but industrial. And revenue from the industry is absolutely crucial for sustaining our European social model, which is, I mean, something what our citizens would not even think that, I mean, could be—could be changed. So it’s absolute political priority. And if it comes to energy prices, that’s of course, the big challenge. And for us, it’s a big priority. So we changed the so-called electricity market design. What it means in colloquial language is that we changed the way how we can trade electricity in Europe, where we are going back to the possibility of long-term contracts, so-called power purchase agreements, where we are looking for the way and how we can allow the companies to invest in the long term. And we are using also governmental power to kind of limit the worries of the eventual fluctuation and eventual loss, if you invest in the right technologies.

So over time, I believe it would lower the energy prices. What would help us, of course, would be if we would have even more LNG on the market, because it hopefully would help us to lower the price. Because despite the fact that we generated more electricity from renewables than from fossil fuels last year, still in our gas—in our energy system, the gas is so-called what they call the last marginal fuel. So it means that—it’s a little bit technical—that you have to calculate the overall energy price based on what is the cost of these marginal fuels.

So let’s say if you don’t have enough sun and enough water, you still need that baseload. And the baseload is coming mostly by gas. And therefore, you have to buy—you have to pay the gas price if they are producing or idling, because they’re just there on standby. And that will be there for a long time. So for us to have a competitive price of gas would help us to lower the prices in Europe for electricity.

ANA SWANSON: OK. If there are any questions in the room, there’s a microphone stand here. Happy to take some questions from inside the room. I’ll give you just a minute to get over there. Great.

Q: Hi. Good afternoon. Sophie Hamer, I’m the climate counselor here at the German embassy in DC. And thank you very much for your remarks and your very interesting input.

I was wondering, what role do you see for The Climate Club when it comes to a transatlantic green marketplace, and in setting some standards?

MAROŠ ŠEFČOVIČ: I think that—thank you very much for that question. Of course, it’s also very important because from the perspective of the generational challenge, clearly tackling the climate challenge is the more difficult one. Very often, and I know that this is difficult for every politicians because you have to deal with the crisis managing, and unfortunately you have too many crises, I would say, these days. But, I mean, from the perspective of the scale of the task, from the perspective of the importance of the task, and I would say how you would hand over the planet to the next generation, clearly tackling the climate change and have a clear roadmap how we are—how we are going to make it possible for our children and their children. I mean, in this century, it’s absolutely crucial.

And I think we’ve been working very well with Secretary Kerry. In Dubai, I think that EU-US cooperation was absolutely crucial to, at a certain moment I would even use the word, unblock the negotiations on the final document. It will be very crucial this year for climate finance COP in Azerbaijan. And, of course, absolutely topical when the Brazil will take over in the next year. So I think that work on a—in the form of Climate Club I think would be very important for the future. Because it helps you to kind of adjust the approaches, to exchange the best practices, and look for the—for the common solutions.

ANA SWANSON: Great. Maybe another here.

Q: First off, thank you so very much for your time today, your excellency. My name is Alex. I’m from Georgetown University.

And recently I had a discussion with His Excellency Enrico Letta. And we were talking about that one of the key issues about the Green Deal right now is how to finance it. And especially looking at the farmer protests right now, one of the questions is how to integrate all the mechanisms of the EU to try and finance the green transition, especially the common agricultural policy. Because right now, it seems like the Green Deal is relying a lot on NextGenEU, which is set to end soon and probably won’t continue afterwards. So how do you see this possibility of integrating the common agricultural policy, and the budget that’s allocated to that, to try and integrate into the Green New Deal—with the Green Deal? Thank you.

MAROŠ ŠEFČOVIČ: Thank you very much. I will start with the last part of your question, because, of course, agriculture is very much on the mind of every single politician in Europe. And if you look at, I would say, the situation of our farmers and foresters, you have seen that over the last couple of years, especially if it comes to farmers, their incomes dropped, in some cases significantly. One of the examples, just for you to see the scale, is that, I mean, from one year to another, let’s say, the revenue they had from cereal production and sale dropped from eighty billion euros to sixty billion euros. So, I mean, you suddenly—you have kind of loss of twenty billion euros, which is a lot of money for the farming community.

Then, of course, they suffer a lot because of the high gas prices and energy prices, because they use fertilizers, they use tractors. And simply I mean, the econometrics of the agricultural production have significantly changed over the last couple of years. And therefore, from one side when you talk to them they have lots of understanding and, I would say, they support the measures which we proposed under the Green Deal, because they know that we need to treat the soil in respect—in respectful way, that they need the biodiversity for pollinators, that we have a big problem with the droughts in parts of Europe. And I was talking to, you know, Spanish regional leaders from Andalusia, from Catalonia. I mean, their reservoirs already now, I mean, you have—at least in Brussels, we have an impression it’s raining all the time, which it is. But there, I mean, you have the water reservoirs filled like between 4 to 20 percent. And they are in the middle of what we would call in Europe the rainy season. So they understand all that.

But of course, they’re telling us that: Look, our incomes dropped. So if you want to kind of work with us on all these measures, we have to look at new sources of revenues for agriculture. Of course, one of the—one of the idea which we are testing, and we’ll see how it will be in the future. I, again, believe that we can use much more the concept of carbon removal certificates. So if you are the responsible forester, and if your forest serves as important carbon sink, or if you’re going to do what they’re going to do in Andalusia, as I heard from the—from the first minister of Andalusia—that they’re going to reforest part of the field, just to keep the water in the system, I think you should be rewarded for that.

I think—I mean, because you’re removing the carbon from the environment. So I think you should be—you should be rewarded for that. Like, you have to buy your emission allowance when you’re going to pollute. So I think you should be rewarded when you’re actually removing the carbon from the system. But for that, you need to discuss the methodology. That’s a little the same, like with the green steel and with other things. But I think that’s, I would say, one concept which we have to work.

And concerning the financial instruments, you are right that we are kind of funding the Green Deal projects from basically, I would say, two major sources. One is the seven years budget, what we call in EU-speak multiannual financial perspective. And there, it’s in the realm of 1.2 trillion euros. And like 40 percent of that is devoted to, I would say, climate-related projects. And then the NextGenerationEU, which is in the realm of eight hundred billion euros. So, again, I would say that more than 40 percent was devoted to this type of the project. But, of course, the scale of demand and change is much bigger than what you could fund from the, I would say, public funds, or through grants.

So, we are talking very intensively with the new management of the European Investment Bank, with the financial industry, because we need to work more with leveraging, with blended finance, and especially to bring also private investors, private equity investing into this transition, because it makes sense. We have to build, coming back to what I said earlier, the business case for this Green Deal project. And we are now figuring out, with the capitals of the European industry, how to achieve that.

ANA SWANSON: OK, well, we’re all out of time for today. But thank you so much for a great discussion. Thank you to everyone who joined us, both online and in the room today. And as a reminder, this event will be available both on YouTube and the Atlantic Council’s website. So thank you.

MAROŠ ŠEFČOVIČ: Thank you

Watch the full event

Public Event Tue, February 13, 2024 • 1:30 pm ET

Maroš Šefčovič on US-EU collaboration towards a transatlantic green marketplace

AN #ACFRONTPAGE EVENT— European Commission Executive Vice-President Maroš Šefčovič on building more resilient, green transatlantic economies.

Energy Markets & Governance Europe & Eurasia European Union Geopolitics & Energy Security

The post The European Commission’s Maroš Šefčovič maps the way forward for EU-US collaboration on energy security and critical minerals appeared first on Atlantic Council.

Why the European Commission’s Maroš Šefčovič is confident that US gas exports will keep flowing to Europe

Katherine Walla — Wed, 14 Feb 2024 17:58:30 +0000

Watch the full event

Public Event Tue, February 13, 2024 • 1:30 pm ET

Maroš Šefčovič on US-EU collaboration towards a transatlantic green marketplace

AN #ACFRONTPAGE EVENT— European Commission Executive Vice-President Maroš Šefčovič on building more resilient, green transatlantic economies.

Energy Markets & Governance Europe & Eurasia European Union Geopolitics & Energy Security

Last week, the European Commission released its newest climate targets, aiming to cut greenhouse-gas emissions by 90 percent by 2040, compared with 1990 levels. “We want to be climate neutral by 2050,” explained Maroš Šefčovič, executive vice-president of the European Commission for the European Green Deal. “But we know that without gas… it will not be possible for us.”

Šefčovič spoke at an Atlantic Council Front Page event Tuesday hosted by the Council’s Global Energy Center and Europe Center. There, he explained that liquefied natural gas (LNG) is “a very important transitional fuel,” but also in short supply in Europe, after the European Union (EU) began to shift away from Russian gas—imports from Russia declined from 150 billion cubic meters (bcm) in 2021 to just over 40 bcm in 2023. Imports from the United States increased from 19 bcm to 56 bcm.

Šefčovič—who is also the European Commission executive vice-president for interinstitutional relations and foresight—was in Washington, DC, this week to speak with Biden administration officials about a recent White House executive order that halted new approvals of LNG exports to countries that don’t have free trade agreements with the United States. “We had very good conversations on this topic yesterday,” Šefčovič said, adding that the US officials who attended the meeting were able to give him “reassurance” that in the next two to three years, “there should be no impact whatsoever on the supplies of US LNG to Europe.”

“What is expected anyways is that export capacity of the LNG would double between now and 2030,” Šefčovič added. “On top of it, there is a kind of emergency clause that if things will really go in the wrong direction, that there is a possibility to kind of adjust the measures.”

Below are more highlights from the event—moderated by New York Times reporter Ana Swanson—which touched upon US-EU cooperation on critical minerals, trade, and climate.

Cooperation on critical minerals

Following the 2022 passage of the US Inflation Reduction Act, Šefčovič said that some projects (including projects focused on strengthening Europe’s battery manufacturing industry or building gigafactories) have “slowed down” or are being “transferred” to the United States.
Šefčovič said he would welcome a US-EU agreement on critical minerals and would like to see cooperation result in a free trade agreement for the EU. He said that the EU and United States “understand each other” and have a similar philosophy on critical minerals, in that they want to make sure that any critical mineral project in another country creates added value for citizens there in the form of jobs, revenue, and more.
With China dominating the extraction and processing of raw materials, Šefčovič said that the EU and United States need to “offer the better alternative.” The EU and United States, Šefčovič argued, “have [the] financial firepower to support these projects and to do it with this philosophy of sharing, not just extracting.” He argued that such critical minerals sharing could benefit Europe in the long run, since it is currently dependent on China and “we are concerned that any dependency could be weaponized.”
Šefčovič also is bullish about a source of critical minerals (and low-carbon energy) closer to home: Ukraine. “To put it simply, I think Ukraine has everything we need,” he said. “I think [the EU and United States] can come together as part of our reconstruction efforts to kind of build this potential.”

A transatlantic green marketplace

Šefčovič argued that “the next level of cooperation” between the United States and EU should be a transatlantic green tech market that not only permits free trade but also sets the stage for common standards, a shared vision on subsidies, and improvements in investment flows.
Šefčovič said such a marketplace would allow the EU and United States to put their combined economic weight behind the development of new technologies, which would also benefit developing countries that need access to green technologies to mitigate and adapt to climate change. The “sooner we develop them… at scale so they are affordable, the better it would be for the planet,” Šefčovič said.
“So I see this transatlantic marketplace as a recipe for making our cooperation even closer, stronger,” Šefčovič said, “[and] with a very positive impact.”

The United States’ inescapable responsibility

The increase in US LNG exports to Europe as the bloc underwent its energy shift was “absolutely crucial”—despite the fact that the EU “paid a lot for it,” Šefčovič said. It had a “calming effect” that allowed EU countries time to “look for other supplies from other corners of the world” and to focus on how to deal with Russia’s invasion of Ukraine.
Altogether, the EU’s energy shift, Šefčovič said, is a “pattern for the future, of what good allies should do [for] each other.”
Šefčovič noted that the Biden administration’s executive order on new approvals on LNG exports, which was released last month, sent “ripples” around the world. That, he said, shows just how much the United States has become a “global guarantor of energy security,” and that Washington’s responsibility extends far beyond Europe—it also lies in developing countries across Southeast Asia, Africa, and Latin America. Cooperation on reducing carbon emissions in these countries “is very essential,” Šefčovič argued.

Katherine Walla is an associate director on the editorial team at the Atlantic Council.

Watch the full event

The post Why the European Commission’s Maroš Šefčovič is confident that US gas exports will keep flowing to Europe appeared first on Atlantic Council.

Ukraine opens new front with drone strikes on Russia’s energy sector

Mykola Bielieskov — Tue, 06 Feb 2024 21:43:21 +0000

Amid worsening ammunition shortages and mounting concerns over the future of Western military aid, the Ukrainian army has largely switched to active defense in recent months. Nevertheless, as the full-scale Russian invasion of Ukraine approaches the two-year mark, talk of a stalemate remains premature.

While heavy fighting continues at various hot spots along the front lines in southern and eastern Ukraine, Ukrainian commanders have begun 2024 by attempting to bring the war home to Russia with a new air strike campaign against the Russian oil and gas industry. By targeting Putin’s economically important energy sector, Ukraine hopes to weaken Russia’s war machine and create a range of dilemmas for the Kremlin.

The recent long-range Ukrainian drone strikes against energy sector targets deep inside Russia are not entirely unprecedented. Indeed, during 2023, Ukraine managed to carry out a number of successful strikes against Russian military targets.

But unlike these earlier attacks, the major feature of Ukraine’s latest drone strike campaign is the emphasis on Russia’s oil and gas processing, storage, and export facilities. Since the start of 2024, Ukraine has bombed a series of facilities located hundreds of kilometers from the border, with targets ranging from Volgograd in the south to Saint Petersburg and the Baltic Sea in the north.

These Ukrainian attacks strike at the heart of the economic engine that fuels Putin’s war machine. Oil and gas exports remain a major source of Russian GDP and have so far proved surprisingly resistant to Western sanctions, with new clients emerging to compensate for the loss of European customers. As many commentators have quipped in Kyiv, Ukraine has now decided to impose its own informal and far more direct sanctions on Russia’s energy sector.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Ukrainian commanders believe their new long-range drone strike campaign can eventually create major disruption to the Russian economy that will translate into leverage over the Kremlin. For now, however, the scale of the drone strikes remains limited.

One key obstacle is the size of Ukraine’s delivery systems. While Ukraine is constantly upgrading its drone fleet, the country’s existing long-range UAVs are unable to carry warheads weighing more than around 50 kilograms. This means most of the damage done at Russian energy facilities is relatively easy to localize and neutralize. Ukraine also faces significant challenges navigating past Russia’s traditional air defenses and electronic warfare systems.

Despite these limitations, there are already signs that Ukraine’s long-range air strike campaign is having an impact. A February 5 report by Bloomberg indicated Russia’s weekly oil-processing rates had dropped to the lowest level in almost two months after two major refineries were forced to halt operations following Ukrainian drone strikes.

Eurasia Center events

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

Ukraine’s military planners are now hoping long-range drone strikes can force their Russian counterparts to make some difficult decisions. At present, the vast majority of Russia’s air defense assets are concentrated along the front lines of the war. These systems play a crucial role providing protection against the Ukrainian Air Force and Ukraine’s increasingly deadly drone forces. As Ukraine intensifies attacks on Russia’s energy sector, Kremlin chiefs will have to choose whether to keep their country’s limited air defense systems close to the battlefield in Ukraine or redistribute them to protect oil and gas facilities inside Russia itself.

Both scenarios could potentially lead to major risks. If Russia fails to protect critical oil and gas infrastructure, there is always a danger that the sheer quantity of Ukrainian attacks may cause serious harm to the Russian economy and compromise the Kremlin’s ability to wage war. At the same time, attempts to reinforce the defense of Russian energy facilities would leave Putin’s army in Ukraine exposed and vulnerable.

Moscow faces additional dilemmas due to Russia’s vast size, which makes it extremely challenging to provide comprehensive air defense coverage. Russian officials have recently indicated that the country lacks sufficient air defense systems to fully protect major cities like Saint Petersburg against Ukraine’s expanding long-range drone threat.

The situation is further complicated by the Russian energy industry’s reliance on Western technologies. While Ukraine is currently unable to inflict major harm due to the country’s relatively modest air strike capabilities, sanctions restrictions will likely make it difficult for Russia to replace any Western equipment damaged or destroyed by Ukrainian drones.

At present, Ukraine’s new long-range drone strike campaign is too limited in scope to derail the Russian war effort of seriously disrupt the Russian economy. However, these attacks are clearly capable of inflicting economic pain, while also increasing the pressure on Russian commanders to reduce air defense protection for their army in Ukraine. This is the same dilemma Ukrainian army chiefs have faced for much of the past two years in response to Russia’s own air strikes far beyond the front lines against civilian targets including essential infrastructure.

By attacking Russia’s energy sector, Ukrainian commanders are seeking to open a new front in the war and reshape the battlefield in Ukraine itself. The recent flurry of air strikes on Putin’s oil and gas industry underlines Ukraine’s commitment to bring the war home to Russia, even while adopting a strategy of active defense along the front lines of eastern and southern Ukraine.

Mykola Bielieskov is a research fellow at the National Institute for Strategic Studies and a senior analyst at Ukrainian NGO “Come Back Alive.” The views expressed in this article are the author’s personal position and do not reflect the opinions or views of NISS or Come Back Alive.

Many in Kyiv believe the potential to cause economic mayhem is even greater. The Russian economy is heavily reliant on the energy sector, making it an obvious and attractive target for Ukrainian military planners. Russia’s oil and gas industry has so far proven remarkably resistant to Western sanctions, with clients from the Global South stepping in to replace exiting European customers. Ukrainians hope their far more direct approach will now succeed where sanctions have failed and impose crippling costs on the Kremlin.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Kyiv’s recent attempts to expand attacks on energy targets inside Russia are in part a reflection of unfavorable battlefield realities. The failure of the much-hyped Ukrainian counteroffensive in the second half of 2023 forced the country’s commanders to acknowledge that the war had reached a stalemate. Meanwhile, the future of international military aid to Ukraine is now in doubt amid mounting political obstacles, leaving front line troops increasingly outgunned and forced to ration limited ammunition. With little choice but to adopt a strategy of active defense, long-range drone strikes against strategic targets inside Russia offer Ukraine an opportunity to break the deadlock and undermine Putin’s war machine.

This kind of asymmetrical warfare plays to Ukraine’s strengths while exploiting Russia’s weaknesses. The long-neglected Ukrainian arms industry has been unable to keep pace with the unprecedented demands of Russia’s full-scale invasion, but the country has managed to develop impressive domestic drone production capabilities. Government initiatives like the BRAVE1 hub are helping to support private sector efforts and harnessing the huge potential of Ukraine’s vibrant tech sector.

This emphasis on defense tech is enabling Ukraine to keep pace with its far wealthier adversary in what is widely seen as the world’s first drone war. Innovations are a daily feature of the contest between Russian and Ukrainian drone warriors, with both sides struggling to counter the latest enemy developments while implementing their own upgrades. For Ukraine, range has been a key factor. Recent drone attacks demonstrate that Kyiv now has the ability to hit targets throughout European Russia, where the vast majority of the country’s energy assets are located.

Eurasia Center events

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

Ukrainian drone attacks on Russia’s energy infrastructure are creating serious headaches for the Kremlin. Russia’s vastness and the sheer size of the country’s energy industry make it virtually impossible to provide all possible targets with adequate air defenses. The problem is further complicated by the fact that the bulk of Russia’s air defense systems have already been deployed to occupied Crimea and the front lines in Ukraine. If Ukraine’s current bombing campaign continues to gather momentum, Russian military chiefs will have to decide whether to reduce protection for the army in Ukraine or leave critical infrastructure on the home front exposed to potential attack.

The Kremlin is also likely to encounter significant challenges repairing any damage done to the country’s oil and gas facilities. The Russian energy sector is highly reliant on equipment imported from the West. While sanctions measures imposed since February 2022 have so far failed to seriously impede the Russian economy, import restrictions should make it difficult for Russian energy companies to replace sophisticated equipment following Ukrainian drone attacks.

Crucially, the use of domestically produced drones enables Ukraine to minimize any potential protests from the country’s international partners, who have consistently sought to prevent Kyiv from using Western weapons inside Russia due to escalation fears. While Ukrainian leaders remain sensitive to these concerns, they have long expressed frustration over what many regard as excessive caution among Ukraine’s Western allies. Speaking at the recent World Economic Forum in Davos, President Zelenskyy complained that the West’s emphasis on avoiding escalation at all costs had resulted in countless missed opportunities while emboldening the Kremlin. “Every ‘don’t escalate’ addressed to us, sounded like ‘you will prevail’ to Putin,” he commented.

Ukraine’s decision to target Russia’s energy infrastructure is one of the boldest moves of the entire war. For almost two years, hostilities have been largely confined to Ukraine itself. That now appears to be changing. So far, Ukraine’s drone strikes are too small in scale to seriously damage the Russian war effort. Nevertheless, the recent flurry of attacks inside Russia crosses a major red line and marks a new phase in the conflict. The oil and gas industry has long fueled Russia’s resurgence on the international stage; Ukrainians are now hoping it will become Putin’s Achilles Heel.

Peter Dickinson is editor of the Atlantic Council’s UkraineAlert service.

Houthi attacks in the Red Sea hurt global trade and slow the energy transition

William Tobin, Joseph Webster — Thu, 25 Jan 2024 17:38:34 +0000

Recent attacks on commercial ships in the Red Sea have underscored the importance of seaborne international trade, and challenged the role of the United States in safeguarding commerce in the global commons. Maritime choke point disruptions have worldwide consequences because the price of oil is set globally. Simply increasing oil supply will not solve the problem of a major disruption, such as in the Strait of Hormuz, which has been overtly threatened by Iran. This is why the United States has a deep interest in freedom of navigation. Maritime trade of energy is of fundamental importance to the security of supply for energy and to the price felt by consumers worldwide. In addition, the effects of a major disruption to freedom of navigation would hold many damaging but indirect consequences—including slowing progress on addressing climate change.

The danger created by Houthi attacks

The Houthi movement, or Ansar Allah, is a Shia Islamist group that seeks to maintain control of critical territory in Yemen. It operates as a proxy group for Iranian influence, especially the Islamic Revolutionary Guard Corps. The Houthi movement has ramped up attacks on merchant vessels transiting the Red Sea since November 19, 2023, according to US Central Command.

The United States’ response to the attacks, Operation Prosperity Guardian, concentrates naval assets and command-and-control bandwidth on the Bab el-Mandeb Strait, wedged between the Horn of Africa and the southwestern corner of the Arabian Peninsula. It is a key choke point for commercial traffic transiting between the Arabian Sea and Red Sea toward the Suez Canal—another choke point through which more oil is flowing than ever before.

Due to Russia’s invasion of Ukraine and the subsequent trade diversion, the Suez Canal is increasingly used for Middle East-to-Europe flows of energy, as well as Russia-to-India shipments. About 8.8 million barrels per day of oil and oil products utilized the Suez transit in the first half of 2023, or about 12 percent of maritime oil trade.

Operation Prosperity Guardian has engaged Houthi drones, surface-to-ship ballistic missiles, small combatant vessels, and other arms in defense of merchant traffic and naval assets. However, the operation has thus far failed to deter further Houthi attacks and provide assurance of safe passage to commercial vessels transiting the Red Sea.

In order to restore deterrence, the United States and the United Kingdom are conducting airstrikes against Houthi military infrastructure. These actions are not only necessary to restore the safety of trade through the Suez Canal, but to assure the principle that maritime trade cannot be disrupted by force.

The waves rule energy trade

Freedom of navigation matters deeply for preserving the security and efficiency of global energy markets. Forty percent of maritime trade by weight consists of oil, coal, gas, or petrochemical products, per the United Nations Conference on Trade and Development.

Thus far, the Houthis have largely not targeted vessels engaged in energy trade, perhaps stemming from a desire to avoid an environmentally catastrophic oil spill along Yemeni shores, which was only narrowly avoided in August as the oil tanker FSO Safer, abandoned off of Yemeni shores, was successfully drained of its contents.

The Houthis are also likely to avoid drawing Arabian Gulf states deeper into the conflict. Most Gulf economies are deeply dependent on maritime energy trade—hydrocarbon exports are responsible for 40 percent of Saudi and Qatari gross domestic product (GDP), and 50 percent of Kuwait’s GDP.

Additionally, the Houthis’ Iranian patrons wish to avoid antagonizing major oil importers China and India, or partners such as Russia. Last week, a Houthi spokesman told a Russian news channel that Chinese and Russian cargoes would not be targeted.

The prospect for escalation, and the potency of the threat which the Houthis have displayed, is substantial. Major oil traders such as BP, Shell, and Trafigura have now suspended shipments through the Red Sea completely.

Although the United States conducts limited oil and liquefied natural gas trade through the Suez Canal, the risk of a supply disruption in this critical choke point matters to US economic security, as oil prices are set globally. Moreover, the United States must ensure that its European allies retain access to energy supplies amid Russia’s invasion of Ukraine. Regardless, it is the threat of escalation, in the Red Sea or other choke points such as the Strait of Hormuz, and the broken principle of freedom of navigation that most acutely threatens US interests.

US energy trade rules the waves?

For the United States, free maritime commerce has long been central to its economic prosperity, from the nation’s founding as a merchant power to the modern era, when maritime vessels account for 40 percent of US international trade by value and 70 percent by weight.

The United States’ rising oil exports underscore how its economic competitiveness is intertwined with the global maritime commons. The United States has emerged as the world’s leading producer of oil, as US exports of oil and oil products have consistently been above ten million barrels per day since early 2023, with seaborne exports often accounting for more than seven million barrels per day of this trade.

Global maritime trade of oil is estimated to be approximately forty-three million barrels per day, according to commodity services firm Kpler, and the US export share of maritime oil trade has expanded dramatically since the crude oil export ban was lifted in 2015.

While the Red Sea is not a major transit point for US oil exports, which primarily traverse the Atlantic crossing or Panama Canal, it is not in the US national interest for any waters to be closed to energy trade. If energy vessels are required to reroute amid security threats and a fragmented global commons, shipping costs and energy prices will rise, lowering world economic growth. Secondly, although some US energy companies will benefit temporarily from rising prices, overall US energy and economic security suffers, as the US remains a large oil importer, typically receiving over six million barrels per day due to domestic refinery configurations. Moreover, disruptions to global supply chains would reverberate across other sectors of the US economy that rely on international trade.

It is in the economic interest of the United States to ensure that the global maritime commons remains free from disruption.

Threats to freedom of navigation are also threats to net-zero emissions goals

Maritime security does not only affect fossil energy. If freedom of navigation is no longer secured—if merchant vessels can be disrupted or even sunk by armed groups—then the clean energy transition will face disruption. Shipping costs and insurance rates will rise sharply amid greater uncertainty.

Additionally, the inputs for clean energy supply chains often transverse many different maritime nodes across the globe, from mine to factory to final installation. For instance, cobalt that is mined in the Democratic Republic of the Congo may be refined in Finland, assembled into a battery in Japan, and shipped to an electric vehicle factory in the United States. With maritime supply chains facing greater uncertainty, firms will require greater redundancy and inventory stockpiling.

These dynamics will lower efficiency and increase inflation. The snarling of supply chains and resultant inflation will also necessitate higher interest rates, all things being equal. Higher interest rates, in turn, will pressure capital-intensive clean energy projects by raising financing costs. The global clean energy transition will be slowed considerably if freedom of navigation is no longer a reasonable assumption of seaborne trade.

In sum, a world without freedom of navigation would represent a disaster for not only the world economy but also squash any aspiration of reaching net-zero emissions by 2050.

Will Tobin is an assistant director at the Global Energy Center.

Joseph Webster is a senior fellow at the Global Energy Center.

This article represents their own personal opinion.

The post Houthi attacks in the Red Sea hurt global trade and slow the energy transition appeared first on Atlantic Council.

The skies are quiet, but the Iran-Pakistan strikes left lasting diplomatic damage

Muhammad Faisal — Thu, 25 Jan 2024 14:55:42 +0000

Pakistan-Iran relations nosedived sharply on January 16, when Tehran carried out unilateral strikes in western Pakistan, following its recent attacks in Iraq and Syria. In turn, Pakistan adopted a two-stage strategy: First, it downgraded diplomatic ties with Tehran by recalling its ambassador. Then, forty-eight-hours after the attack, it conducted retaliatory strikes inside southeastern Iran, targeting what it described as terrorist hideouts. Several tense days followed, and then Iran and Pakistan announced on Monday that they would return their envoys and Iranian Foreign Minister Hossein Amir-Abdollahian would visit Islamabad next week.

With their strikes, Pakistan and Iran targeted different Baloch-led militant groups along their shared border. The latest tit-for-tat military strikes, however, must also be seen against the backdrop of widening regional conflict in the Middle East as US-led forces attack Iranian-backed Houthis in Yemen. While Iran’s proxy conflict with Israel and the United States has escalated in recent weeks, Pakistan faces a new external challenge: How should it navigate relations with its Persian neighbor while supporting regional stability?

The strikes last week will alter regional dynamics with a long-term impact on bilateral ties between Islamabad and Tehran. While the immediate crisis will subside, an intensified security dilemma will be permanent for Pakistan. Pakistan is already navigating difficult ties with India and Afghanistan, its two main neighbors. Now, Pakistan is inevitably compelled to review its overall relationship with Iran and seek a new modus operandi, both bilaterally and in the region. This will include reviewing its existing defense posture on its border with Iran, establishing new patterns of regional engagement, and reassessing trade and other interactions between the two sides.

Rethinking border security

For starters, Pakistan’s defense planners now must examine their existing posture along the country’s southwestern border and throughout the Balochistan province. Now security managers will have to consider a renewed Iranian inclination to act across the border when dealing with separatist groups active in Balochistan. This will demand evaluating the current defensive posture and, where necessary, beefing it up with additional aerial reconnaissance drones, air-defense assets, artillery vehicles, and long-range rockets. Islamabad will be cognizant that military planners in Tehran are also reviewing Pakistan’s retaliatory strikes and reconsidering Iran’s defense posture along their country’s border with Pakistan.

Diplomatically, Pakistan is now poised to take advantage of strategic opportunities provided by Iran. Pakistan has an opportunity, for example, to be a swing state in the wider Persian Gulf and Arabian Sea region that can take advantage of great powers’ interest toward “nearshoring” and “friendshoring.” Islamabad could increase political engagement with Tehran’s regional competitors and the United States on regional security in the Gulf and Strait of Hormuz. Capitals in the region and beyond have already taken note of Pakistan’s strikes inside Iran—the first time in more than three decades that a country has conducted missile strikes inside Iran. While Pakistan had no option but to respond, this exchange has opened space for new conversations on regional stability and enhanced maritime security cooperation in the western Indian Ocean region with Gulf states and the United States.

Meanwhile, countries such as China and Turkey are likely to continue to focus on defusing tensions and reviving communication channels between Pakistan and Iran to address their respective concerns. Islamabad will be cognizant of Beijing’s concerns about the security of its citizens in Gwadar, a major port city near the Iranian border where China has launched infrastructure and connectivity projects.

With Russia, however, Pakistan’s regional convergence may have peaked. Pakistan-Russia relations grew in recent years out of both countries’ involvement in Afghanistan, but their influence over the current Afghan regime is much more limited. Additionally, Islamabad and Moscow previously used their engagement to signal to (and to hedge against closer cooperation between) New Delhi and Washington. Recent diplomatic shifts, including some diplomatic fallout from then Pakistani Prime Minister Imran Khan visiting Moscow as Russia started its full-scale invasion of Ukraine, have reduced the signaling effectiveness of greater Pakistan-Russia engagement.

Even still, many in Pakistan’s strategic community had envisioned a Russia-Iran-China-Pakistan axis to balance Washington’s posture across the Middle East and South Asia. Increased Pakistan-Iran tensions could work against this trend, too. If the United States, as a result of ongoing turmoil in the Middle East, expands it engagement and military footprint in the wider region, then Islamabad may seek even greater engagement with Washington as a signal to Tehran. That will then put Pakistan in a position of navigating the competing interests of the United States and China, the latter of which has increased its engagement in the region in recent years but will want to keep friendly relations with Iran.

Beyond regional politics, cross-border militancy will now again be at the forefront of the Pakistan-Iran relationship. In reciprocal strikes, both sides claimed to target hideouts of specific militant groups they hold responsible for attacks on their forces and citizens. The people inhabiting Pakistan-Iran borderlands are no stranger to violence by both state and militant groups. China has been active in bringing Iran and Pakistan together to discuss counterterrorism concerns and cooperation. That Iran chose to unilaterally strike, instead of seeking coordinated action, underscores the limitations of trilateral and bilateral cooperation to address this ongoing irritant for Islamabad-Tehran ties. From here onwards, despite vows of defusing tensions, Pakistan needs to prepare for renewed instability in Balochistan, as the current crisis has demonstrated to Baloch separatist groups and to the militant group Jaish al-Adl that they can provoke an inter-state crisis, with wider regional implications.

Trade ties that bind

Pakistan’s crucial vulnerability with Iran, however, is its dependence on high-volume informal trade, which sustains the populace in border regions and across Balochistan. Formally, seven border markets are now operational to facilitate barter trade between people from both sides. Informal trade, however, dominates. Pakistan’s Makran region is particularly dependent on supplies of food, petroleum products, and electricity from Iran. Some products also make their way to Karachi and as far as Islamabad. Iranian diesel is smuggled across the border on blue Zamyad pickup trucks, which are easily spotted across Balochistan. Makran division and the border districts are connected more to Iran’s economy than to Pakistan’s. These relatively cheaper goods—since no duties or taxes are levied—are crucial to fight inflationary pressures across Balochistan and in cities elsewhere. This economic activity, however, is complicated by illicit drug trafficking facilitated by different militant groups through overland and maritime routes, with the region serving as a gateway to Turkey and Europe on one side and South Asia on the other.

Taken together, these economic activities are massive. Based on an estimate derived from data on smuggled gasoline and diesel in a 2020 inquiry commission report, informal Iran-Pakistan trade could surpass three billion dollars per year, while official data put formal trade at two billion dollars per year. Islamabad’s challenge, thus, is to ensure the economic needs of the local populace are sufficiently met as it prepares for an uneasy relationship with Tehran where arbitrary curbs on informal trade could be applied by each side to gain leverage. This challenge is only compounded by already strained border trade with Afghanistan, where Pakistan is trying to set new parameters of bilateral engagement.

These external challenges are mounting while Pakistan is in the midst of an election campaign. When the new government enters office in a few weeks, it will confront a new reality of eroding trust with Iran. It’s worth remembering that Pakistan withstood pressure from its traditional Gulf partners (the United Arab Emirates and Saudi Arabia) for refusing to contribute troops to fight against the Iranian-backed Houthis in Yemen in 2015. Despite divergent regional interests, successive governments maintained steady engagement with Iran. Even military ties picked up steam with regular visits and naval exercises, with one taking place on the day Iran attacked inside Pakistan. Islamabad’s proactive balancing effort has been undermined, and repairing this relationship would require concerted efforts from Iran, as Pakistan has learned that its third border has become a potential military zone with long-term impacts on the country’s internal and external security calculus.

Muhammad Faisal is a PhD candidate in international relations at the University of Technology Sydney.

The post The skies are quiet, but the Iran-Pakistan strikes left lasting diplomatic damage appeared first on Atlantic Council.

Tran quoted in TIME on Red Sea shipping disruptions

pmeng — Mon, 08 Jan 2024 17:56:43 +0000

The post Tran quoted in TIME on Red Sea shipping disruptions appeared first on Atlantic Council.

Wald featured in Bloomberg Surveillance podcast discussing potential for oil supply risk amid recent Houthi attacks and avoiding the Red Sea

smeadows — Fri, 05 Jan 2024 20:35:21 +0000

The post Wald featured in Bloomberg Surveillance podcast discussing potential for oil supply risk amid recent Houthi attacks and avoiding the Red Sea appeared first on Atlantic Council.

Wald quoted in Bloomberg on the potential disruption to the oil trade amid Red Sea attacks

smeadows — Fri, 05 Jan 2024 16:23:03 +0000

The post Wald quoted in Bloomberg on the potential disruption to the oil trade amid Red Sea attacks appeared first on Atlantic Council.

Wald and Shaffer quoted in S&P Global Commodity Insights on Iranian sanctions, ties to Houthis, and crude oil supplies

smeadows — Fri, 29 Dec 2023 16:54:36 +0000

The post Wald and Shaffer quoted in S&P Global Commodity Insights on Iranian sanctions, ties to Houthis, and crude oil supplies appeared first on Atlantic Council.

Wald featured in Bloomberg Surveillance podcast discussing global oil markets in Middle East geopolitics

smeadows — Thu, 28 Dec 2023 16:08:10 +0000

The post Wald featured in Bloomberg Surveillance podcast discussing global oil markets in Middle East geopolitics appeared first on Atlantic Council.

Tran cited by Investopedia on Red Sea attacks disrupting global trade

rmurphy — Wed, 20 Dec 2023 21:36:03 +0000

The post Tran cited by Investopedia on Red Sea attacks disrupting global trade appeared first on Atlantic Council.

What’s behind the attacks on ships in the Red Sea

Ellen Wald — Wed, 20 Dec 2023 18:25:50 +0000

For years, a Yemen-based Islamist group called the Houthis have periodically attacked ships traversing the Bab el-Mandeb Strait at the opening of the Red Sea. These attacks were focused on Saudi or Emirati vessels, typically carrying medical supplies, weapons, or oil, and they occurred during flare-ups in the ongoing conflict between Saudi Arabia and the United Arab Emirates (UAE) on one hand, and the Iran-backed Houthi forces in Yemen on the other. However, since the October 7 Hamas attack on Israel, Houthi attacks on other ships have escalated.

Initially, it seemed the Islamic group, which now controls most of Yemen and receives financial and military support from Iran, was limiting its attacks to vessels affiliated with Israel or Israeli business interests. For example, on November 19, Houthi forces commandeered an empty ship called the Galaxy Leader and are still holding it at the Hodeidah Port in Yemen. The Galaxy Leader is operated by a Japanese company, flies a Bahamian flag, but is owned by Ray Shipping, a British company that is partially owned by an Israeli businessman.

Recently, the Houthis have stepped up their attacks on ships in the Bab el-Mandeb corridor. Since December 9, Houthis have launched drone and missile attacks against commercial ships in the area. Some of these attacks have been thwarted by a US Navy destroyer, the USS Carney, which has been stationed in the region, but some of the missiles have hit commercial vessels and caused damage. Companies are taking note, with four out of five of the world’s largest container-shipping companies suspending routes through the Suez Canal and the Red Sea.

Global seaborne trade will not grind to a halt, but it is going to take longer and be more expensive as vessels take alternate routes and as insurance costs rise. BP, for example, announced that it would no longer send crude oil and petroleum tankers through the Suez Canal due to the risk of Houthi attacks. Meanwhile, the credibility of some of the oldest and most important international conventions, and the ability of nations such as the United States and others to secure those conventions, are at risk.

Why the Suez Canal matters

Before these recent attacks, 12 percent of the world’s seaborne trade used the Suez Canal and therefore, went through the Bab el-Mandeb Strait to enter or exit the Red Sea. In terms of petroleum (crude oil and oil products), more than 6.2 million barrels per day of petroleum traveled through the Bab el-Mandeb Strait, either through the Suez Canal or to the SUMED pipeline, which runs from south of the canal west and north across Egypt to the Mediterranean Sea. This reflects a little more than 9 percent of the total seaborne petroleum trade. The Suez Canal route has become even more crucial since European countries stopped buying Russian oil. Most of these countries have replaced a great deal of the Russian petroleum they had been importing with crude oil and products from the Middle East. The fastest route to Europe from the Middle East is through the Red Sea and the Suez Canal, even though the Suez Canal is unable to accommodate some of the very largest crude oil ships, classified as Very Large Crude Carriers, or VLCCs.

Shipping traffic around Africa has jumped recently, as many companies are choosing to send their ships around the Cape of Good Hope instead of taking their chances in the Red Sea. This change can add as much as fourteen days to a trip and will incur additional fuel and personnel costs. Longer trips also mean higher greenhouse gas emissions.

This is not the first time that ships have been unable to use the Suez Canal. In 1956, the Suez Canal was shut down for six months after Egyptian forces sank several ships along the canal in retaliation for a British-French invasion of the recently nationalized canal zone. Britain and France experienced acute but short-lived disruptions to their oil supplies, and the oil industry’s long-term response was to develop the VLCC to maximize the amount of oil that could be shipped around Africa. More recently, the Suez Canal was blocked for six days in March 2021, when the container ship Ever Given got stuck, causing losses of nearly ten billion dollars a day in international trade.

What’s the plan for Prosperity Guardian?

International shipping and supply chains are significantly more resilient now than they were several years ago. Disruptions from pandemic shutdowns and sanctions on Russia have prepared companies to handle the logistics of rerouting or reloading ships to accommodate such disturbances in the least disruptive ways. But that doesn’t mean the Houthis should be allowed to continue terrorizing global commerce or that the United States Navy should be the only military force responding to Houthi attacks. Finally, this past weekend, US Defense Secretary Lloyd Austin declared that these attacks violate international law. This statement comes across as tepid, given that maritime conventions protecting the safe passage of commercial vessels is one of the oldest and most universally recognized international law concepts. (Freedom of navigation rights are also enshrined in the United Nations 1982 Law of the Sea Convention, which has been ratified by 169 parties).

Even after Austin announced the formation of a multinational force called to protect ships in the Red Sea from Houthi attacks, more companies, including shipping giant Maersk, announced they would reroute ships away from the Suez Canal and the Red Sea. Their concerns are valid, as neither the United States nor the international force, called Prosperity Guardian, have addressed how they plan to thwart Houthi attacks or provide additional protection. During the decade-long Iran-Iraq War in the 1980s, naval vessels escorted tankers in and out of the Persian Gulf to assure their safety during periods of maritime conflict. This would not provide adequate security in the Red Sea today because the volume of ships is much larger, and the ability to use drones makes military escorts less effective security deterrents. The Houthis have large stockpiles of missiles and drones that they can launch at ships from land. This could mean that without ground operations to destroy Houthi military infrastructure, there can be no assurances of safety.

Ellen R. Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the president of Transversal Consulting.

The post What’s behind the attacks on ships in the Red Sea appeared first on Atlantic Council.

Sullivan quoted in Business Day on oil trade and traffic in the midst of Houthi attacks

smeadows — Wed, 20 Dec 2023 16:46:09 +0000

The post Sullivan quoted in Business Day on oil trade and traffic in the midst of Houthi attacks appeared first on Atlantic Council.

Wartime Ukraine’s European energy integration continues

Aura Sabadus — Tue, 19 Dec 2023 21:32:29 +0000

The EU’s decision to open membership talks with Ukraine on December 14 was an historic win for Kyiv, but it was not the only piece of encouraging news received that day. A few hours before EU leaders agreed to launch accession negotiations, Ukraine was invited to join Europe’s leading electricity infrastructure association as a full member, gaining a voice in discussions that will shape the EU’s energy vision in the years to come.

Ukraine’s electricity grid operator, Ukrenergo, will become the fortieth member of the European Network of Transmission System Operators for Electricity (ENTSO-E) on January 1, 2024. In this new role, it will contribute alongside other members to drafting strategies designed to boost the security, resilience, and reliability of the continent’s connected power systems.

It is highly symbolic that Ukraine’s breakthrough to full ENTSO-E membership should come on the same day as the landmark agreement to begin EU membership talks. Ukraine’s European energy sector integration got underway just hours before the launch of Russia’s full-scale invasion on February 24, 2022, when the country unplugged its energy grid from the old Soviet system. This process has continued in parallel with the country’s EU integration, despite the unique challenges created by Europe’s largest invasion since World War II.

Wartime Ukraine’s energy sector pivot toward Europe has been little short of remarkable. The country’s electricity infrastructure has been targeted by Russian drone and missile attacks ever since the start of war, making Ukrenergo’s fight to keep the lights on even harder as it has transitioned from the legacy Soviet grid to synchronising with the EU.

During twenty-one months of air strikes and bombardments, Russia has destroyed more than half of Ukraine’s thermal power generation capacity and transmission lines, damaged or occupied 90 percent of its wind farms, and taken over the Zaporizhzhia nuclear power plant, the largest in Europe. While the current winter season has yet to witness a repeat of last year’s intensive bombing campaign targeting Ukraine’s civilian energy infrastructure, the threat of further large-scale attacks remains.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

In addition to guarding its civilian energy infrastructure against Russian air strikes, Ukraine must also navigate the further integration of its electricity market at a time when the EU itself is making an historic transition of its own from fossil fuels to cleaner forms of energy. Closer cooperation with Romania may help. Deepening energy sector partnership between Kyiv and Bucharest would not only boost regional security and facilitate a smoother energy transition, but could also pay economic dividends.

Romania has already offered Kyiv significant support last year, exporting electricity and helping to stabilize the Ukrainian system when Russian airstrikes plunged much of Ukraine into darkness. Bucharest has also helped Moldova, which synchronized with the European grid together with Ukraine last year, but whose electricity supplies were caught in the Russian crossfire. The three countries could now build on this relationship in a way that would be mutually beneficial.

The bulk of Romanian power generation is concentrated in the southeastern Dobrogea region of the country, with an excess of renewable output which cannot be easily transported to other regions. Unless major investments are made to reroute flows northwards, Romania will not be able to build additional offshore wind capacity in its share of the Black Sea region.

One option would be to export some of the excess generation to decongest the system. Southern Ukraine’s Odesa region, which shares a border with Romania, has a supply deficit and needs to import electricity to cover demand, particularly in a postwar scenario where its industrial base would need to be rebuilt. Meanwhile, nearby Moldova has historically depended on electricity generated in the country’s Kremlin-controlled Transnistria province and would benefit from ending this reliance.

Eurasia Center events

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

Prior to the Russian invasion of Ukraine, there had been discussions to build a 120 kilometer high-voltage overhead line linking Isaccea in Romania to Prymorske in the Odesa region. If these plans were resurrected, the project could help establish an interconnection capacity of up to 1,200 megawatts. This would have the potential to power around two million homes in Ukraine and possibly also supply Moldova, while helping Romania to decongest its Dobrogea region. The project could be part of a broader vision to regenerate the northwestern part of the Black Sea coast.

Romania, Moldova, and Ukraine are also linked through the Trans-Balkan corridor, a major gas transmission artery previously used by Russia to transport gas to southern Europe. This route has remained largely idle since 2020 after the Kremlin decided to reroute supplies via its new TurkStream pipelines to Turkey. Efforts to make the most of the Trans-Balkan corridor are now gaining momentum. In December 2023, Ukraine and Moldova announced plans to join a vertical gas corridor that would give companies the possibility to receive gas from international markets in Greece before exporting it to Ukrainian underground storage facilities via Bulgaria, Romania, and Moldova.

The Trans-Balkan corridor is of major importance not only because it can link southern Europe to Ukraine and Moldova, but also because by 2027 it should be in a position to start transporting larger quantities of gas produced in the Romanian Black Sea offshore zone. In the longer term, the three countries could also establish an energy research center focusing on offshore natural gas or wind output and adapting electricity and gas transmission infrastructure to accommodate cleaner forms of generation. A Black Sea energy production and research cluster would not only provide greater supply security to this part of Europe, but also help Ukraine, Romania, and Moldova deepen their integration and regenerate their economies.

With no end in sight to the Russian invasion in Ukraine, talk of regional energy transformations may seem overly ambitious. However, Ukraine’s remarkable wartime progress toward European energy sector integration is a reminder that major developments remain realistic.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own.

smeadows — Tue, 19 Dec 2023 16:39:39 +0000

Watch the full interview here.

The post Sullivan quoted in First Post on the effects of Red Sea attacks on the price of oil appeared first on Atlantic Council.

Tran interviewed by the BBC on Red Sea attacks disrupting global trade

rmurphy — Tue, 19 Dec 2023 16:38:26 +0000

The post Tran interviewed by the BBC on Red Sea attacks disrupting global trade appeared first on Atlantic Council.

Wald featured in Bloomberg Surveillance podcast discussing the impacts of the Red Sea attacks on the global oil market, commercial transportation alterations, and responses to Houthi attacks

smeadows — Tue, 19 Dec 2023 16:17:35 +0000

The post Wald featured in Bloomberg Surveillance podcast discussing the impacts of the Red Sea attacks on the global oil market, commercial transportation alterations, and responses to Houthi attacks appeared first on Atlantic Council.

Tran cited by Semafor on Red Sea attacks disrupting global trade

rmurphy — Tue, 19 Dec 2023 15:50:04 +0000

The post Tran cited by Semafor on Red Sea attacks disrupting global trade appeared first on Atlantic Council.

What attacks in the Red Sea could mean for the global economy

Hung Tran — Mon, 18 Dec 2023 21:24:51 +0000

In the past week, Iran-backed Houthi rebels in Yemen have fired missiles at container ships in the Red Sea in addition to attacking US and allied warships. Houthi representatives have said that those attacks will continue against ships related to Israel in any way, to support Hamas and as a protest against Israel’s war in Gaza. The attacks have raised geopolitical and military tension in the region and disrupted trade flows—adding headwinds to a fragile global economy and threatening to expand the already extensive war with rising civilian casualties launched in response to Hamas’ brutal terrorist attacks on October 7.

While no real damage has been done, top shipping companies such as Maersk, Hapag Lloyd, and MSC have decided not to use the Red Sea, pausing their ships before traversing the Bab-el-Mandab strait on their way to the Suez canal. Some ships have been diverted around Africa’s Cape of Good Hope—adding significant delays and costs. For example, voyages to Europe could be extended by up to two weeks, raising fuel and operating costs as well as delay costs for exporters, importers, and end users. Since 12 percent of global trade passes though the Red Sea, including 30 percent of global container traffic, accounting for one trillion dollars of trade each year, delay and diversion there would cause significant disruption to world trade. Oil and gas prices have already jumped following news of the attacks. Shipping insurance premiums have nearly doubled for some carriers over the past week.

The disruption to Red Sea shipping would create a strong headwind to the global economy which is still recovering from various shocks since 2020, such as the Covid-19 pandemic, Russia’s invasion of Ukraine, and the significant monetary tightening by major central banks. Energy importing regions will suffer the most; in particular low-income countries and Europe which is teetering on the verge of a recession. While the Israel-Hamas war has not yet had an impact on energy prices, the disruption in the Red Sea might. Rising oil and gas prices would keep headline inflation high, complicating central banks’ efforts to pivot to easing.

More importantly, the Houthi attacks have visibly raised the military tension in the region, threatening a spreading of the war in Gaza. The United States is about to launch a maritime protection force called “Operation Prosperity Guardian” including Western and Arab countries to protect shipping in the Red Sea. However, it is difficult to see how that can completely protect commercial ships from missile attacks or the threat of them. Bombing missile sites on Yemeni soil would expand the scope of the conflict and likely cause civilian casualties, further inflaming and dividing international public opinion.

In short, the longer the war in Gaza lasts, the longer shipping disruptions caused by missile attacks in the Red Sea will go on. The risk is that a widening conflict further destabilizes the regional economy, and in turn spills over into the global economy.

Hung Tran is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center, a former executive managing director at the Institute of International Finance and former deputy director at the International Monetary Fund.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

Learn more

The post What attacks in the Red Sea could mean for the global economy appeared first on Atlantic Council.

Tran cited by Business Insider on Red Sea attacks disrupting global trade

rmurphy — Mon, 18 Dec 2023 16:30:40 +0000

The post Tran cited by Business Insider on Red Sea attacks disrupting global trade appeared first on Atlantic Council.

Sullivan quoted in Al Jazeera on what the Houthi attacks mean for the oil market

smeadows — Sat, 16 Dec 2023 16:31:18 +0000

The post Sullivan quoted in Al Jazeera on what the Houthi attacks mean for the oil market appeared first on Atlantic Council.

The takeaway from COP28: Gas and nuclear are part of the energy transition

Ana Palacio — Fri, 15 Dec 2023 17:58:08 +0000

Standing at the epicenter of the United Nations Climate Conference in Dubai, also known as COP28, it was clear that this year’s event was qualitatively different from previous ones. What started in Berlin in 1995—convened by Angela Merkel, then the German environmental minister, as a private meeting of experts seeking to draw the attention of leaders and the media to the increase in global average temperatures—has become a prominent and massive gathering. Over the course of two weeks, more than 150 heads of state and government walked the halls of Expo City Dubai, compared to 112 who attended COP27 last year in Sharm El Sheikh, Egypt. There were also reportedly more than 90,000 participants at COP28, compared to less than 50,000 at COP27.

With the increase in size, COP’s center of gravity shifted away from the formal management structure of the convention. Instead, the focus was on disparate and scattered initiatives in which nonstate actors—including from the private sector—play a prominent role. There are several ways to interpret this conference: a holy pilgrimage for those who are devoutly green, a new Davos attended by executives of the same corporate giants who frequent the World Economic Forum gathering in Switzerland, a photocall of politicians from around the world, a theater with armies of lobbyists, a mix of consultants and media. “Inclusion” was an oft-repeated theme this year. And although it may seem provocative, the meeting’s most notable decision may have been to include the oil and gas sector, which had been previously sidelined—a decision that spotlighted a larger confrontation at COP28 between ideology and pragmatism.

A new energy era

Strategic ambitions have historically revolved around energy, a substantive battle in international relations. The nineteenth century can be understood as the era of coal, driving the development of the manufacturing industry and rail transportation. World War I marked the beginning of the era of oil. (Controversy surrounded Winston Churchill’s decision, as the civilian head of the British Royal Navy, to switch the fleet to this fuel in 1913.) The current century will witness an “energy transition” intended to move the world toward a sustainable future. However, as “green” ideologies have come to dominate public discourse, the concept of a “transition” is too often lost: specifically, the idea that it will extend over time and require overlap. Countries must invest in renewables while continuing to rely on fossil fuels, which currently represent around 80 percent of the global energy mix (a figure that has stubbornly persisted since the world began to monitor the consequences of anthropogenic greenhouse gases).

The expectation of continued growth in demand through 2050 further complicates the global trilemma—ensuring a reliable energy supply at an affordable price while also accounting for the environmental dimension. Considering today’s technological framework, any solution to the equation likely involves replacing coal with gas—along with the return of nuclear—which is the most effective way to reduce emissions in situations where alternative sources are not conducive. Provided, of course, that “inclusive” and “equitable” are not just formulaic terms, and that “leaving no one behind” is more than a stylistic clause. In other words, Europe and other wealthy countries can afford to do away with coal or nuclear, or even to bet completely on renewables. But in the rest of the world, if a choice needs to be made between prosperity and the environment, the former will likely win out.

Today there is growing awareness of the urgency of the climate crisis. Far from being a technical dialogue among scholars, the climate conversation has permeated society; ordinary citizens around the world feel involved. Education has become not only positive but essential. Given that development, it is necessary to review the messages being sent; to reconsider the apparent dichotomy between renewable energies (presented as unquestionably good) and coal, oil, natural gas, and nuclear. These have been collectively condemned without considering their different contributions to what should be our only goal: combating the accumulation of greenhouse gases in the atmosphere.

The challenge ahead

The historic language enshrined in the final—although nonbinding—deal of the summit urging countries toward “transitioning away from fossil fuels” reflects a collective commitment to the energy transition that is taking shape. At the same time, there was progress in efforts to align hydrocarbons, and particularly gas, with sustainability goals, in recognition of their continued importance. Two initiatives stand out: a push to abate methane emissions, in particular from venting, flaring, and leaks; and a sharpening focus on the capture, storage, and eventual use of carbon dioxide throughout the gas value chain, starting with extraction.

Equally transformative is the return of interest in nuclear power, following a long period of rejection that occurred despite it being one of the most efficient and reliable energy sources (even with the challenge of waste from current reactors). The deal reached two weeks ago has opened a horizon that, a year ago, would have been unimaginable: Twenty-two countries have committed to tripling their nuclear capacity by 2050. US climate envoy John Kerry has even emphasized that the world cannot achieve net zero by 2050 without some nuclear energy.

An initiative announced by European Commission President Ursula von der Leyen is also worth mentioning: More than a hundred countries have joined the Global Commitment on Renewable Energy and Energy Efficiency. It sets two goals: tripling installed renewable capacity and doubling the rate of improvements in energy efficiency, both by 2030. This effort must be accompanied by widespread electrification, a transformation that will require the rare earths and other critical minerals that have become indispensable in new energy technologies. Their concentration in certain areas presents a series of challenges, as does the almost monopolistic control of China over their extraction and processing. Currently, there is an effort to replace these minerals with more common, more abundant elements—although the necessary technology is still being developed.

The challenge coming out of COP28 is to consolidate a pragmatic vision, a global objective that values all three components of the energy trilemma. The vision must take into account the heightened energy demand that will accompany the global population growth expected in the next thirty years—an anticipated increase of two billion people—and must understand that for now fossil fuels inevitably will continue to play a significant role in meeting that demand.

The most pressing challenges of our century are clear: The world needs to multiply installed renewable capacity and advance electrification, along with its corollary of a constant supply of necessary critical minerals and rare earths. What’s also needed are efforts to develop a natural gas that is increasingly less polluting. And finally, nuclear skeptics need to make peace with nuclear energy.

A version of this article originally appeared in El Mundo. It has been translated from Spanish by the staff of Palacio y Asociados and is reprinted here with the author’s and publisher’s permission.

Ana Palacio is a former minister of foreign affairs of Spain and former senior vice president and general counsel of the World Bank Group. She is also a visiting professor at the Edmund E. Walsh School of Foreign Service at Georgetown University and a member of the Atlantic Council’s Board of Directors.

The post The takeaway from COP28: Gas and nuclear are part of the energy transition appeared first on Atlantic Council.

The US and NATO must clamp down on Russian fossil fuels to end the war in Ukraine

Svitlana Romanko and Oleh Savytskyi — Wed, 13 Dec 2023 14:35:07 +0000

Last Wednesday, Russian President Vladimir Putin landed in the United Arab Emirates for a short visit before heading to Saudi Arabia. His trip outside of Russia, a rare occurrence since Russian forces began their full-scale invasion of Ukraine in February 2022, is evidence that Putin is strategically wielding his country’s influence among OPEC+ nations—this at a time when the United States and European Union are attempting to tamp down Russia’s fossil fuel exports that help fund its war. Efforts to do so have yielded mixed results, and with Russia’s military budget set to dramatically increase in 2024, the West must do more to staunch the flow of Russian oil and gas—and restore peace for Ukraine.

The connection between Russia and oil-and-gas-producing countries in the Middle East has undeniably strengthened in the nearly two years since the invasion of Ukraine and Russia’s hybrid energy warfare against Europe began. Following the imposition of a price cap on Russian oil by the Group of Seven (G7) and the subsequent reluctance of most Western nations to consume Russian crude, international traders seeking unhindered dealings with Russia flocked en masse to Dubai.

But preventing financial actors from capitalizing on these resources is imperative. Attempts to do so thus far have largely been thwarted. International sanctions on Russian exports of fossil fuels—its primary financial resource—aimed to deal an economic blow to the Kremlin. Initially impactful, these measures soon faltered due to various loopholes and insufficient enforcement, rendering them ineffective, with Russian fossil fuels ending up in unexpected places. Investigations by the Washington Post and Project on Government Oversight reveal that shipments of Russian oil have continuously made their way to a refinery that supplies fuels to US military bases in the Mediterranean Sea. And, as the authors found in their report, “The carbon war: Accounting for the global proliferation of Russian fossil fuels,” the share of tax proceeds from fossil fuel exports in Russia reduced this year but still represents nearly a third of all federal income.

Since February 24, 2022, Russia has amassed around $600 billion in profits from fossil fuel exports, and is rushing to develop Siberian and Arctic fields. If, however, international sanctions on Russia’s fossil fuel industry remain in place and are rigorously enforced, the International Energy Agency projects that the Kremlin’s profits from oil and gas could plummet by 40 to 50 percent by 2030.

Anything short of a unified approach among Western nations to curb the export of Russian fossil fuels and hinder the country’s expansion of LNG exports would reveal a vulnerability that the United States, EU, and all G7 nations cannot afford in a destabilized world. Reaping profits from oil and gas exports, the Kremlin has sponsored more than 112,000 registered war crimes in Ukraine since February 2022. Russia has alarming plans to escalate the brutal war in Ukraine even further. These plans are starkly visible in its recently adopted budget for the coming year. For the first time since the Soviet era, the Kremlin allocated almost a third of all expenditures to the army and the military-industrial complex. In 2024, the national defense budget will swell to 10.775 trillion roubles, which is 70 percent more than in 2023, 2.3 times more than in 2022, and three times higher than in pre-war 2021. The army and private military companies will account for 30 percent of the 2024 budget, with all security forces together receiving 40 percent.

Frankly put, for the United States and NATO to maintain credibility concerning international security, it’s high time they earnestly consider dismantling the Russian oil and gas business. Putin’s recent trip to Middle East shows that Russia is increasingly becoming politically and economically invested in the key region that stirs in Russia’s oil and gas into world markets. Controlling profit-driven traders, banks, shippers, refineries, and all intermediaries sustaining the Kremlin’s financial lifeline is no simple feat. However, it’s an imperative task that the Biden administration and other Western leaders can’t afford to dodge.

Svitlana Romanko is the Founder and Director of Razom We Stand.

Oleh Savytskyi is the Senior Campaigns Manager of Razom We Stand.

EnergySource

EnergySource Sep 14, 2023

What to do about Russia’s energy trojan horse

By Olga Khakova, Charles Lichfield

Economic Sanctions Economy & Business

EnergySource Sep 18, 2023

Moldova has the chance to break from its Gazprom-dominated past

By Jamal Nusseibeh and Branko Terzic

Moldova has the opportunity to make good use of the lessons of its past by strengthening regulatory independence, increasing competition, and introducing transparent pricing.

Eastern Europe Energy & Environment

EnergySource Oct 11, 2023

A Ukrainian energy hub will help Europe’s clean transition

By Mark Temnycky

Ukraine can become an energy and minerals hub for European. Investing in Ukraine’s renewable energy industry is vital for European decarbonization.

Energy & Environment Energy Transitions

Learn more about the Global Energy Center

The post The US and NATO must clamp down on Russian fossil fuels to end the war in Ukraine appeared first on Atlantic Council.

How GCC and Turkey can go together toward a sustainable future

Eser Özdil — Fri, 08 Dec 2023 17:00:00 +0000

This is part of an essay series on the mutual challenges posed by climate change and opportunities presented by the energy transition that the Gulf Cooperation Council (GCC) and Turkey share.

Introduction

Since the mid-1980s, Turkey’s priority has been to meet the increasing energy demands caused by industrialization and population growth. On the one hand, Turkey is involved in many pipeline projects to supply oil and natural gas, especially from neighboring countries. On the other hand, it has focused as much as possible on electricity production from domestic and renewable resources. In this context, Turkish decision-makers gave high importance to bringing high hydroelectric potential to the economy and strongly encouraged the rapid construction of wind and solar power plants, with various purchase guarantees and support mechanisms for both since the 2000s.

While Turkey’s primary energy demand was 53 million tons oil equivalent (mtoe) per year in 1990, this figure increased to 147 mtoe by 2020. In the process, Turkey’s energy policies were shaped around two main axes. The first priority was supply security, while the secondary priority was to ensure the most reasonable prices possible for energy imports, as Turkey heavily depends on fossil fuels (natural gas, oil, and coal), which meet roughly 80 percent of Turkey’s primary energy demand. Just as the increase in global oil prices following the outbreak of the Iraq War in 2002 seriously affected Turkey, it was one of the countries most affected by the increase in oil and natural-gas prices during the Ukraine War. It should be noted that Turkey paid $97 billion for energy imports in 2022, breaking its all-time record.

Turkey will continue to face important challenges in the future. According to the National Energy Plan (NEP) published by the Ministry of Energy and Natural Resources (MENR) in 2022, Turkey’s primary energy demand will increase to 205 mtoe in 2035. While the installed power-plant capacity will increase from 105 gigawatts (GW) to 189.7 GW, the new capacity will consist largely of solar and wind-power plants. In this context, the challenge of managing energy transformation in line with global trends will be added to Turkey’s priorities of supply security and affordability. It is important to underline that Turkey’s concept of energy transformation is evolving toward a more liberal market structure with a smart transformation strategy, while transitioning to a carbon-neutral economy without increasing costs for the end consumer. This process will include many cooperation opportunities, especially for joint investments in renewable-energy facilities, electricity and gas distribution, grid modernization, optimization, digitalization technologies, hydrogen and ammonia production, and so forth.

Turkish energy transition 1.0

Alparslan Bayraktar, Turkey’s minister of energy and natural resources (MENR), defined the country’s energy policies between 2002 and 2018 as Energy Transition 1.0 in an article he wrote for Turkish Policy Quarterly in 2018, when he served as the deputy minister. Bayraktar summarized the priority policy set for the sector, which attracted more than $60 billion of investment in this process, as part of the transition to a more transparent and competitive energy market. Indeed, after the AK Party first came to power in 2002, it launched broad privatization and liberalization policies for all segments of the energy sector. In this period, electricity-distribution companies and natural-gas utilities—with the exception of Istanbul’s gas-distribution firm İGDAŞ—were privatized. While some publicly owned power plants were privatized, the private sector’s share of electricity production increased to 80 percent. The most important point here is that most of these investments were carried out in line with liberalization and free-competition principles, without long-term guaranteed-purchase contracts. In addition, the market structure was strengthened by the unbundling of vertically integrated public companies.

Turkish energy transition 2.0

Bayraktar states that Turkey has moved to version 2.0 in energy transformation within the framework of the National Energy and Mining Policy (NEMP) published by MENR back in 2017. He explains NEMP’s three main pillars as “security of supply, localization, and predictability in the markets.”

In this context, Turkey’s infrastructure investments between 2017–2023 have almost permanently solved the supply security problem. By increasing the capacity of land-based liquefied-natural-gas (LNG) terminals and commissioning new floating storage regasification units (FSRU), Turkey’s daily LNG regasification capacity has exceeded 140 million cubic meters (mcm). In addition, with the increase in the capacity of the Silivri Underground Natural Gas Storage facility and the commissioning of the Tuz Gölü Natural Gas Storage facility, Turkey’s annual natural-gas storage capacity reached 6 billion cubic meters (bcm). With the commissioning of international natural-gas pipelines such as TurkStream and Trans-Anatolian Pipeline (TANAP), Turkey achieved resource and route diversity. With a gas entry capacity of more than 400 mcm per day, Turkey not only meets its domestic needs but has become a supplier to neighboring countries, with state-owned BOTAŞ signing gas-export agreements with Bulgaria, Romania, Hungary, and Moldova. The discovery of the Sakarya gas field in the Black Sea and the increase in oil production are also among the important developments during this period. There are also established oil, oil products, and gas import and trade relations between Turkey and Gulf Cooperation Council (GCC) countries. As Qatar emerges as one of Turkey’s most important LNG suppliers, Saudi Arabia supplies roughly 5 percent of Turkey’s crude-oil demand. Saudi Arabia and the United Arab Emirates (UAE) supply gasoline, diesel, and other relevant oil products to Turkey. Last but not least, BOTAŞ recently signed a 1.4-bcm LNG-offtake agreement with Oman LNG company.

Renewable-energy investments are also gaining momentum in the field of electricity generation. After triggering these investments through a feed-in, tariffs-based support mechanism (YEKDEM) elaborated in December 2010, the new strategy brought further investment opportunities to Turkey. This entailed a “renewable energy resource zone (RE-ZONE) competition mechanism,” which encouraged investors not only to build power plants but also to manufacture renewable-energy equipment in Turkey. This RE-ZONE model aims to both utilize renewable resources and reduce the country’s current-account deficit with locally manufactured equipment. Considering investments since the new approach was announced, installed wind capacity increased from 7 GW to almost 12 GW, and solar capacity increased from 5 GW to 10.1 GW.

There is still much to do in the market-liberalization sphere. Especially in the natural-gas market, BOTAŞ’ dominant position in both imports and the domestic market prevents the formation of a gas market with liquidity. In addition, subsidizing domestic-market sales prices from time to time also harms market predictability. This situation also negatively affects Turkey’s strategy to become a natural-gas hub, which is a widely discussed topic. Similarly, the pricing policy of the public company EÜAŞ also emerges as an important issue. For this reason, it is of great importance to eliminate interventions through public companies and generate healthy price signals.

If you want to go fast, go alone;

if you want to go far, go together!

African proverb

Energy transition 3.0: Go together

Transitioning to carbon-neutral economies has emerged as a must rather than a necessity. However, the threats faced by our planet and humanity, especially global climate change, clearly demonstrate that no country can overcome these challenges alone. The phenomena of decarbonization, decentralization, digitalization, and diversity (4D) force all countries to cooperate in this journey.

For this reason, Bayraktar argues that the energy transition should be smart, and he summarizes the main parameters of this smart transition as an energy transition that is inclusive, responsive, flexible, rational, and digital. The minister has explained: “What Turkey foresees is a smart energy transition, where decisions are made rationally, not emotionally, for the purpose of maintaining our supply security, diversifying our energy mix, and transforming Turkey into an energy hub, becoming a safe space for investors. In line with this objective, we will continue to increase our oil and natural gas production as well as build nuclear power plants to diversify our energy mix.”

At this point, NEP targets should be examined. Turkey, which plans to become a carbon-neutral economy by 2053, has set challenging targets for 2035. The most challenging is to increase the total installed power-plant capacity to 189.7 GW (it is currently 105 GW). To achieve these targets, it aims to invest mainly in wind and solar power plants and reach capacities of 52.9 GW and 29.6 GW, respectively. Another goal is that approximately 5 GW of the installed wind power will be offshore, and studies on this issue continue in close cooperation with the World Bank. Various companies are interested in investing in offshore wind projects in Turkey, and the UAE’s Masdar is also closely following developments there. A study published by the World Bank in 2019 stated that Turkey’s total offshore wind power-plant potential was around 75 GW. TÜREB states that Turkey’s total wind potential is around 150 GW. Similarly, GÜNDER stated that Turkey’s total solar potential is more than 150 GW.

Another of Turkey’s priorities is to invest in base-load nuclear energy and battery facilities to manage the energy-transformation process in a healthy way. According to the NEP, Turkey aims to reach 7.2 GW of installed nuclear-power capacity by 2035. In addition to conventional nuclear-power plants, small-scale nuclear power plants (SMR) have become among Turkey’s priorities. Bayraktar recently announced in an interview with the Turkish television channel NTV that the ministry wants to reach a total SMR capacity of 5 GW. In the long term, Turkey plans to have a significant share of nuclear power in its electricity-generation portfolio.

In battery investments, Turkey aims to have an installed capacity of 7.5 GW in 2035. However, pre-license applications to the Energy Market Regulatory Authority (EMRA) have already exceeded 90 GW. Undoubtedly, most of these applications will not be implemented, but the interest in the sector suggests that investments realized in the coming period may be above the level planned by the ministry.

Another priority for Turkey will be green- and blue-hydrogen investments, especially for industrial use. According to the NEP, the target is 5 GW of electrolyzer capacity in 2035. Though hydrogen projects in both Turkey and GCC countries are at the early stage, Turkey and Saudi Arabia announced establishment of working groups on development of hydrogen-production technologies. In the hydrogen strategy paper published by the ministry, the targeted capacity is 70 GW by 2053. Considering both its renewable-energy potential and its proximity to Europe, Turkey can be an important hydrogen producer and exporter. While it’s very early to make sound forecasts about hydrogen production and demand, Europe has a clear strategy to increase hydrogen consumption to replace fossil fuels. The Gulf region and North Africa are emerging as the cheapest hydrogen-producing regions with high-efficiency, renewable-energy production as per International Energy Agency (IEA) data. Turkey is also a key country, considering its status as a transit option and its significant renewable-energy deployment. That’s why the future will see strong cooperation between Turkey and GCC countries.

At this point, Turkey’s main approach is to develop international cooperation. In this context, during President Recep Tayyip Erdoğan’s visits to the UAE, Qatar, and Saudi Arabia in July 2023, memoranda of understanding (MoUs) were signed regarding investments with a total size of $29.7 billion. These planned investments will be made in in renewable energy, including offshore wind, solar energy, clean hydrogen, and nuclear power, in line with Turkey’s future projections. Within the scope of the visit, an agreement was signed between Limak and Alpha Dabi to realize joint investments, including in the energy sector. The strategic-cooperation agreement signed between Abu Dhabi National Oil Company (ADNOC) and Türkiye Petrolleri Anonim Ortaklığı (TPAO) also stands out as important.

Similarly, Turkish and Saudi Arabian leaders decided to develop cooperation in energy fields, including renewable energy, electricity interconnection between the two countries, electricity exports from Turkey to Europe, energy efficiency, innovation and clean technologies for hydrocarbon resources, low-carbon fuels such as clean hydrogen, and nuclear energy. They expressed their desire to explore cooperation options regarding areas of peaceful use and the regulatory aspects of these areas.

Even before these trips, the interest of GCC companies in Turkey was remarkable. In 2022, International Energy Holding, a subsidiary of International Holding Company, acquired a 50-percent stake in Turkish renewable-energy company Kalyon Enerji for $490 million. As Bloomberg reported earlier, Masdar is interested in buying shares of Fiba Energy, an owner of wind farms in Turkey. Clearly, there is a convergence of priorities and policies between Turkey and GCC countries regarding the energy transition. Developing political relations will be further cemented by economic investments.

Conclusion

Both Turkey and GCC countries seem aligned in terms of green-energy transition strategies. While Turkey has large industrial production capacity, as well as substantial experience and know-how in renewable-energy power-plant installations, GCC countries have ample financial capacities and huge renewable-energy deployment potential thanks to long sunny seasons. On top of that, Gulf countries are also looking for lucrative investment opportunities around the world. Therefore, strategies and economic aspects of both sides seem to complement each other. Thanks to financial capabilities, Gulf countries can invest in Turkish companies and/or develop common projects in both Turkey and the Gulf region. Erdogan’s working trips to Gulf countries and signed MoUs are clear signals of future joint steps.

Eser Özdil is a Nonresident Fellow at the Atlantic Council IN TURKEY & founder of Glocal Group Consulting, Investment & Trade

The post How GCC and Turkey can go together toward a sustainable future appeared first on Atlantic Council.

Prospects for cooperation in energy transition for a sustainable future: GCC, Turkey, and regional perspectives

Atlantic Council IN TURKEY & TRENDS Research and Advisory — Fri, 08 Dec 2023 17:00:00 +0000

Foreword

The Gulf Cooperation Council (GCC) and Turkey share mutual challenges posed by climate change while, at the same time, possessing important synergies in the energy sector that deserve further exploration from policymakers and the private sector.

With the shared goals of reducing carbon emissions, ensuring energy security, and stimulating economic growth in perspective, TRENDS Research & Advisory and the Atlantic Council in Turkey are proud to present our joint publication on Prospects for Cooperation in Energy Transition for a Sustainable Future: GCC, Turkey, and Regional Perspectives. We hope this publication will contribute to the important discussion of the need for international and regional cooperation to accelerate the adoption of clean energy and address climate change. Our joint publication represents a starting point and roadmap for future cooperation.

Diversifying the energy mix through clean energy enhances energy security for both regions. By reducing reliance on fossil fuels, the GCC and Turkey can shield themselves from geopolitical uncertainties and price fluctuations in the global oil and gas markets. By sharing knowledge and best practices, they can accelerate climate adaptation, making the transition more efficient and cost-effective. Collaboration in clean energy projects can also promote regional stability at this critical time of uncertainty by fostering economic ties and mutual interests.

The joint publication explores prospects for partnership between the GCC countries and Turkey to accelerate energy transition and clean-energy deployment. The goal is to diagnose the current state of renewables adoption in Turkey and the GCC, identify potential areas for cooperation in aligning their net-zero emissions targets, and produce a set of policy recommendations to accelerate the transition. The publication underscores the imperative of shared efforts, knowledge exchange, and sustainable initiatives to fortify regional stability and contribute to a resilient, low-carbon future.

May our joint efforts to address the challenges of climate change and foster clean-energy cooperation serve as a testament to the power of regional partnerships in shaping a more secure, resilient, and interconnected world.

Mohammed Abdullah Al-Ali
CEO, TRENDS Research and Advisory

Defne Arslan
Senior Director, Atlantic Council IN TURKEY & Turkey Programs, Atlantic Council

ARTICLES

Introduction

Going together toward a sustainable future

Charting energy transitions

EV adoption could drive collaboration

Forging a collaborative energy transition

Prospects for cooperation in energy transition for a sustainable future: GCC, Türkiye, and regional perspectives

An in-person discussion and publication launch taking place at COP28, on Türkiye-GCC prospects for cooperation in energy transition.

Energy & Environment Energy Transitions Geopolitics & Energy Security Middle East

Learn more

The post Prospects for cooperation in energy transition for a sustainable future: GCC, Turkey, and regional perspectives appeared first on Atlantic Council.

Technology leaders warn that 2030 climate aims are at risk without accelerated support for innovation

Nick Fouriezos — Fri, 08 Dec 2023 11:20:18 +0000

Global policymakers and leaders will have to act quickly to pave the way for innovation if they want any chance of meeting their lofty 2030 decarbonization goals, industry leaders warned on Thursday at the Atlantic Council’s Global Energy Forum in Dubai, which is currently hosting the United Nations climate change conference known as COP28.

“The stark contrast to me is that energy companies are actually here, and two COPs ago at Glasgow, there were CEOs of oil companies who were told they were not permitted to attend,” said HIF Global Executive Director Meg Gentle, adding that energy company executives’ voices are sorely needed in these conversations about fighting climate change.

“It’s getting better, but policymakers don’t really listen to industry leaders,” said Gentle, whose company makes synthetic fuels from renewable energy. “And they underestimate how long it takes to build these projects. We’re futzing around with getting things perfect, rather than getting things moving.”

That urgency was felt across the panel. Gentle was joined by Jon Mitchell, chief sustainability officer at Canadian energy company Suncor; Naser Al Hajri, deputy chief operating officer of Abu Dhabi-based Mubadala Energy; and Fareed Yasseen, climate envoy and advisor to the prime minister of the Republic of Iraq.

See more highlights below from their discussion, which was moderated by Cody Combs, future editor for the National.

Energy innovation at work

Gentle said that e-fuels, which are made from green fuel and recycled molecules of carbon dioxide, already have significant promise in addressing the climate challenge. While they are still more expensive than producing fossil fuels, they are chemically identical to what’s being put in car and jet fuel: “What we need to do is create the policy and the market mechanisms that can extend and accept e-fuels into the market and use it in existing infrastructure,” she said, describing it as a public policy and economic challenge more than a technological one.
In Chile, HIF Global is producing an e-methanol that can be used for the shipping sector and synthesized into gasoline. Chile can start reducing fossil fuel dependence by blending that e-methanol with other fuels, which adds only “a couple cents’ increase in the cost,” Gentle said, proving that the world can start creating “different market mechanisms where pricing can be spread over large markets.”

Mitchell said that Suncor has started taking more of a focus on the demand side of the energy technology equation. “We’re in a situation where we need significantly more energy with significantly less emissions. And so how are we going to do that?” Mitchell said. “Demand’s been a bit absent from the conversation. And I think we need to spend a little bit more time on that.”
There are numerous questions about whether noncombustible uses of fossil fuels and hydrocarbons can provide an alternative product mix for energy companies. Al Hajri gave the example of a geothermal project that Mubadala Energy recently conducted with Chevron to provide sustainable energy to a town in Indonesia. “All forms of energy will be required,” he said.
Yasseen argued that nuclear technology needs to get more attention. “We can’t have just one arrow in our quiver. We really have to broaden what we do,” he said. “There are significant developments that make nuclear reasonable and achievable and safe within our lifetimes,” he added. Those developments include novel ways to yield nuclear ashes with one hundred-year lifetimes instead of one thousand-year ones, making it possible to solve the challenge of nuclear waste, and fusion advances that have made commercial solutions a possibility by 2035 or 2040.

Changing the clean energy conversation

Many on the panel observed a marked shift in the conversations at COP28 compared to past years. “For years we’ve been pushing a rock up a hill trying to get people to understand, notice, pay attention to this issue,” Mitchell said. “It feels to me like we’ve crested that hill. The rock is now rolling down the other side, and now we have to harness the momentum on where we want to take it,” he said, noting that there were almost one hundred thousand people in attendance this year, more than double last year’s attendance. “I think COP28 can do, for the energy sector, what Glasgow did for the financial sector,” he said.
In order to reach 2030 sustainable development goals, the multi-year projects required to build novel energy technology facilities need to get started now, Naser argued. “In my industry, it can take five, six, seven years sometimes to get the projects ongoing,” he said. “Everyone is talking about the long target, but I think what we need is a short-term and medium target.”
Gentle described an e-fuels facility HIF Global is building in Texas, where the construction process will take at least four years.“ So the longer we wait on policy to allow these projects to start,” she said, “the lower probability we have of delivering solutions before 2030.”

New technologies confront new realities

Yasseen said that taking action should put ethics first. “The driver to everything that we do should be equity,” he said. “You can’t, for example, force people to switch to new technologies if it’s very costly to them. You have to take circumstances into account,” he said. “So the focus now, for example, in Iraq, is not on carbon capture and storage, but on stopping flaring.” It’s not about hydrogen, he said, “but it’s about taking account of methane.”
Asked about whether Iraq had the political will to resolve some of these issues, Yasseen said that the prime minister recently told a friend in a private conversation that the biggest thing that kept him up at night was flaring. “In Iraq, it is a health hazard to people,” he said. “Frankly, it’s money that we’re wasting, huge amounts. And it’s bad for the planet.”
The Global Methane Pledge, Al Hajri said, will “provide us a dynamic to work with vendors, to work with partners, operators, different sectors, and to try to see what kind of technology that we can implement in our facilities.” Globally, there are lots of opportunities to use existing facilities to help in the long term too, Mitchell added, noting that the same storage infrastructure used to decarbonize oil production can be used to store carbon dioxide with carbon capture and storage technologies as they advance.

Nick Fouriezos is a writer with more than a decade of journalism experience around the globe.

Note: Mubadala Energy and HIF Global are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Watch the full event

The post Technology leaders warn that 2030 climate aims are at risk without accelerated support for innovation appeared first on Atlantic Council.

What the Global South needs for a just energy transition

Katherine Walla — Fri, 08 Dec 2023 10:26:29 +0000

Achieving a just energy transition for the Global South may require a complete reversal in the way the world has operated for centuries.

According to Caribbean Development Bank President Hyginus Leon, who spoke at the Atlantic Council’s Global Energy Forum in Dubai on Thursday, the Global North has long benefitted from being the destination for flows of goods, money, and people from the south. “Now,” he explained, “you need a reversal” to “generate equity” and “allow the Global South to grow.”

Herbert Krapa, Ghana’s deputy minister of energy, explained that despite African countries being the source of both fossil fuels and vast critical mineral deposits—both crucial for meeting energy demand—the continent hasn’t been able to leverage them for its own development. “A just transition,” he explained, will require “taking advantage of these resources.”

But for the sake of the climate, he added, it will also require “significant financing” for renewable energy.

Ultimately, Leon explained, the Global South must have a larger voice on the world stage. Otherwise “we are not going to make progress” toward climate goals.

Fahad al-Dhubaib of the Saudi national oil company Aramco argued that Global North countries pinning their hopes on keeping global warming below 1.5 degrees Celsius should focus on the Global South now: “This is our opportunity [to curtail] the potential growth and emissions we could be seeing going forward.”

Below are more highlights from the conversation on energy security among leaders from the Global South, moderated by Jason Marczak, vice president and senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

A secure energy future

“The energy transition needs to go as fast as it can,” said Pietro Sampaio Mendes, Brazil’s secretary for oil, natural gas, and biofuels. However, he added, “we will not stop the production of gas . . . we are increasing the production.” Krapa similarly said that while Ghana understands that it will need to transition, it is an expensive endeavor: “We have oil and gas in significant quantities, and will continue to explore that . . . side by side with our transition plan to move more to renewables.”
Al-Dhubaib noted that the bulk of energy demand in the future will come from the Global South, where the gross domestic product per capita is just shy of seven thousand dollars. So “we shouldn’t take affordability and reliability lightly in the Global South,” he said.
He explained that since Russia invaded Ukraine in 2022, gas prices and coal demand have skyrocketed, making energy more expensive and less reliable. “Time is not working in our advantage,” he said. When it comes to energy supplies, he argued, “we need everything going forward.” Sampaio Mendes added that in the battle for the climate, “our enemy is the carbon; it is not any technology or the pathway.”
And according to Marcelino Madrigal, head of the Inter-American Development Bank’s Energy Division, the question about the future of energy security is “more complex” than whether to pursue renewables or fossil fuels. For him, it is also about securing ample energy-production capacity that is accessible to all in the long run.

There will be costs

Al-Dhubaib argued that as the world switches from oil and gas to renewables, energy “resilience will be quite challenged,” as renewable energy can’t be stored as long and renewable-energy technologies are more expensive upfront—with smaller returns.
Leon asked: “What good is it to have a high return, and that high return means it only yields our ultimate death?” He continued, “We cannot be arguing that there’s a higher cost to financing something in the realm of renewable energy that saves the planet . . . and then say we cannot do it because the cost is too high.” Madrigal added that, while the energy transition will spread benefits, “there are also costs.”
Madrigal noted that countries will also need to invest “a lot,” and not just money: In particular, he said that Latin America will need to invest in better rule of law, regulatory instruments, and institutions to create a better environment for private investment. The world’s mission to slow global warming is “a huge opportunity for Latin America,” he explained.

The Global South’s take on COP

The speakers, all in Dubai for the United Nations climate change conference known as COP28, reflected on the breakthroughs they’ve seen come out of the convening thus far. Leon said that he sees COP as “a process” that leaders “advance as we go along each year,” achieving “pieces along the way.”
Pointing to a new push to triple renewables and double energy efficiency, Leon cautioned that for that to happen, more finance is needed. While a new thirty-billion-dollar fund from the United Arab Emirates and the loss and damage fund are “welcome,” he said, “the actual investment need is . . . in the range of twenty trillion [dollars]. So there is a humungous gap that is still to be filled.”
“Those are essentially seed funds,” Krapa added. “The amount of financing that needs to go into remodeling energy systems and energy infrastructure” across Africa is much higher, he warned, adding that the new funds amount to “a drop in the ocean.”
Krapa said that he is keeping an eye on the global stocktake—an assessment of global climate progress (or lack thereof) that is expected to be completed at COP28. “I think we should be very clear in the outcomes of the stock,” he said, “in terms of the progress or the little progress that has been made . . . we should be bold to confront the truth that the pledges and commitments have not come through.”

Katherine Walla is an associate director on the editorial team at the Atlantic Council.

The post What the Global South needs for a just energy transition appeared first on Atlantic Council.

Zaid interviewed by Kurdistan 24 on economy and security

Atlantic Council — Thu, 07 Dec 2023 18:53:36 +0000

Flagship Event Tue, December 5, 2023 • 5:00 am ET

The post Zaid interviewed by Kurdistan 24 on economy and security appeared first on Atlantic Council.

Biden’s energy security adviser Amos Hochstein on COP28 and the future of the Middle East

Atlantic Council — Thu, 07 Dec 2023 17:19:43 +0000

Watch the event

Global Energy Forum at COP28

The eighth Forum will be held in Dubai as energy and climate decision-makers converge for COP28.

Energy & Environment Energy Markets & Governance Energy Transitions Geopolitics & Energy Security

Event transcript

Uncorrected transcript: Check against delivery

Speaker

Amos Hochstein
Senior Advisor to the President for Energy and Investment
Executive Office of the President

Moderator

Frederick Kempe
President and CEO, Atlantic Council

FREDERICK KEMPE: So it is such a pleasure to have this conversation with Amos, senior advisor to the president of the United States for energy and investment. I had to read it here because you’ve had so many titles since you came—and so many titles in your career, so many titles. You’re a person who’s worn a lot of hats in your—you’re one of the most impressive, resourceful, and capable public servants I know. And we’ve known each other a long time, Amos—a personal friend and former board member of the Atlantic Council.

We’ve got a packed house. People are always interested in hearing what you have to say. So I think we’ll get started.

Like a lot of people of great capability and capacity, you keep taking on more tasks and you keep—and so let’s start by talking about your relatively new job and about the importance of global connectivity for economic growth and enabling the transition to clean energy. I talked to Amos about what we could talk about and he says, well, you can ask whatever you want to ask, but I’m going to answer whatever I want to answer. And so this will be an interesting conversation.

But he’s been involved in the situation with Israel in Gaza. He was involved in the situation in Ukraine, particularly the energy elements of this, where Vladimir Putin has done a lot of harm to the world but one of the things he did was accelerate the energy transition of Europe.

But let’s get started with, first of all, talking about your role. It seems to have evolved from a focus on the security of energy and supply management toward a more holistic approach which is inclusive of energy infrastructure and economic interconnectivity. So, first of all, has this sort of job ever existed in the White House before? A little bit of history on how it came about and what you see as your primary priorities, and then we’ll get into some of the—some of the details.

AMOS HOCHSTEIN: Yeah. First, Fred, thank you, and for taking our private conversation before and broadcasting it. But—so I’ll talk about something completely different.

Look, I think I should start by the—it’s amazing to me, Landon, you said this is the eighth. It feels to me like it’s the—it’s the, you know, fifteenth. There’s just so much going on that the Atlantic Council has done, and the partnership of doing it here in UAE, in Abu Dhabi and now in Dubai, has really transformed what this event has always been. But it’s—and I’m glad that you took a minute to recognize Ambassador Dick Morningstar’s extremely productive contribution to the concept of energy security in the context of American government and diplomacy, and bringing energy into diplomacy and national security, which is not a given. And it’s flourished since then, but in—just about fifteen years ago nobody thought there should be a conversation of energy in the national security space in Washington. The rest of the world figured it out about thirty years earlier, but—and Washington didn’t get it. So I’m really grateful that you, first of all, named something after Dick Morningstar and recognized him here. I think this is probably one of the first ones that he has not attended, so I’m really grateful for you for doing that.

Look, this role, no, it has not existed before in the White House, and it demonstrates what the president—how much the president is emphasizing the holistic approach to the focus on what is our work on climate change and responding to a climate emergency. And I’ll take a minute just to say what I think that—in my mind, what I think that means.

When we want to look at—we’re here at COP, where we originally talked about things—about COP in the context of what is it communicating and what are the NDCs, what are countries agreeing to as far as what are the—setting the longer-term goal and then setting some milestones on the way to that goal so that we don’t just talk about 2050 without saying, OK, but what’s going to happen in 2030, and then 2035, and 2040. If you just leave it at 2050, it becomes a little bit pointless.

So that really was the main aspect of what COP’s about. And what it’s transformed into is looking at COP is really how do we get to that kind of a world where, now that we see that it’s possible to reach net-zero but it also suddenly dawn on us, we caught the bus, right, as far as convincing the world that this is what we have to do. Now it’s really, how do you do it? And the energy system is a really complicated system—global system that it’s not so simple to just simply unplug from one system and just say, oh, it’ll take twenty years. We’ll just—it’ll take twenty years.

It actually is really complicated. And one of the things that makes it really difficult is how do you do it across the board regardless of income level? And it’s one thing that you can do things in the United States, in the UAE, in Germany, in Denmark, in China. It’s another to do it in countries that can’t afford to do the same thing. So how do we have a holistic approach to say that the work we have to do, one, has to be across the board, two, it doesn’t have to be just focusing on deployment of renewable energy and storage?

But, rather, what are the other pieces of infrastructure that need to be built in order to enable that kind of investment? Because if you don’t have the rail, and the transmission, and the ports, and dry ports, and how to connect the cities to the rural areas—all those things have to be connected. And, by the way, if you don’t have the connectivity, the 5G, and have the telecommunication side of it so that you can use and utilize the advancement in technology that the new energy system has, if you can’t implement that in places that don’t have the digital connectivity, then you’re not going to be able to reach that goal.

So how do you look at all these pieces? And what the president has asked me to do is to say, OK, how do we bring a holistic approach? How do we bring our G7 partners together, which is where we launched a lot of this new kind of effort, and then bring more and more partners as we go along? And I think it culminates in what the UAE announced here on Friday, which is Alterra. Which is, I think, OK, we got to put the money towards this goal of net zero, but it has to be invested in a broader—to a broader set of locations. And it has to have a cost of capital that enables the investment in countries where right now the cost of capital is what prohibits the investment itself.

So these are all the—a lot of different pieces. And if we’re going to be successful, the thought was that we would have—that I would try to see if I can bring the different parts of the US government, the different agencies that are all doing great work, and to all coordinate towards one goal, while doing the same thing with our friends and allies around the world.

FREDERICK KEMPE: And I guess two things. In this effort, what do you think success will look like? And over what period of time will we see it? And in that context, how does this COP28 fit in? You’ve seen the various media controversies about this. Some have called it a divisive COP because of the issue of fossil fuels and climate. Others have called it an inclusive COP, that you can’t get to the solutions we want to get unless you bring all of these actors together. So two things, what does—in your own role what does success look like over time? And then, secondarily, how do you think this COP28 will be remembered, if you don’t think it’s too early to talk about that?

AMOS HOCHSTEIN: Think what success looks like, is if we took—you know, this is the stocktake COP. If we have a stocktake that doesn’t have to be announced as a stock but we keep taking stock as we should, and then as we move forward we see that the percentage of invested dollars are distributed more equally around the world, one; two, that we’re actually building infrastructure that will enable investment, whether that’s hard infrastructure or it’s the deployment of actual energy infrastructure; and if we’ve been able to do those two things over the next few years, then I think that will be—for me that will be seen as success.

If we—if as a result of that we’re actually narrowing the gap between developed and developing economies on both deployment and viewpoint and a feel that everybody is in this together so I think that will—for me that will be the success.

I’ll add one aspect to that that I haven’t mentioned before, and that is Landon talks—and, Fred, you really started this at the Atlantic Council on energy security. And it used to be—a few years ago somebody said to me, well, energy security is the—is code word for fossil fuels. So there’s the climate world of energy and there’s the energy security.

To me, if we’re still doing that today that’s not a success. That’s a failure, because energy security is as true in the era of climate change and battling climate change as it was in the era of fossil fuels and security of supply and making sure that it is available, affordable, and diversified is not something that we only talk about in the context of Russia and Europe on gas. It has to be the same for EVs and lithium and panels and—solar panels and turbines.

And so the entire supply chain can’t be dominated by one country. It has to be—or—and I’m saying not China and not the United States. It has to have a diversified set of investment into the infrastructure that’s necessary from mining to processing to manufacturing and distribution. All of that has—we have to—we can’t have single points of failure and the world has to have competition in this world so that prices can continue to come down.

As far as this COP, look, I think there’s a lot we’ll have to judge. You know, you can only judge certain things in the middle. You’ll have to wait to the end to see how things turned out. But I think Dr. Sultan has done a very good job, and the team around UAE, of putting together, one, a beautiful COP and efficient and effective from a facilities and location and it’s really run very smoothly.

I think we’ve had some very important successes that before COP we talked about were going to be the failure points potentially and that is the loss and damage, whether we would be able to get something on an agreement of the fossil fuel companies on methane leakage and reducing methane.

So we’ve had already some successes of bringing people together. I think there are some things that are always difficult to achieve at COP because they require such broad consensus or, rather, consensus from such a broad and diverse viewpoint around the world and that’s what makes it so difficult and that—we’ll see how that develops.

Some of those never get agreed to early and we’ll have to see where we get to. But I think—I want to just respond to one thing that you said, which is, is this going to be an inclusion COP or is this a divisive?

The thing that bothers me the most in this debate not just here at COP is that we push worlds into their corners and we create echo chambers, and I can name the conferences that I would go to where they’re all 90/10, right. Ninety percent is fossil fuel companies and fossil fuel financiers and you get a certain view of what 2050 really will look like in reality—a certain skeptical view—and then you come to COP or you go to a different conference and it’s, you know, we can do it tomorrow and there’s a 90/10 in the other direction.

That’s not going to get us there and I think what the—what we’re trying to do here, what I think the government of the UAE is doing and the presidency here, is bringing everybody together. And I think it’s OK to have disagreements. I don’t think that we should expect that if somebody came here and didn’t agree then that’s a failure.

I think that’s a success that we’re having the conversation. We should let people views change, and the only way to change that is by having everybody there together because this is, again, the energy system. If you really want to change the energy system, you really want this to be a net zero world, you can’t do it by just wishing and willing.

You have to bring everybody together and say, here’s the reasons why we can create a market-based—working with market-based solutions, government, MDBs, philanthropies, of how do you bring everybody together to make this investable and then maybe the fossil fuel companies will say, OK, I need to start investing more into this part of it because that’s not just investing in my disruption but it’s investing in where the future is going to be.

And that’s where—that’s when we get to success, when everybody’s going—rowing in the same direction. We won’t get there right away. I think that’s OK. But I think bringing everybody together to have the hard conversation is better than separate echo chambers.

FREDERICK KEMPE: That’s just a terrific answer and I’m really proud also over the eight years of this forum that we have never been 90/10 in either direction. We’ve always had the full conversation and I’m really proud of that.

So CIA Director Bill Burns talks about climate as the problem without borders. But then he talks about what’s going on in the rest of the world which is the problem that has borders which is a war in Ukraine, a terrorist attack on Israel, Hamas—the war in Gaza that’s followed.

How did October 7 change your job? You’ve been playing a lot of—you’ve been spending a lot of time on that issue as well. And I think a lot of people in this audience know this but if you don’t, Amos was instrumental in bringing about the Israel-Lebanon maritime deal and in that context is—you know, that deal would be almost impossible to do right now, at a guess.

But how does something like that stand up? So the problems that are going on right now in Israel and the Middle East how does this affect your job and what you’re trying to do and what you’ve already achieved with Israel and Lebanon?

AMOS HOCHSTEIN: I think October 7 affected the whole world and waking up to the really horrific attack—and the more time goes by the more we learn about how horrific that day was—and now we find ourselves in a place where nobody, I think, wanted to be in. Nobody in this room and no one in the civilized world wanted to see this war in Gaza and where so many innocent people and children from every—from across both sides are suffering.

And Israel has the right to defend itself. We want to be able to see what—a stable and peaceful existence. But nobody wants to be here. This is a horrific place for all of us regardless of where you fall and how you see it. There is—this is—everything changed on October 7 and it was not in a good direction.

I think that where, as you said, we negotiated the—we helped the sides negotiate a maritime agreement that for the very first time exactly a year ago we got a real boundary between Israel and Lebanon.

Israel and Lebanon have never had an agreement on any kind of boundary ever and the idea that these two neighbors since their independence have never agreed but finally agreed, yes, it was in the maritime so there were certain things that made it easier but it was still fairly difficult, and it was fourteen years of multiple envoys from different countries trying to get there and we finally got there.

I think my success was based on the fact that I was one of those failed attempts in the past. So sometimes when you fail something you come back and you learn from that. But I think that we’re—we have to learn—what we’re trying to do is learn from what went right there and the countries—Lebanon did not—

FREDERICK KEMPE: Could you talk about that? What did go right there?

AMOS HOCHSTEIN: Well, I think there were wins for both sides. The idea was not—when you walk into these negotiations oftentimes is a zero-sum game of—the first conversation I would have with both sides was, well, but what are they going to get, and I said, forget what they’re going to get or not get. Don’t worry about that. Tell me, what do you want out of this? What’s in it for you?

It sounds simple in this room but I promise you that over several years we could not get the answer to that. Neither side can actually answer that question. It was much more important to delineate and describe what the other side should get or should not get or what was fair or what happened twenty years ago and fifty years ago.

Once we can get past that part of the conversation and say—I can—we were able to show and see that what they actually want their number-one priorities did not clash. There was no—it suddenly wasn’t a zero-sum game. Both sides can get their number one, two, and three most important piece that they needed—economic security, physical security, et cetera. So I think that and sort of making—understanding what the red lines were, both sides, was enabled.

I think that what we have wanted since October 7, since that morning, was to make sure that, as bad as the situation is in Gaza, in this war, that we can keep it contained there, that it does not—we do not want to see this war expand across other borders. Now, it has to some degree. There has been an exchange of fire on almost a daily basis, except for the pause, between Israel and Hezbollah and some of other Palestinian armed groups—terrorist groups in—housed in Lebanon. But keeping it at a certain level of violence, but—which is—again, stating the obvious, that is not an acceptable situation, but it’s a—it’s a reality. But trying to lower the flame there, trying to get to a much more peaceful existence, and to see what is it that we can do to get to a solution that provides more security for people in Israel who live in the north at the border and for people in Lebanon to live peacefully in the south and to have economic prosperity.

The thing that I learned the most from what we did in the maritime agreement and other agreements around the world that I’ve been involved in is there is a key element of economic prosperity that we—that we have to integrate. And I’m a believer not just in energy security being part of national security, but economic prosperity has to be part of national security, because the more there’s physical interconnection and integration, the more there is a codependency and the more that there is what to lose. And I think that there—it’s important as much to have what to win for, what to look forward to, and to know what you lose when you walk away from it.

And so I think that as we hopefully get to the other side of this conflict as soon as humanly possible, and while achieving what is necessary to secure the future, we have to look at something that’s viable for the Lebanese state to get stronger, to return to economic growth, and to have a security along the border or along the line—the Blue Line between Israel and Lebanon.

FREDERICK KEMPE: Thank you for that. I think this is now working, so you can hang onto that microphone. Maybe yours is as well.

So you’ve been a champion in the White House for normalization with Israel through the Abraham Accords, something that the Atlantic Council has spent a lot of time on. In fact, the week of the terrorist attack we had to bring our team out of Israel. Ministers from the normalization states were on their way to Israel for a conference that we were holding that would have been focused on economic integration. President Netanyahu would have been part of it. Ministers from the region would have been part of it. So this—there are some real human victims, but this is also a victim of this. You know, and our Middle East Program, working with the Jeffrey Talpins Foundation, led by Will Wexner, has done a lot of work on this.

You were also involved in an effort for—that seemed to be growing closer with Israeli-Saudi normalization. You said you hope you get there. What is the path back to that? Is there a path back to that? How much damage has this situation done for all of that hope?

AMOS HOCHSTEIN: Look, we have had—we’ve had examples of what is positive momentum and the kind of future that this region can have. And I think that in the previous administration, the great work that was done on the Abraham Accords and the remarkable decisions that were made by the government here in the UAE and Bahrain and Morocco to take a step towards a different kind of future, and to understand that if we want to focus on the real existential crises of the day of climate change and economic disparities around the world, that’s what we should all work on together. And the vision that President Biden has insisted on since the day he came into office is to focus on a regional integration. It has to be the path, and strengthening what was done in the Abraham Accords and expanding, and looking at what other kind of agreements we can make.

I think that the United States has always wanted to see throughout multiple generations and administrations a normalization of relations between Saudi Arabia and Israel. It’s no secret that that’s something that President Biden has wanted to see. He’s talked about it a lot. His trip to Saudi came as a—part of a two-stop trip between, first, in Israel, and then to Saudi on a direct flight from Jerusalem to Saudi Arabia. And all the work that was done since then was to see and explore what is possible.

Clearly, we’re right now in a moment of conflict that we all have to focus on getting to the other side of. But I don’t think that we lose the hope, the vision, and we’re going to continue to work towards that. I think that not every road is a straight road, and sometimes it goes in—we have to go in different directions first. But the goal is still the same. And we remain as committed to that goal of regional integration. And it’s not just about Saudi Arabia and Israel. It’s as broad as—it has to be much broader than that.

If we all can focus on those kinds of solutions that also use that momentum to then support what—how we can better the lives of Palestinians in the West Bank and Gaza, how do we use that momentum to create an atmosphere that is the opposite of where we’re going now, of increasing hate speech and increasing demonization of the other side, and get back to starting to talk about what brings us together, what unites us, and the same fears, hopes, and dreams that people on all sides of this region have, that are no different than they are in the United States, Europe, South America, or everywhere. We want to have a better life for our—for our families.

And I think that all has to be together. So I don’t think that we have—we’re changing directions. I don’t think this conflict should do that. In fact, this conflict should be a doubling down on reminding us that if we don’t go towards regional integration, peace, and security, this is this—this is the alternative. These are the two options that the world is facing, and this region faces. And I think it’s an overwhelming choice to choose the path of integration, peace, security, and prosperity.

FREDERICK KEMPE: That’s a very powerful answer, thank you, Amos.

Let’s try to get a couple of questions in, in the time that we’ve got left. Let’s pivot back to energy. President Biden talks about inflection points quite a bit. And I wonder if you can talk about the energy inflection point we’re in, and the relationship between energy interconnectivity and energy security, and the emerging energy system. And how does it shape US energy security priorities moving forward? As you said, for a while energy security—that term almost went off our screens. And they came back pretty powerfully with the war in Ukraine—Putin’s war in Ukraine. And you’ve said in an interview that the US should learn from what we went through in the oil and gas energy space as we transition to an energy market. What do you mean by that?

AMOS HOCHSTEIN: Well, I think I had this conversation with Helima here in January. I got a little bit of trouble afterwards. But there’s a—so we’ll try to do that again. Look, I think that the lessons that—we have to—you can’t just say it’s a new world. You have to learn from how we got here. And I think that the twentieth century taught us a lot of lessons about energy security and security of supply. And it started in the 1970s with OPEC, and it—and then in—and then we saw what happened in Europe and the dependency on gas that for most people started—kind of came on the national—on the international media stage in—as the invasion into Ukraine happened.

But in reality, we were—this is what—the pipeline wars of the 1990s, the direction of where hydrocarbons were going to go, in which direction, they were all about geopolitics. And so we have to learn the lesson. The lesson is not—I’ve said this in Europe a lot—the lesson from the dependency on Russia is not I shouldn’t depend on Russia for all my gas. That’s the wrong lesson. The lesson is I shouldn’t depend all my energy on a single source, or majority of it, on a single source, and I shouldn’t have a single point of failure in my supply chain. And that was true on oil. And it was true on gas. And it is now true on renewables. And it’s true on nuclear fuel for a—I’m happy to see a new enthusiasm for nuclear power with new technology. But my nuclear fuel has to be in that conversation. And in my electric vehicles and my critical minerals and my—the entire supply chain.

The lesson from the twentieth century is, build a well-diversified world and economic structure. And I think we have such an amazing opportunity because you’re building something new. So why would we slip right into the same bad habits of, it’s a little bit cheaper to do this, and I’ll buy what’s cheaper, and I won’t invest in what may be a little bit more expensive, but it will actually be something that is more secure. And I think that’s where—that is good money to spend. The question becomes, who should spend that money? And I get that, because why should a company say to its shareholders, I’m going to spend more money and I can’t really articulate what the amortization is of that extra cost? And when I go to the investment committee, they’re going to say, no, that piece is cheaper. Buy the cheaper one we’ll let the government figure out the other stuff.

So we have to come together as governments and say, no, we’re on the ground floor. It may not feel that way, but we’re on the ground floor of the energy transition. And how do we come together, the wealthier countries together with MDBs and philanthropies and sovereign wealth funds, and say: This is our moment to make these investments. Together with the business community, put our money into the capital stack so that they are—so we de-risk these investments. And that we come out of it’s on the other side with a stronger, more diversified supply chain in the clean energy space, that will actually enable both growth and equity and security. And that’s the energy security—the concept of energy security of the future is in that space.

FREDERICK KEMPE: And I don’t think that answer will get you into any trouble. That was a brilliant answer. So we’re running out of time, we’ve run out of time. But I’d like to end this with a question that is always one of my favorite questions for someone like you, who has to deal with risks and opportunities. And that is, as you—as you look out at the world you’re dealing with day-to-day, what gives you the biggest concern? What keeps you up late at night? And, conversely, what do you see as the biggest opportunity? What gives you your biggest hope?

AMOS HOCHSTEIN: There’s so much that keeps me up at night these days. I don’t think I really get to sleep with what’s the last few months.

FREDERICK KEMPE: That’s the world we’re in right now.

AMOS HOCHSTEIN: And that’s the world we’re in. So, look, I think I would break it down. On the concern side is the physical security of people’s lives and their ability to protect their families in a world where we are in two active wars in Ukraine and here in the Middle East. So that keeps me up at night. The piece—the second piece is, how do you both bring them to a close in a way that’s not about just ending the war, that’s—it’s easy to say, just end it. But how do you end it in a way that actually defeats what started it, and making sure that the next phase is actually longer-term security? And so those are the things that really, how do you—how do you do that?

The next piece is really what keeps me up at night, but it also is what I feel is the best hope and opportunity, is the ability to rebuild and reshape a world. And what we’ve—what I’m grateful that President Biden has allowed me to do is to implement that vision. And to—so while I’m here in the Middle East, you know, I’ve been to Angola and DRC and Zambia, and the president of Angola was just in the White House last week. And that’s because there’s such an opportunity to do investment in a different way, that’s development is really important but it doesn’t replace investment. And that’s what we’ve done wrong. And so the idea that we can recognize we did that wrong, let’s do this better, and we can keep our development agenda and add into the component of actual investment, so that the infrastructure we build, we don’t come back to it ten years later and there was because it was just development without investment it meant that there was no money for maintenance, there was no money for running it efficiently, and now we have these big pieces of infrastructure that are not working.

But now we’ve actually cracked the code and been able to launch projects that the president talks about all the time. Even during these two wars, President Biden talks all the time about building a railroad from Angola to Tanzania, across all of Africa, and doing it in a commercial way. And why? Because that enables critical minerals and lowering corruption; because that enables food security, investment; because if you can have a landlocked country that has good water and good soil and good weather but it doesn’t have a connection to any market, then nobody’s going to invest in it, but now you can if you do that, and you can get fiber-optic connectivity so that small businesses can be there.

All of these things, connecting those dots is—it keeps me up at night that we’re not working fast enough, but the hope and opportunity, I can’t tell you how thrilling it is to work on these projects, or the one that we did with the United Arab Emirates and Saudi Arabia and the European Union and India of getting a logistics operation—IMEC—the corridor from India to the Middle East, through the Middle East to Europe that will be energy, electricity, hydrogen, fiber-optic cables, and lowering the cost of shipping products and materials across the world. These are the kinds of things, Fred, that we can actually do by working together with other countries that literally transform the world, and that is—that is the fun part about this job.

FREDERICK KEMPE: Amos, thank you so much for that. I don’t think in my lifetime I’ve ever seen a world where the risks are so pronounced and the opportunities are so pronounced, both at the same time. It makes me feel better that you’re in a position of responsibility during this really tricky time. So join me, please, in thanking Amos.

Watch the event

The post Biden’s energy security adviser Amos Hochstein on COP28 and the future of the Middle East appeared first on Atlantic Council.

Partner perspective: Energy companies are essential to global climate solutions

Mansoor Mohamed Al Hamed — Thu, 07 Dec 2023 05:01:00 +0000

global energy agenda

global energy forum

Mansoor Mohamed Al Hamed is CEO of Mubadala Energy. Mubadala Energy is a sponsor of the 2023 Atlantic Council Global Energy Forum. This essay is part of the Global Energy Agenda.

Societies and economies have come to depend upon access to reliable, affordable, secure, and sustainable energy. To provide this access, a complex and intricate system has emerged.

But energy systems are changing fast, shaped by many factors and diverse actors. Chief among these drivers is the need to transition to a lower-carbon future. This assessment is almost universally accepted. The question requiring consensus, however, is how do the world’s leaders accelerate the transition while ensuring communities do not suffer, and that people maintain access to the energy they need in order to develop and grow.

As Fatih Birol, head of the International Energy Agency, has said, “No energy company will be unaffected by clean energy transitions. Every part of the industry needs to consider how to respond. Doing nothing is simply not an option.”

How then can the energy sector ensure it contributes to the transition while also ensuring its long-term viability and that it meets the needs of consumers?

At its core, this question asks: Should today’s oil and gas companies be viewed as part of the problem, or could they be crucial to solving it?

Part of the solution

At its core, this question asks: Should today’s oil and gas companies be viewed as part of the problem, or could they be crucial to solving it?

In addressing this question, three considerations provide the boundaries for the debate.

First, demand for the services that energy provides is increasing due to a growing global population—some of whom remain without access to modern energy—and an expanding global economy. Take Southeast Asia as an example. According to analysts, gas demand is set to increase by 88 percent by 2050, driven by growth in countries such as Indonesia, where the population is expected to rise from 274 million to 325 million by 2045.

Second, the vision of the future must recognize that oil and natural gas play critical roles in today’s energy and economic systems, and that affordable, reliable supplies of liquids and gases (of different types) are necessary to sustain energy access and expand it.

Indeed, gas will be key to the transition and will likely remain an important part of the energy mix for many decades, not least because it produces 50 percent less CO₂ for power generation than coal. Natural gas is also abundant and provides a vital back-up power supply for renewables.

And last but far from least, setting the terms of oil and gas’s role in the transition is imperative to reduce energy-related emissions in line with international climate targets as set out in the Paris Agreement.

Energy companies are acutely aware of the need to navigate the energy trilemma of affordability, security, and sustainability, while being part of the transition. To achieve these goals, the energy sector has to be part of the solution.

Accelerating the transition in partnership with energy producers

The question the world faces is therefore not whether to transition, but at what pace it can achieve the change while balancing the complex factors and challenges at play.

What is patently true, however, is that without the engagement and focus of the energy sector, together with the scale, capabilities, and capital the industry can deploy, progress will be slower, more expensive, and more difficult.

How then can global leaders ensure energy companies are empowered to accelerate progress?

Decision makers must remember that energy is a system not a sector. All parties must align on common goals, regulations, and systems to enable an accelerated transition. This is a hugely complex task, but without regulatory frameworks in areas such as carbon credits and the nascent hydrogen market, investments won’t be incentivized. The energy system needs collective action and global frameworks.

Additionally, national governments must set out clear visions that frame how the energy ecosystem must evolve. They must commit to net-zero emissions by 2050 and set interim targets for reducing carbon emissions. Achieving these targets requires significant investments in renewable and nuclear energy projects.

Industry must also play a key role by expanding the technology, innovation, and problem-solving capacity that is essential to finding solutions and accelerating progress. What’s more, the solutions can be a win-win.

As an industry, we cannot shy away from the facts. As of today, 15 percent of global energy-related GHG emissions come from the process of getting oil and gas out of the ground and to consumers. But reducing emissions intensity of oil and gas scope one greenhouse gases is possible through portfolio rebalancing and exploring technologies that support the optimization of the business.

The world cannot afford for the legacy energy companies to sit on the sidelines, and in the long-term these companies cannot afford it either.

More can be done, however. For instance, reducing methane leaks to the atmosphere is the single most important way for the industry to bring down emissions. And measures adopted to tackle methane emissions will generate revenues of about $45 billion from the sale of captured methane.

Oil and gas companies must also invest in low-carbon and renewables business outside their core operations—such investments are currently less than 5 percent of total capital expenditures. Ramping up investment is a critical factor in accelerating change.

The transformation of the energy system will happen with or without the oil and gas sector, but if energy companies are not fully engaged and committed, it will be slower and more expensive. The world cannot afford for the legacy energy companies to sit on the sidelines, and in the long-term these companies cannot afford it either.

All essays

The energy transition can shape a more inclusive world

By Damilola Ogunbiyi

Europe needs a Green Deal that can meet the moment

By Michał Kurtyka

Countries can only achieve carbon neutrality together

By Shin Hosaka

Public funds alone can’t solve the climate crisis

By Mafalda Duarte

Accelerating clean energy in emerging markets

By Sebastian Kind

Toward net zero with a new generation of nuclear energy

By John Wagner

Partner perspective: A catalyst for cleaner energy

By Scott Strazik

Partner perspective: Climate policies must reflect developing world’s needs

By Majid Jafar

A people-centric energy transformation

By H.E. Leila Benali

Energy security as the foundation for Ukraine’s formula for peace

By German Galushchenko

Partner perspective: Energy companies are essential to global climate solutions

By Mansoor Mohamed Al Hamed

Energy security is global security

By Geoffrey R. Pyatt

The post Partner perspective: Energy companies are essential to global climate solutions appeared first on Atlantic Council.

The Oil and Gas Decarbonization Charter is a start, but more work remains

David L. Goldwyn, Andrea Clabough — Tue, 05 Dec 2023 17:19:40 +0000

A cornerstone of the United Arab Emirates’ COP28 presidency has been its proposed commitment to meaningfully bring the oil and gas industry to the table for the first time in order to negotiate a comprehensive, concrete strategy for emissions reductions in the controversial sector. The Oil and Gas Decarbonization Charter is the scorecard for that gambit. Does it succeed, and what can (or should) come next?

What it accomplishes

Perhaps most notable in the charter is the aspiration to “reach net-zero CO₂eq emissions (Scope 1 and 2) for operations under our control…by or before 2050.” In addition, signatories publicly pledge to eliminate routine flaring and achieve “near-zero” methane emissions by 2030. The charter achieves corporate commitments to methane reductions that theoretically parallel the country-level commitments of the Global Methane Pledge. It requires each company to sign the charter, a public (albeit voluntary) commitment that includes “required mechanisms” for transparency. Among these are the development and publication of company strategies to achieve scopes one and two emissions reductions by 2030. If not already published, companies must do so no later than 2025, with an update and potentially increased aspiration by 2028, adoption of a to-be-determined “measuring, monitoring, reporting, and verification” system to score progress, and annual publication of their emissions levels.

As of now, fifty oil and gas companies have signed the agreement, publicly committing to its net-zero and other aspirations, representing about 40 percent of global production. Among these are a number of international oil companies (IOCs) such as ExxonMobil, BP and Shell but also several major national oil companies (NOCs) which, as a broad category, have historically been hesitant to make overarching climate commitments. NOC signatories include Saudi Aramco, ADNOC, Petrobras, Sonangol, Libya National Oil Company, and Petronas.

Given the vast diversity of the global oil and gas industry (and challenges/incentive structures therein), this is a significant accomplishment. In this respect, the charter has materially broadened the level of commitment of the upstream oil and gas industry to emissions reductions, both carbon dioxide and methane. While these commitments are voluntary, they are public and now subject to measurement and verification.

What it does not accomplish

Despite an impressive effort to coalesce a wide range of industry stakeholders around a shared ambition, there are significant shortcomings to the charter as it stands. These areas represent opportunities for strengthening the agreement as the Global Decarbonization Accelerator (GDA) takes clearer shape. The GDA is a plan launched by the COP28 presidency to speed up system-wide emissions reductions across a range of key sectors, including the oil and gas industry.

Limited breadth

Unfortunately, the charter only addresses a part of the oil and gas value chain and a minority share of oil and gas production. Despite the dozens of signatories, dozens more companies have not signed on to this initial charter; some of these include major developing country NOCs (such as Qatar Petroleum or Mexico’s Pemex) as well as some Western majors including American companies Chevron and Conoco-Philips.

Undoubtedly, there are manifold reasons why individual companies were unable or unwilling to agree to this first iteration of the charter; reluctance to sign on may not necessarily represent a repudiation of its goals or sentiment. However, it is in the interest of the oil and gas sector writ large, as well as major consumers of oil and gas industry products and services, to incentivize those companies not yet aligned with the charter’s laudable goals to reconsider.

Limited commitments

The charter itself places a relatively limited commitment on its signatories that leaves important areas minimally or not addressed at all. For example, the charter addresses the emissions of “upstream” or producing companies, not including the “midstream” companies that transport hydrocarbons or the “downstream” or refining and processing companies that turn them into products (such as liquefied natural gas exports). Within this framing, the agreement only addresses scope one and two emissions and is silent on “scope three emissions” (i.e., emissions from the use of oil and gas products) altogether—for both carbon dioxide and methane. For the oil and gas industry, the use (overwhelmingly combustion) of its products constitutes the vast majority of the industry’s carbon footprint.

In another example, signatories pledge to work with partners (such as technology companies and data centers) that consume massive amounts of power, but those partners make no commitments under this particular agreement. Likewise, charter members address “operations under their control” but pledge to work with their partners on non-operated projects, ones where NOCs or non-signatories control operations. This is a recognition of the massive volume of oil and gas production by companies that, so far, have refused to spend what would be required to achieve significant reductions (e.g., such as tools to prevent flaring).

A differentiated approach

Importantly, the charter speaks to “differentiated approaches” many times, a recognition that the IOCs that signed the agreement are already on a faster track to emissions reductions than many of their NOC peers. The charter also understandably refers to the need for supportive governmental policies, the importance of a full suite of emissions reducing technologies from direct air capture to carbon capture and sequestration, and the need for permitting reform to expedite the siting and construction of infrastructure. It also speaks to the importance of energy security and alleviating energy poverty in line with the UN Sustainable Development Goals, which remains a significant challenge in many low-income countries. All of these are key acknowledgments given the salience of the energy trilemma in a world attempting to fundamentally transform its energy systems.

Is this meaningful?

The charter achieves three meaningful contributions. It significantly broadens the commitment to emissions reductions, especially methane, by bringing a wider range of companies into the fold. It has secured highly public commitments by fifty companies, a commitment weighty enough to have given pause to many IOCs and NOCs that might be concerned that the targets are out of reach. It unequivocally extracts recognition by major members of the oil and gas industry of responsibility to address emissions quickly while meeting obligation to provide security of supply.

Although laudable, the pace of change for this industry (as represented in this charter) is not fast enough, deep enough, or broad enough to materially address the yawning gap between the Paris commitments and the present Dubai reality. After months of negotiations to achieve this charter, it is now time for governments, consumers, and other stakeholders worldwide to push even further. The oil and gas industry is, after all, a business; it responds to its buyers. The mounting pressure on this industry to begin to change, combined with the perseverance of the COP28 leadership, resulted in this important step forward in addressing its role in climate change. But this charter should be the beginning of a conversation since we are nowhere close to its end.

David L. Goldwyn served as special envoy for international energy under President Obama and assistant secretary of energy for international relations under President Clinton. He is chair of the Atlantic Council’s Energy Advisory Group and a nonresident senior fellow with the Council’s Global Energy Center.

Andrea Clabough is a senior associate at Goldwyn Global Strategies, LLC, and a nonresident fellow with the Council’s Global Energy Center.

Note: Three companies mentioned in this article—ExxonMobil, BP, and ADNOC—are donors to the Atlantic Council’s Global Energy Center. This article, which did not involve these donors, reflects the authors’ views.

EnergySource

Global Energy Center at COP28

The 28th annual United Nations Climate Change Conference takes place from November 30-December 12, 2023 in Dubai, United Arab Emirates. The Atlantic Council Global Energy Center will be on the ground to work alongside government, industry, civil society, and public stakeholders to discuss key issues and outcomes.

Meet the author

Fellow

Andrea Clabough

Nonresident Senior Fellow

Climate Change & Climate Action Energy & Environment

Fellow

David L. Goldwyn

Adrienne Arsht Latin America Center Global Energy Center

Caribbean Climate Change & Climate Action

EnergySource Nov 21, 2023

Beyond promises: Pathways to deliver on methane commitments

By David L. Goldwyn, Andrea Clabough

The Global Methane Pledge has committed over one hundred adherents to collectively reduce their methane emissions by 30 percent by 2030. The challenge however, seems as intractable as ever.

China Climate Change & Climate Action

EnergySource Nov 29, 2023

How COP28 can help cities drive climate action

By Willow Fortunoff, Maia Sparkman

Centering cities as enablers of both climate adaptation and mitigation is absolutely critical. In light of this, COP28 will include, for the first time, a summit dedicated to localized efforts to curb climate change.

Africa Americas

New Atlanticist Nov 30, 2023

Expert analysis: The successes and shortcomings in the fight against climate change at COP28

By Atlantic Council experts

Our experts dispatched to Dubai, where they analyzed how global leaders responded to the greatest challenges posed by climate change.

Climate Change & Climate Action Energy Transitions

The post The Oil and Gas Decarbonization Charter is a start, but more work remains appeared first on Atlantic Council.

Partner perspective: To make a lasting impact on carbon emissions, we must respect the developing world’s needs

Majid Jafar — Tue, 05 Dec 2023 06:19:08 +0000

global energy agenda

global energy forum

Majid Jafar is the CEO of Crescent Petroleum and a member of the Atlantic Council’s International Advisory Board. Crescent Petroleum is a sponsor of the 2023 Atlantic Council Global Energy Forum. This essay is part of the Global Energy Agenda.

As COP28 kicks off in the United Arab Emirates, the divide between Western countries and the developing world over cutting global carbon emissions has never been deeper. As Western activists and policymakers focus on cutting oil and gas production and wrangle over whether to phase out or phase down the use of hydrocarbons, those in the developing world increasingly see their future coming down to reducing emissions at the cost of economic progress.

Bridging this divide will be critical for any real, lasting climate progress. The developing world is where the entire climate change battle will be won or lost; it is where all the net growth in emissions will come from, because it is where the most rapid economic and population growth is taking place. These nations must progress toward a lower-emissions pathway to development, but policymakers must disabuse themselves of the idea that progress can be accomplished by reducing access to energy supply or simply cutting consumption.

Policymakers must disabuse themselves of the idea that progress can be accomplished by reducing access to energy supply or simply cutting consumption.

Unintended consequences

Every nation has been grappling with the energy trilemma of affordability, availability, and sustainability as energy crises began in 2022. Every leg of this trilemma is critical to maintaining equilibrium and ensuring that energy security is met while emissions fall. But while European countries realized the importance of the trilemma when the energy crisis began, the developing world has faced the challenge for decades.

The West’s choices and policies have had significant unintended consequences on the developing world, which often bears the brunt of climate change impacts despite contributing minimally to the problem. Western policies that seek to dampen investment in oil and gas only darken the picture by raising energy costs and creating shortages for those who can least afford them.

European policymakers, for example, proudly heralded their ability to prevent energy shortages at home amid the energy crisis of 2022 by amassing liquefied natural gas (LNG) supplies from around the world. But the triumphalism ignored the impact of their deep pockets on energy costs and supply going to developing countries such as Pakistan, Bangladesh, and others. The result in these emerging markets was skyrocketing LNG costs, energy shortages, inflation, and ultimately greater use of dirtier fuels.

Adoption of natural gas with renewables by the developing world promises to be the most effective means of cutting carbon emissions quickly and affordably. Enabling the developing world to begin the downward march of carbon emissions now is crucial to this goal. Yet when investment in gas is starved to discourage its development and use, or the cost of capital is too high to enable the shift, the Global South is forced to resort to cheaper but higher-emitting fuels, namely coal.

License to operate

The oil and gas industry is also making tangible progress to be part of the climate solution. Most companies have pledged to reduce their carbon intensity and prevent methane leaks ahead of COP28, further reinforcing the reductions possible with natural gas and other cleaner sources of fuel. Substituting diesel and fuel oil with natural gas is one way the industry can decrease CO₂ emissions. Additionally, process improvements to lower carbon intensity along with offsets can enable the industry to achieve carbon neutrality across operations.

Efforts like these can create a virtuous circle of emissions reductions while ensuring affordable and reliable energy supply for developing economies. In time, the energy mix will include natural gas and other clean fuels such as hydrogen, in addition to intermittent renewables and other forms of new energy.

The developing world is where the entire climate change battle will be won or lost.

Financing the change

Ultimately, change on the order required to reduce emissions is only possible with global cooperation. Lasting change requires genuine efforts from the West to respect and address the needs of developing nations by fulfilling climate funding commitments and providing finance as well as technical support and assistance.

One promising solution would be a new global institution, such as a World Carbon Bank, to channel technical assistance and climate aid to developing countries. Another powerful solution would be to establish a global system of carbon pricing to create economic incentives for reducing greenhouse gas emissions by incorporating the true cost of carbon into market decisions.

Clearly, the inherent distrust developing countries feel toward the West remains a major stumbling block to achieving global net-zero ambitions. It is therefore crucial to have a neutral space to host these conversations where all countries’ views will be welcomed and provided an equal platform.

COP is such a platform, and the UAE as the COP28 convener offers a model for action. As an early and major investor in all forms of energy, the UAE has the resources, both in terms of finance and low-cost solar energy supply, to advance the technologies of the future such as hydrogen. It plans to invest $54 billion in renewables over the next seven years as part of efforts to reach net-zero emissions by 2050.

The UAE’s geographical location also makes it a strategic meeting point between the Global South and North, serving as a hub for trade, finance, and diplomacy, with strong ties to both developed and developing nations.

The fight against climate change requires global solidarity, collaboration, and systematic thinking. Climate policies must be revised to reflect the needs and views of developing nations as well as those of the West. Undermining poorer countries’ growth in order to cut emissions is not a viable path to change; only by respecting those countries’ needs can we make a lasting impact. That is why we can all look forward to real and lasting action at COP28 in Dubai this year.

All essays

The energy transition can shape a more inclusive world

By Damilola Ogunbiyi

Europe needs a Green Deal that can meet the moment

By Michał Kurtyka

Countries can only achieve carbon neutrality together

By Shin Hosaka

Public funds alone can’t solve the climate crisis

By Mafalda Duarte

Accelerating clean energy in emerging markets

By Sebastian Kind

Toward net zero with a new generation of nuclear energy

By John Wagner

Partner perspective: A catalyst for cleaner energy

By Scott Strazik

Partner perspective: Climate policies must reflect developing world’s needs

By Majid Jafar

A people-centric energy transformation

By H.E. Leila Benali

Energy security as the foundation for Ukraine’s formula for peace

By German Galushchenko

Partner perspective: Energy companies are essential to global climate solutions

By Mansoor Mohamed Al Hamed

Energy security is global security

By Geoffrey R. Pyatt

The post Partner perspective: To make a lasting impact on carbon emissions, we must respect the developing world’s needs appeared first on Atlantic Council.

Novak published on Timor-Leste through the Lowy Institute and Jakarta Post

kyusko — Fri, 01 Dec 2023 20:46:53 +0000

ORIGINAL SOURCE

On November 29, IPSI/GCH nonresident fellow Parker Novak published a piece via the Lowy Institute, titled “Timor-Leste’s uncertain future.” He wrote that “Timor-Leste has accomplished a great deal over the past two decades but faces headwinds that, if left unaddressed, could undo much of what it has achieved.”

On November 30, Novak also published an article titled “Timor-Leste faces uncertainty in every direction” in the Jakarta Post. In his piece, he explained that despite its status as “one of Southeast Asia’s most vibrant and resilient democracies,” Timor-Leste currently faces a number of serious economic, environmental, geopolitical, transnational, and domestic political challenges.

Fellow

Parker Novak

Global China Hub Indo-Pacific Security Initiative

Australia Democratic Transitions

The post Novak published on Timor-Leste through the Lowy Institute and Jakarta Post appeared first on Atlantic Council.

Goldwyn quoted in The New York Times on the recent surge in US oil production and lower prices

David L. Goldwyn — Fri, 01 Dec 2023 17:15:05 +0000

Check out all our COP28 programming here.

The post Goldwyn quoted in The New York Times on the recent surge in US oil production and lower prices appeared first on Atlantic Council.

Expert analysis: The successes and shortcomings in the fight against climate change at COP28

Atlantic Council experts — Thu, 30 Nov 2023 20:21:06 +0000

This year, the world has seen a slate of devastating weather events—and geopolitical tensions that have raised global concern about access to reliable energy. Did global leaders at the United Nations Climate Change Conference, also known as COP28, respond with enough to meet this moment?

Experts from across the Atlantic Council, from on the ground in Dubai and elsewhere around the world, analyzed how global leaders responded to climate change’s greatest challenges and offered expert insight on the biggest developments in everything from climate finance to the energy transition to the global stocktake.

Get a sense of whether negotiators have proven COP’s value, courtesy of our experts below.

THE LATEST AFTER NEGOTIATIONS

COP28’s legacy will be measured by emissions reduction, not ‘historic’ text

The takeaway from COP28: Gas and nuclear are part of the energy transition

The final report card for COP28

Don’t chalk this conference’s success up to text alone

COP28 gave nuclear power a seat at the table

See day thirteen analysis

DECEMBER 15 | 10:02 PM GMT+4

COP28’s legacy will be measured by emissions reduction, not ‘historic’ text

By Landon Derentz

The final declaration from COP28, “the UAE Consensus,” is transformational in its reflections on fossil energy’s role in contributing to climate change, but with time this climate conference won’t simply be remembered for “landmark” text. If all goes to plan, the COP28 Presidency’s efforts to foster an inclusive platform for promoting private and public actions that reduce global emissions will be its legacy.

The “success” of COP28 was never going to be measured by unrealistic expectations around “phasing out” fossil fuels—a benchmark promoted by the European Union and small island nations severely at risk of global temperature rise. Despite over $3.5 trillion in financing for renewable energy over the past decade, oil, gas, and coal remain stubbornly anchored in the global energy mix, representing around 80 percent of energy consumed. The high reliance on conventional energy resources for their economic growth and political stability unequivocally placed China, India, and Saudi Arabia at the vanguard of a block of countries opposed to any negotiated outcomes at COP28 that locked in a “phaseout” or “phasedown” of specific energy sources.

Behind the scenes, however, the feverish and ultimately successful push for a diplomatic compromise temporarily overshadowed what COP28 has already accomplished.

EnergySource

Dec 15, 2023

COP28’s legacy will be measured by emissions reduction, not ‘historic’ text

By Landon Derentz

The COP28 final declaration is transformational in its reflections on fossil energy’s role in climate change. The conference’s real legacy, however, will be the efforts undertaken to foster the inclusive platform necessary to promote private and public actions and reduce global emissions.

Climate Change & Climate Action Energy & Environment

DECEMBER 15 | 9:58 PM GMT+4

The takeaway from COP28: Gas and nuclear are part of the energy transition

By Ana Palacio

New Atlanticist

Dec 15, 2023

The takeaway from COP28: Gas and nuclear are part of the energy transition

By Ana Palacio

The concept of a “transition” in the energy transition is too often lost: specifically, the idea that it will extend over time and require overlap.

Climate Change & Climate Action Energy & Environment

DECEMBER 14 | 1:48 AM GMT+4

The final report card for COP28

After fourteen days in the desert, it ended with a “beginning.” On Wednesday, the 2023 United Nations Climate Conference in Dubai, also known as COP28, concluded with nearly two hundred countries agreeing to “transition” away from fossil fuels. UN Climate Change Executive Secretary Simon Stiell called the decision the “beginning of the end” of the fossil fuel era. But the agreement text was only one of many outcomes from the conference, including the activation of the loss and damage fund and pledges to abate methane emissions and triple renewable energy. Atlantic Council experts who were on the ground in Dubai share their insights on the agreement and the road ahead.

Fast Thinking

Dec 13, 2023

The final report card for COP28

By Atlantic Council

Atlantic Council experts who were on the ground in Dubai share their insights on the agreement and the road ahead.

Africa Climate Change & Climate Action

DECEMBER 13 | 11:43 PM GMT+4

Don’t chalk this conference’s success up to text alone

By Reed Blakemore

COP28 finally came to a (late) conclusion today, following a frenetic race to the finish.

The final agreement managed to address nearly all of the key items on the COP28 agenda—the loss and damage fund, tripling renewable energy deployment, and global carbon markets with varying levels of strength. But debate over whether this COP was a success or failure will gravitate toward the agreement’s treatment of fossil fuels.

Despite early optimism from the climate community earlier in the week that “phasedown” in some form or fashion might be an ultimate landing spot, the final text on Wednesday, settled on “transitioning away from fossil fuels in energy systems.” That language reveals not only how hard it is to find consensus on the oil and gas industry’s role in climate action; it also shows the complexity of interests that are often misunderstood by climate observers and played out over successive drafts leading up to the final agreement. On one hand, major oil-producing delegations at the COP have been unwilling to accept sweeping or overly broad language that undercuts their still-transitioning economies. Relatedly, many developing economies (particularly in Sub-Saharan Africa) see a phasedown or phase out, in the absence of financing for alternative energy sources, as an unfair deal. They make this point by criticizing how Western countries built their own economies by consuming fossil fuels for decades (and at the same time that many Western countries still produce and use fossil fuels themselves). Meanwhile, small island nations have been adamant that fossil fuels cannot be omitted from COP text, whether this one or in the future.

The result is a bit of a word salad that may not meet the expectations many in the climate community brought to Dubai. But expecting the United Nations Framework Convention on Climate Change (UNFCCC) to address the tricky issue of fossil fuel emissions in one fell swoop may actually be unhelpful for efforts to drive multilateral climate action.

Indeed, the treatment of fossil fuels and their role in global emissions is an urgent area of attention—and it will remain so for COPs to come. But when evaluating the success of this gathering in Dubai, don’t put too much faith in the power of the COP’s signaling abilities through its text. Unlike loss and damage funds or carbon market rules, for which multilateral structures or mechanisms are created through UNFCCC agreement, it’s harder to draw a straight line between strong phaseout language in the text and the drawdown of a resource that remains an intrinsic part of the global economy. This perhaps is what made the alternative phrasing to a “phase out” proposed over the weekend—which listed several options for countries to cut emissions including upping renewable energy capacity—an imperfect but more thoughtful way to use the signaling power of the COP. (This wording, for example, is similar to what was used in the Sunnylands agreement in November between the United States and China). The final COP28 agreement, though also imperfect, is an important starting point to build from.

Regardless, the increasing utility of the COP to build an inclusive ecosystem that effectively integrates industry, civil society, and policy is something to celebrate. Numerous accomplishments—from nuclear energy commitments to a new renewables fund—highlight COP’s value as a necessary platform to align action and commitment.

Bringing the oil and gas industry into this platform is a tricky but necessary part of that process, and an area in which this COP will leave a legacy even outside of the official text. The United Arab Emirates’ (UAE) establishment of Global Decarbonization Accelerator and its Oil and Gas Decarbonization Charter provided that, and while it needs to both grow in participation and ambition, it can be a space where the UAE can push for shared action even once its COP presidency concludes. Holding the oil and gas industry accountable for their role in the climate crisis begins with bringing that industry into the fold, in order to hold it accountable for providing solutions rather than for existing. This COP managed to do that.

What remains to be seen, however, are the tricky bits of climate action. Major tasks ahead for the UNFCCC include effectively de-risking private investment in clean energy projects; establishing clarity on how to allocate “shared pools” of funding for resiliency efforts, such as the loss and damage fund; and navigating the nuance of a trade system that is evolving rapidly in response to energy transition. Arguably, these are just as (if not more) “make or break” for the energy transition and climate action than the language chosen to articulate the future role of fossil fuels.

The ink may still be drying on the final agreement, but much more work remains.

—Reed Blakemore is director for research and programs with the Atlantic Council Global Energy Center.

DECEMBER 13 | 10:43 PM GMT+4

COP28 gave nuclear power a seat at the table

By Jennifer T. Gordon

From the start, it was clear that this COP could justifiably be called “the nuclear COP.” COP28 kicked off with the pledge of more than twenty countries to triple nuclear energy by 2050, which was soon followed by an industry pledge. Additionally, the US Export-Import Bank (EXIM) and the US Department of State announced a “suite of EXIM financial tools” to jump-start small modular reactor deployments around the world. The United States, Japan, Canada, France, and the UK pledged to mobilize at least $4.2 billion in government-led investments to “enhance uranium enrichment and conversion capacity over the next three years.”

Perhaps just as important as the specific announcements on nuclear energy at COP28 was the unprecedented centrality of nuclear energy in conversations at the conference. The International Atomic Energy Agency (IAEA) and the Nuclear Energy Institute hosted a pavilion in the Blue Zone called “Atoms4Climate,” while the Emirates Nuclear Energy Corporation and World Nuclear Association hosted Net Zero Nuclear pavilions in the Blue Zone and Green Zone, along with a two-day Net Zero Nuclear Summit in downtown Dubai. Nuclear energy was present in all these platforms, and conversations around nuclear energy took place in spaces that were dedicated to the energy transition writ large (for example, at the Global Decarbonization Accelerator Connect pavilion, run by the Atlantic Council). The United Nations Framework Convention on Climate Change’s Draft Decision on the Outcome of the Global Stocktake included nuclear energy in its list of “zero- and low-emission technologies,” a move that the IAEA praised for making history.

The importance of nuclear energy becoming part of the climate conversation goes far beyond rhetoric. As countries move to unlock financing for technologies that are considered green, the inclusion or exclusion of nuclear energy could determine whether the industry succeeds or fails. For example, Canada’s inclusion of nuclear energy in its Green Bonds framework is enabling greater funding for nuclear and faster deployment of nuclear technologies. As a zero-emission energy source, nuclear deserves a seat at the table at the world’s premier climate conference, and COP28 was a watershed moment for the inclusion of nuclear in the climate discussion.

—Jennifer T. Gordon is the director for the Nuclear Energy Policy Initiative at the Atlantic Council’s Global Energy Center.

Note: The Emirates Nuclear Energy Corporation is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

DAY THIRTEEN

Watch how final negotiations balance energy opportunity with climate insecurity risks

Will the findings of the global stocktake unite or divide the world?

See day twelve analysis

DECEMBER 12 | 11:45 PM GMT+4

Watch how final negotiations balance energy opportunity with climate insecurity risks

By Thammy Evans

As COP28 draws to a close, the usual frantic bargaining is taking place. This year’s conference has seen several innovations and firsts that show an evolving global and societal response to the climate crisis at hand. More than ever before, themes beyond climate change are attracting more focus, which was seen in announcements such as the launch of the Alliance of Champions For Food Systems Transformation. The day 11 Majlis organized by the United Arab Emirates aimed to bring a more inclusive feel to the negotiations, while the conference’s many official gatherings have earned this COP the name “Conference of Partners.” The findings of the global stocktake, although still not finalized and released, is a first attempt at a comprehensive, transparent inventory of climate action, but gaps remain.

A look at the themes of each COP across the years is a stocktake in itself that shows how negotiations have developed and the topics that have made it into negotiations over time. To date, much of the negotiations (on topics such as food, agriculture, oceans, tourism, health, finance, gender equality, indigenous peoples, youth, nature, land use, urbanization, fashion, adaptation, and loss and damage) have been attempts to make progress on climate mitigation via indirect sectors and to create a means to make it up to developing countries that are suffering the most from climate change. But much of the negotiations have also fallen short on the real elephant in the climate-mitigation room: fossil fuels.

This conference, however, marks the first time the term “fossil fuels” made it into the end-of-COP deal—or at least the draft text of it. Inclusion of the term “fossil fuels” is a sign of how much traction climate science has finally made. It is also recognition that discussions around climate security have adequately—and powerfully—conveyed the risks at stake. If the term “fossil fuels” remains in the final text, and depending on how it is mentioned, it could be a win for the COP28 president, Sultan al-Jaber, who has advocated for the need to have buy-in from all parties and partners, even (and especially) the oil industry.

Efforts to turn global focus toward turning the tap off for fossil fuels (i.e. a complete phase out), on ecosystem and economic regeneration and on a policy switch to regenerative capitalism (rather than merely mitigation, resilience, and adaptation) have not yet succeeded. Some sectors in many developed countries, with a sense of optimism for technological determinism, argue that technological innovations will somehow help achieve climate goals, just in time to keep hard-to-abate sectors alive for just that bit longer. But climate modeling simulators don’t show any scenario in which global warming can be kept to 1.5 degrees or even 2 degrees Celsius by keeping fossil fuels alive (by supporting fossil fuel infrastructure and production) while offsetting by innovation scale up, offsetting, or abatement by 2100, or even by 2050.

It is true that a gradual phase down will keep certain transition challenges more tolerable, especially for those countries whose economies have yet to put a realistic economic transition diversification plan in place. But the lack of a fast enough phase out plan will exacerbate physical climate insecurity risks for the 3.5 billion deemed already to live in climate hot spots. The resulting increased risk of violent conflict, forced migration, and death will raise humanitarian disasters to a level unseen, keeping government institutions, emergency services, and the option of last resort—the armed forces—ever more occupied with responses to climate hazards. As the COP28 negotiations draw to a close, watch this balance of energy opportunities and insecurity risks.

—Thammy Evans is a nonresident senior fellow of the GeoTech Center of the Atlantic Council. She is also a senior research fellow of the Climate Change & (In)Security Project, a collaboration between the Reuben College of Oxford University and the UK Army’s Centre for Historical Analysis and Conflict Research. Her co-authored chapter entitled Ecological Security: The New Military Operational Priority for Humanitarian and Disaster Response, was published in Climate Change, Conflict, and (In)Security: Hot War on December 1.

DECEMBER 12 | 8:14 PM GMT+4

Will the findings of the global stocktake unite or divide the world?

One of the most pivotal items being discussed at COP28 is the global stocktake, a “report card” of the world’s progress on climate action and a key indicator of the implementation of the Paris Agreement.

Two years ago, countries began assessing their progress on climate targets, or nationally determined contributions (NDCs), and submitted their findings to the United Nations (UN) Framework Convention on Climate Change. According to the UN Environment Programme’s Emissions Gap report, with current NDCs and climate targets, the world has little chance of keeping below the 1.5-degree-Celsius warming limit and could see temperatures rise by 2.9 degrees Celsius above preindustrial levels by the end of the century.

Under a three-degree warming scenario, the Amazon rainforest could dry out and ice sheets would melt at exponential rates. To meet the 1.5-degree warming threshold, countries will need to cut their greenhouse gas emissions by at least 42 percent by 2030, the UN says. According to the World Meteorological Organization, the world is slated to reach 1.4 degrees Celsius of warming above preindustrial levels in what remains of this year, making it the hottest year on record. “Greenhouse gas levels are record high. Global temperatures are record high. Sea level rise is record high. Antarctic sea ice is record low,” the World Meteorological Organization’s secretary general warned. Scientists have said that next year could be worse, with an El Niño weather pattern that is expected to cause temperatures to rise.

COP28’s success depends on the global stocktake’s ability to push countries to implement three changes.

First, drastically cutting emissions and having countries increase the ambition of their NDCs, including by committing to reduce emissions by 43 percent by 2030 and by 60 percent by 2035, as recommended by the UN.

Second, a complete phaseout of unabated fossil fuels with a clear timeframe that keeps global warming below 1.5 degrees Celsius. Going forward, countries should set their ambitions even higher than this recommendation by phasing out all fossil fuel use: “abated” fossil fuel, achieved with the help of carbon capture and storage, can take away from the real action that needs to be done. All countries must also commit to triple renewables, double energy efficiency, and make clean energy available to all by 2030.

Third, increasing climate finance to ensure that the Global South doesn’t struggle to reach climate targets and that developing countries are not devastatingly impacted by climate-related disasters they did not cause or only minorly fueled. As negotiations on the way forward come to a close, it is important that countries are acutely aware of the consequences of their shortcomings and the need to ensure climate justice for all.

—Lama El Hatow is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. She is also a professor and program coordinator at Johns Hopkins University in the Environmental Science and Policy and Energy, Policy, and Climate departments.

DAY TWELVE

The Inflation Reduction Act set off waves still felt at COP28

COP28 is talking about how to finance Africa’s green transition. Green banking is a big part of that.

See analysis from day eleven

DECEMBER 11 | 5:41 PM GMT+4

The Inflation Reduction Act set off waves still felt at COP28

By Charles Hendry

The introduction of the Inflation Reduction Act (IRA) in the United States has transformed European thinking about the industries Europe needs if it is to achieve net-zero emissions by the middle of the century.

Political leaders in Europe and elsewhere had long been encouraging the United States to do more to tackle climate change and bring forward the industries needed to do so. But when the IRA was announced, the initial reaction in European capitals was one of shock. The IRA was criticized as being unfair in subsiding companies to invest in the United States and making it more difficult for Europe to compete.

As time has progressed, harsh words have changed into measures that would also attract investment into the United Kingdom and the European Union. Governments realized that their only response was to raise their game and make Europe as attractive a place to invest in low-carbon industries as the United States. Game on!

The mistake in those early reactions was that it suggested that this is a battle between the United States and Europe. But the reality is that if both are to deliver the changes that are needed, and do so in the timeframe needed, then this needs to be the United States and Europe—and China and other countries across the world. This is not a zero-sum game in which if one country does well, then other countries have to do badly. It is one where we all need to win.

The same is true of Chinese dominance of supply chains. The West needs to secure more of those supply chains, as businesses want their supplies closer to them and as they look to have stricter control over manufacturing processes, environmental sustainability, and transparency. Sometimes that is seen as a threat to Chinese industries, but the reality is that China will need the output from those factories to supply its own fast-growing clean industries.

The mood of businesses present at COP28 has been one of realizing ambition, a sense that more can be done, that the necessary funding is there, that the right skills can be developed, and that companies can do all this faster than previously thought. In every panel I took part in, business representatives said that they are ready to deliver on the ambition.

There will be much debate about government policies to reach the United Nations Climate Change Conference commitments, but there has seemed to be little debate at COP28 about the enthusiasm of the business community to rise to the challenge. Sixteen months on from the signing of the IRA, the United States and Europe and countries around the world are starting to realize that they have to deliver together.

—Charles Hendry is a distinguished fellow of the Atlantic Council Global Energy Center. Previously, he was a Conservative member of the UK Parliament for Wealden from 2001 to 2015, the minister of state for energy from May 2010 to September 2012, and the Conservative Party’s spokesperson on energy issues from 2005 to 2010.

DECEMBER 11 | 9:25 AM GMT+4

COP28 is talking about how to finance Africa’s green transition. Green banking is a big part of that.

By Jean-Paul Mvogo

On the ground at COP28, the issue of climate finance, particularly in Africa, has been a big topic of discussion. This is due in part to the magnitude and urgency of the issue. Even with the commitments made here in Dubai and earlier, the amount Africa needs to face climate change—three hundred billion dollars per year, at least—is around ten times the amount of disbursements and pledges made to African countries so far for this purpose.

Beyond the amount of financing needed, the discussions at COP28 have also focused on the topic of the green financial architecture—that is, the logistics to bring green financial services and products closer to African households, businesses, and communities. A major question is how to provide climate insurance to the millions of African farmers, including farmers in Sub-Saharan Africa, who could lose 5-17 percent of their crop yields by 2050 due to climate change and who live on the fringes of traditional financing circuits. Another concern is how to finance the upgrade of African businesses to greener standards, when today only 18 percent of their financing needs are covered. There is in addition the question of how to provide greener transport, energy, and housing solutions to the hundreds of millions of young, urban workers, who earn their living on a daily basis and do not have collateral.

If the need for deployment of climate finance for all is self-evident in countries with developed financial systems, these questions highlight the importance of green financial architecture for Africa to achieve a successful green and inclusive transition. Hence the decision of the Atlantic Council’s Africa Center to launch a reflection on that topic in a new report that I wrote and presented at COP28.

Report

Dec 5, 2023

How green banking can unlock climate solutions in Africa

By Jean-Paul Mvogo

In order to succeed in its transition to a green and inclusive economy, Africa must ramp up its green banking ecosystems and mobilize resources needed to finance climate mitigation and adaptation while also addressing deforestation, pollution and biodiversity loss.

Africa Economy & Business

This report explains how green financial systems can turn Africa into a champion of the green economy by mobilizing its ecosystems. Africa’s ecosystems are among the most efficient carbon sinks on the planet. African countries represent an exceptional renewable energy technical potential that accounts for a little less than half of worldwide capacity. And the continent contains large deposits of numerous critical minerals essential to the green revolution.

The report presents cooperative models for creating alliances of financial intermediaries able to mobilize their respective advantages to efficiently deliver green financial services to the “last mile”—to local communities and small businesses, for example. It also emphasizes issues that the international community must quickly address to resolutely engage Africa in the transition to a green and inclusive economy that would be a benefit to all as a source of stability.

To unblock the African green intermediation pipeline, the report advocates finding solutions to the difficulties faced by African financial actors when they wish to access international green funds. The dysfunctions of African carbon markets, which hinder the rise of pan-African green finance engineering initiatives, also call for resolute action. Finally, the report pleads for curbing the debt bottleneck that prevents African countries from devoting more resources to capacity building and training, which are needed to structure countries’ green ecosystems and attract more private investment. Indeed, private investment represents just 14 percent of green financing in Africa, highlighting a strong growth potential.

With the end of COP28 nearing, these issues, and the report’s twenty-one recommendations, deserve more attention. As COP28 attendee said to me, action, in addition to discussions, is needed to prevent the international community from heading toward “a climatic and societal hell” and allow the construction of a more desirable alternative.

Jean-Paul Mvogo is a nonresident senior fellow with the Atlantic Council’s Africa Center.

DAY ELEVEN

For the global stocktake and beyond, accessible and trusted data are the foundations for progress

Is carbon capture and storage a solution to emissions—or is it a ‘carbon bomb’?

See analysis from day ten.

DECEMBER 10 | 8:15 PM GMT 4

For the global stocktake and beyond, accessible and trusted data are the foundations for progress

By Lloyd Whitman and Raul Brens Jr.

Negotiations on the highly anticipated COP28 global stocktake have already started for the nearly two hundred countries gathered at the climate change conference. This stocktake, the first in a five-year cycle, will determine how far the world has come in trying to meet the goals of the Paris Agreement and where it has come up short. To quote the United Nations Framework Convention on Climate Change (UNFCC), “It means looking at everything related to where the world stands on climate action and support, identifying the gaps, and working together to agree on solutions pathways (to 2030 and beyond).”

During the first week of COP28, a theme heard again and again across discussions on climate science, mitigation, and adaptation is the importance of data and the challenges to making accurate, comprehensive, and trusted data easily accessible to all stakeholders. While the Enhanced Transparency Framework is the foundation for the UNFCC’s data collection and reporting, there is a rapidly growing array of public and private sector resources being devoted to data collection, sharing, and use, including artificial intelligence (AI)-enabled applications.

The power of data was vividly illustrated at COP28 in a presentation by former US Vice President Al Gore and Gavin McCormick, co-founder of the Climate TRACE coalition. They revealed how comprehensive data on sources of greenhouse gas (GHG) emissions can provide actionable insights into how to target emissions reductions more effectively. This global-scale monitoring system uses satellites and other remote sensing methods, combined with ground-truth measurements and AI, to provide an open and accessible global inventory of emissions.

The data from Climate TRACE also demonstrate the importance of space for providing critical climate-related data—the topic of a discussion at COP28 moderated by one of the authors. The panel was hosted in the Blue Zone by the World Green Economy Organization and titled “Space for Sustainability: Contribution of Space-Based Capabilities to Sustainability Research and Climate Science.” It featured Aarti Holla Maini, director of the UN Office of Outer Space Affairs; Salem Butti Salem Al Qubaisi, director general of the UAE Space Agency; Andrew Zolli, chief impact officer at Planet; and David Roth, director of international public policy at Amazon. This discussion made clear that whether looking inward at the Earth, outward at other planets and beyond, or providing global network connectivity, space should not be an afterthought and, instead, should be embedded into climate policy making.

These are just two of a multitude of conversations at COP28 on the importance of trusted and accessible data for the entire climate ecosystem. Some of the other data-related projects and resources discussed include:

A partnership between UNFCCC and Microsoft to use AI and advanced data technology to track global carbon emissions and assess progress under the Paris Agreement.
A partnership between the UAE Space Agency and Planet Labs to use satellite data to construct a loss and damage atlas to inform the Loss and Damage Fund first announced at COP27.
A tool developed by Google to forecast life-threatening floods up to seven days in advance using publicly available data sources and AI.
A centralized and open source private sector climate data repository co-developed by France and Bloomberg enabling investors and regulators to track and compare climate commitments for hundreds of companies.
The full launch of the Methane Alert and Response System, a satellite detection and notification tool to accelerate data gathering and notification to countries of this potent GHG.
The Global Renewals Watch, a longitudinal atlas observing solar and wind renewable resources on Earth and how they are growing to better inform the transition to clean energy.

A diverse set of data collection methods are important to accurately assess emissions across different sectors, but data sources also offer opportunities beyond tracking emissions. Data collection methods across different areas are crucial to our growing understanding of holistic impacts of climate change, including that of deforestation, biodiversity loss, and impact assessments of natural resources such as melting ice caps, oceans, and water systems. It is key to transparency in government and business commitments related to sustainability and to reveal “greenwashing.” To ensure a global benefit and ease of utility across data sets, it is important to underscore robust data and reporting standards. Data need to be trustworthy, accessible, and interoperable to ensure access and ultimately action. Standardized reporting can breathe transparency into a system mired with distrust, and it can facilitate global collaboration, allowing for an acceleration of insights and ideas on how to address climate change.

The effective use of climate-related data requires global collaboration and cross-sector engagement, even where geopolitical tensions hinder other bilateral activities. The democratization of data will be a requirement to ensure that data sets are not only available but also accessible in usable formats for those who need it the most across sectors and countries. The effort will require the involvement of governments, international organizations, the private sector, philanthropic foundations, and civil society. They must work together to build capacity for knowledge-sharing and facilitate the strategic deployment of resources necessary to optimize the use of cross-functional data. A multi-stakeholder approach is the best way to prioritize and implement the most effective and economical solutions.

As the negotiations for the global stocktake move closer to the finish line, it is important to highlight one thing everyone should agree on: Accessible and trusted data are the foundations for progress on decisive climate action and achieving a sustainable future.

—Lloyd Whitman is the senior director at the Atlantic Council’s GeoTech Center.

—Raul Brens Jr. is the deputy director and a senior fellow at the Atlantic Council’s GeoTech Center.

Note: Amazon is a sponsor of the Atlantic Council’s work at COP28.

DECEMBER 10 | 12:29 PM GMT+4

Is carbon capture and storage a solution to emissions—or is it a ‘carbon bomb’?

To meet the Paris Agreement’s goal of limiting the global average temperature increase to 1.5 degrees Celsius, the world will need to cut fossil fuel production by an estimated 40 percent within this decade, according to the International Energy Agency. In an effort to reach the Paris Agreement goal, several countries—including Saudi Arabia, the United Arab Emirates, Canada, and the United States—have proposed the use of carbon capture and storage (CCS) technologies to abate carbon emissions from fossil fuels and heavy industry, and store them back in the ground, either offshore or on land.

However, several groups have criticized the technology and its implications on the wider project of achieving climate goals. A report by the Center for International Environmental Law (CIEL), for example, states that the oceans are already plagued with ocean acidification and pollution from offshore oil and gas installations, and the seabed should hence not be turned into a storage site for carbon dioxide (CO2) waste. In addition, the CIEL report mentions that CCS projects have repeatedly fallen short of capture targets and encountered financial and technical hurdles, raising doubts about their feasibility and safety. Offshore CCS experience has been limited so far to only two projects in Norway, both of which encountered unpredicted problems, raising questions about the technology’s risks.

Similarly, another report by Climate Analytics states that a reliance on CCS could be dangerous for the planet, since its impacts and ramifications are still not well known or studied. The report argues that for the world to achieve the Paris Agreement’s 1.5 degrees Celsius limit, a near-complete phaseout of fossil fuels is needed by the middle of the century. The Intergovernmental Panel on Climate Change, too, has stated that a fossil fuel phaseout is necessary to meet the 1.5 degrees Celsius limit target, but that a small amount of CCS can be utilized in this pathway with capture rates of 95 percent. The Climate Analytics report suggests, however, that if carbon capture rates only reach 50 percent rather than 95 percent, and upstream methane emissions are reduced to low levels, this outcome would pump 86 billion tons of greenhouse gas emissions into the atmosphere, equivalent to more than double the global CO2 emissions in 2023. The report calls this a “carbon bomb.”

Some scientists and climate experts have raised concerns that the use of CCS to abate fossil fuels would reduce pressure to completely phase them out, shifting the focus instead to “phasing down” their use. The concern is that, as a result of CCS, both emissions mitigation efforts and an energy transition to renewables would be slowed considerably, and that the technology would therefore in effect promote the expansion of oil and gas projects globally instead of limiting them. The Climate Analytics report, for example, states that CCS is “heavily promoted by the oil and gas industry to create the illusion we can keep expanding fossil fuels with dismal capture rates to count as climate action.”

Here at COP28, as countries are reportedly discussing the wording of an “abated” versus “unabated” fossil fuel phaseout in the text, the consequences of allowing a technology with unknown risks to make its way into the calls for “climate action” remain a concern.

—Lama El Hatow is a nonresident fellow with the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East. She is also a professor and program coordinator at Johns Hopkins University in the Environmental Science and Policy and Energy, Policy, and Climate departments.

DAY TEN

Getting private capital off the sidelines for the Global South

COP28 turns out the private sector to solve the climate crisis

Ukraine’s path to victory and European integration is paved through war-insured decarbonization investments

COP28 is different from every other COP. Here’s why.

AI is generating a lot of attention at COP28—and predictions about the climate’s future

See analysis from days eight and nine

DECEMBER 9 | 11:47 PM GMT+4

Getting private capital off the sidelines for the Global South

By Racha Helwa and Hezha Barzani

Check out this untapped opportunity: Africa has 60 percent of the world’s best solar resources, but only 1 percent of installed solar capacity. That lack of commitment from the private sector is due to perceived and real investment risks, stemming from concerns about weaker institutions in these countries.

But for the world to meet its energy-transition objectives, the private sector must increase its investments fourfold, according to the Independent High-Level Expert Group on Climate Finance.

One mechanism available to help minimize those investment risks—whether real or not—is the global suite of multilateral development banks. These banks can take on this challenge by offering insurance or guarantees to investors, or through other means. But, as discussed in a GDA Connect event we hosted today, those de-risking instruments appear insufficient to many investors.

That’s why there’s so much chatter about sovereign wealth funds and green funds. They are equally crucial when it comes to attracting investments for renewables in Africa, parts of the Middle East, and other countries facing similar challenges. It could be argued that, out of the variety of funding initiatives and deals to take place here at COP28, the Alterra fund is the one most likely to have an immediate and significant impact on climate action.

At the GDA Connect event, UAE Minister of State for Foreign Trade Thani bin Ahmed Al Zeyoudi unpacked the new $30 billion climate-focused fund, highlighting that it aims to mobilize an additional $250 billion globally by 2030 and increase investment flows to the Global South. What’s important here is that the fund could radically alter the dynamics and pace of the energy transition in Africa and the Middle East, helping to sustain momentum over time.

But with much more financing needed—in the trillions, not the billions—it will take additional bold initiatives to push the energy transition in the Global South to where it needs to go.

—Racha Helwa is the director of the empowerME Initiative at the Atlantic Council’s Rafik Hariri Center for the Middle East.

—Hezha Barzani is an assistant director at the Atlantic Council’s empowerME Initiative.

DECEMBER 9 | 10:38 PM GMT+4

COP28 turns out the private sector to solve the climate crisis

By Frederick Kempe

This entry is part of the “Inflection Points Today” newsletter. To receive more quick-hit insight on a world in transition, subscribe here.

There are different theories about how this city, the most populous in the United Arab Emirates, got its name. My favorite is that it came from an Arab proverb that says “Daba Dubai,” meaning, “They came with a lot of money.”

Dubai was established in the eighteenth century as a fishing village, where a good living could be made from trade and pearl diving. By the time the COP28 climate conference kicked off here, it had become one of the world’s richest cities, with the world’s tallest building and more five-star hotels than any city except London, the result of oil revenue, tourism, real estate, and sovereign investment.

Dubai was host to climate action over the past week, gathering almost one hundred thousand people from nearly two hundred countries. The public and private sectors drew closer than ever before to a consensus that addressing the perils of a warming planet was both a matter of urgency and business opportunity.

That does not fix the problem, but there is no solution without vast amounts of private-sector financing and investments in climate solutions from renewables to nuclear energy, and from decarbonization to green tech.

Many climate activists opposed opening the doors to industry, particularly those producing fossil fuels, but the result has been a flurry of unprecedented agreements that, if executed and sustained, have the potential for tens of billions of new dollars to address the climate crisis.

For example, there is the $700 million in loss and damage support for the Global South. There is also the $30 billion “Alterra” fund, launched by the United Arab Emirates—and with private-sector giants Blackrock, Brookfield, and TPG—whose aim is to generate $250 billion of capital by 2030 for climate investments in the Global South.

Some fifty oil and gas companies, including Saudi Aramco and twenty-nine national oil companies, agreed to reduce their emissions to zero by 2050 and to reduce methane emissions to zero by 2030. At other points of the convening, countries joined together in agreeing to triple renewables, also by 2030, and to triple emissions-free nuclear energy by 2050. Achieving both goals will require the participation of the private sector.

Negotiators are squabbling over the text of the final COP28 agreement. Politico reports that a draft it has seen has expanded to twenty-seven pages and includes five different options on how to manage disputes over “phasing down” or “phasing out” fossil fuels. The battle could get ugly before the conference closes Tuesday.

Whatever the outcome, veterans of the UN climate process believe this year’s sharply increased level of private-sector engagement could be the game changer to address challenges beyond the capacity of governments alone. Says Jorge Gastelumendi, a veteran of sixteen COPs who runs the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center: “After twenty-eight COPs, we have finally seen the private sector arrive in the climate space with full force and commitment. Without them, we will not be able to solve the climate crisis.”

DECEMBER 9 | 3:55 PM GMT+4

Ukraine’s path to victory and European integration is paved through war-insured decarbonization investments

By Olga Khakova

Ukraine’s COP28 pavilion hosts sobering evidence that Russia’s full-scale invasion of the country has included an environmental assault on Ukraine’s nutrient-rich soil, interconnected watershed systems, and diverse wildlife, in addition to Russian forces’ attacks on civilians and their communities. But Ukraine’s COP28 pavilion is also a stage for showcasing the country’s resilience, innovation, and resolve to decarbonize, despite ongoing Russian attacks. Allies from around the world stopped by to demonstrate their support, including US climate envoy John Kerry and European Commissioner for Energy Kadri Simson. Victoria Hallum, New Zealand’s deputy secretary of multilateral and legal affairs, and Marco Vinicio Ochoa, Guatemala’s vice minister of natural resources and climate, also stopped by the site. Continued engagement from international partners will be critical to rebuilding the country and transforming its energy systems toward net-zero emissions.

Ukraine is already making strides to cut carbon emissions and strengthen energy security, from local small-scale initiatives to record developments. One of the news-making announcements at the Ukrainian COP28 pavilion was the signing of a memorandum of understanding between DTEK, Ukraine’s biggest private energy company, and Vestas, a company with more than a hundred gigawatts of wind turbine installation and service under its belt. They agreed to expand the Mykolaiv wind farm in southern Ukraine into the biggest wind project in Eastern Europe. Cities across Ukraine are also doing their part to meet climate targets. In the North, Nizhyn (which was covered in a death blanket of Russian rockets at the onset of the Russia’s February 2022 invasion) is now installing photovoltaic cells and storage at local utilities and maternity wards, as well as ramping up heat pump integration ahead of the winter.

But to reach momentum and scale, Ukraine will need war risk insurance for Ukrainian and foreign investors and project developers. Initial efforts are on the way through the World Bank’s Multilateral Investment Guarantee Agency; the US International Development Finance Corporation; and the European Bank for Reconstruction and Development; as well as national insurance solutions from Poland, Germany, and France for protecting exports and investments in Ukraine. However, a comprehensive war risk mechanism is missing for clean energy projects that could be accessible to global companies of all sizes seeking to invest in the transformation of Ukraine’s energy system. Such mechanisms could be partially funded through state guarantees combined with support by allied governments and bolstered by engagement from private sector insurance companies and reinsurance schemes.

Ukraine is showcasing unwavering commitment to decarbonization even in the midst of war. Sufficient war risk insurance would unlock private sector investments in the clean energy economy. Moreover, these efforts will contribute to defeating Russia, to Ukraine’s economic development, and to closer integration with European energy systems.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

DECEMBER 9 | 9:50 AM GMT+4

COP28 is different from every other COP. Here’s why.

By David L. Goldwyn

After twenty-eight official gatherings, the Conference of the Parties to the UN Framework Convention on Climate Change has evolved to the Conference of the Partners. Whatever the result of the final communique, the more lasting contributions will come from what is happening outside the tent. The real tests of this COP boiled down to a handful of crux issues: whether meaningful reductions in methane emissions would be accomplished, whether real money would be committed to promote the energy transition in the Global South, and whether credible pathways to net-zero emissions would be charted given the dismal results of the global stocktake. The Emirati leadership of COP28 has largely met this test.

First, the Oil and Gas Decarbonization Charter (OGDC) has done what governments could not: gotten 40 percent of global oil production committed to measurement and verification of their greenhouse gas emissions and near-zeroing of methane emissions, complete with public reporting and transparency guarantees. While the OGDC has not really deepened the commitments of the international oil companies that have signed on, it has greatly broadened these commitments to many more companies, especially national oil companies. If the OGDC proves a transformative effort, those companies that do not participate will miss out on the opportunity to have their environmental, social, and governance qualifications significantly improved.

Second, the announcement of the United Arab Emirates’ Alterra Fund commits thirty billion dollars to hard-to-finance projects in the Global South. This is nowhere close to closing the universally acknowledged climate finance gap between the needs of developing countries and emerging markets to meet their climate goals and the current financing for these needs. Theoretically, the Alterra Fund could spur as much as $250 billion in investments by 2030 to close this gap—a force multiplier by any definition. Moreover, these funds are likely to be more flexible and credible than the commitments of governments and some other private institutions thus far, as well as more effective than the sclerotic Global Environment Fund.

But the greatest legacy accomplishment may be to transform the COP process itself. For years, COPs have been caught within unrealistic and polarized debates, such as how fast net-zero emissions can be achieved, how fast renewables can be scaled up, and what role (if any) fossil fuels should play in a decarbonizing world. It seems that COP28 has, for the first time, brought a wide breadth of fuels and technology types to front-and-center roles: nuclear energy, various “colors” of hydrogen, carbon sequestration and carbon removal (as well as more ambitious renewables pledges). Even US climate envoy John Kerry is speaking positively for the first time about the need for carbon management—strongly implying that governments are recognizing that all of these strategies will play a role in reaching net-zero emissions.

While some stakeholders will be understandably skeptical of this “all of the above—and more” approach, it is a welcome recognition of the heterogenous pathways most countries (especially emerging economies) will take to reach net-zero emissions. This historic presence of diverse investors, technology companies, and even oil and gas companies that will develop and deploy these tools is what makes this (and hopefully future COPs) a gathering for partners, not just a gathering for parties. All of this, to be sure, is just a first step—but it is a hopeful one.

DECEMBER 9 | 9:30 AM GMT+4

AI is generating a lot of attention at COP28—and predictions about the climate’s future

Here on the ground, there’s been a lot of chatter about the role technology, including artificial intelligence (AI), plays in the climate crisis. One event at the Technology for Innovation Hub highlighted how 4 percent of global emissions come from the tech industry, which can be attributed mostly to data centers and devices (such as smartphones and computers). For countries to meet climate goals, tech leaders will need to find efficient ways to reduce these emissions.

But tech can also be used in various applications to assist in solving the climate crisis. AI could be especially useful, for example, for monitoring irrigation, offering insights into how to conserve water. AI could also help map the ocean environment and aquatic ecosystems to assess how warming seas are impacting aquatic life.

There’s more: For example, a new chatbot called ChatNetZero can help determine whether decarbonization plans designed by corporations, governments, and other institutions are credible. Scientists have been calling for sustainability reporting and corporate transparency in climate data, which often has been met with opposition due to claims of privacy and security concerns—AI may offer a way to satisfy the needs for transparency and security. Google’s DeepMind, an AI research lab, has recently uncovered 380,000 new stable materials, which have the potential to be used to power electric-vehicle batteries, superconductors, and supercomputers.

AI, with the help of data from sensors, can also help cities predict water leakages in city distribution networks in cities to avoid water losses, which account for an average of 20 percent of water losses globally in the networks.

AI, with its predictive capabilities, could be a resourceful tool in fighting climate change. But the question is how to get it to everyone. As participants have been able to glean at the Technology for Innovation Hub, organized by the COP28 Presidency, there is an urgent need to strengthen the Global South’s climate-tech ecosystems, democratize access to knowledge and capacity building, and spur climate-tech innovation. There is hope: For example, showcased at the Hub, four Palestinian startups have overcome hurdles, such as lack of access to funding and support systems, even under the dire conditions of war.

DAYS EIGHT AND NINE

What the Global South needs for a just energy transition

The White House’s Amos Hochstein on ensuring energy security amid global crises

Global consensus on climate action is harder amid geopolitical strife

Faith at COP, or faith in COP?

City-led solutions have power—but they need funding

Fusion is the future (these energy experts mean it this time)

See day seven analysis

DECEMBER 8 | 2:35 PM GMT+4

What the Global South needs for a just energy transition

By Katherine Walla

Achieving a just energy transition for the Global South may require a complete reversal in the way the world has operated for centuries.

But for the sake of the climate, he added, it will also require “significant financing” for renewable energy.

Read more highlights from this discussion

New Atlanticist

Dec 8, 2023

What the Global South needs for a just energy transition

By Katherine Walla

Achieving a just energy transition for the Global South may require a complete reversal in the way the world has operated for centuries.

Africa Climate Change & Climate Action

DECEMBER 8 | 12:22 PM GMT+4

The White House’s Amos Hochstein on ensuring energy security amid global crises

By Daniel Hojnacki

Energy security is “not just something we talk about in the context of Russia and Europe on gas,” said Amos Hochstein, senior advisor to the US president for energy and investment, on Thursday. Speaking at the Atlantic Council’s Global Energy Forum in Dubai, he explained that the priority of energy security “has to be the same when it comes to EVs [electric vehicles], lithium, solar panels, and wind turbines.”

Hochstein, who was formerly the US assistant secretary of state for energy resources, discussed the United States’ vision for the future of energy security, the importance of building supply chain resilience as part of the energy transition, and the path forward for regional integration in the Middle East.

Atlantic Council CEO and President Frederick Kempe asked Hochstein whether he thought the United Nations climate change conference known as COP28 in Dubai was divisive or inclusive for its large number of participants, including members of the oil and gas industries. “It’s okay to have disagreements,” Hochstein said. “I don’t think that we should expect that if somebody came here and didn’t agree, then that’s a failure. I think it’s a success that we’re having a conversation.”

Read more highlights from this discussion

New Atlanticist

Dec 7, 2023

The White House’s Amos Hochstein on ensuring energy security amid global crises

By Daniel Hojnacki

At the Atlantic Council Global Energy Forum in Dubai, Hochstein discussed the United States’ vision for the future of energy security.

Economy & Business Resilience & Society

DECEMBER 7 | 9:48 PM GMT+4

Global consensus on climate action is harder amid geopolitical strife

By William Tobin

At COP28, hundreds of countries have gathered to work together to address the climate crisis. Seeing them, here on the ground, one might momentarily forget about much of today’s geopolitical friction and global fragmentation.

But for the sake of the planet and humanity, we must not forget that reality: Meaningful progress on climate goals will only be feasible by accounting for our global context and important issues such as economic and national security.

To achieve the financial infrastructure, investment environment, and supply-chain resilience required to achieve net-zero emissions—all hard to come by with geopolitical friction—it will be important to quickly and widely deploy the full suite of decarbonization technologies that are available: from solar and wind to carbon capture, utilization, and storage. That was a big takeaway from the second day of our Global Energy Forum in Dubai today. On that stage, the White House’s Amos Hochstein argued that such a vast deployment will require both cooperation and economic competition—the latter achieved by better trade systems—ultimately lowering prices and fostering resilience.

There’s more to the context that must be considered, too. High interest rates and persistent inflation around the world are creating headwinds, slowing the deployment of (capital-intensive) clean energy tools. As financial experts and leaders from the Global South explained today at the Forum, counteracting those headwinds—and expanding access to affordable and reliable energy—will require more climate finance.

There is reason for optimism. Every COP is rightly branded as a moment with existential consequences, and COP28 was widely anticipated as the last best chance for action in key areas such as reducing methane emissions, spurring political momentum for the deployment of carbon-management technologies, improving energy finance, and more. There has been progress across these areas, such as the UAE’s launch of a thirty-billion-dollar fund (which aims to, in part, incentivize further investment into the Global South) or through the launch of the Oil and Gas Decarbonization Charter, which has significant potential for emissions reduction (equal to that of the global aviation sector), but does not address emissions from fossil fuel end use.

With war in Ukraine, the Middle East, and Sudan, and with tense relations between countries such as the United States and China, it is clear that consensus among the 198 parties at COP will be elusive. Against this frayed backdrop, the urgency to employ inclusive, science-based climate solutions is higher than ever.

—William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy.

DECEMBER 7 | 6:32 AM GMT+4

Faith at COP, or faith in COP?

For the first time ever, the COP presidency launched a Faith Pavilion this year. This decision signals the responsibility of religious leaders to promote efforts to care for the environment through their faiths. Although absent from COP28 for health reasons, Pope Francis helped set the tone for the Faith Pavilion in a message inaugurating it, stating that “climate change is a religious problem.” Additionally, representatives from various faiths produced the “Interfaith Statement for COP28,” in November, which expressed their shared concern over escalating climate impacts, as well as a joint commitment to address the crisis.

The Faith Pavilion aims to bring together religious leaders, officials, and scientists to discuss the role of faith communities and religious institutions in addressing the climate crisis. Several side events in the Faith Pavilion have demonstrated how various religions, including Islam, Christianity, and Judaism, enforce the notion of being “stewards of the earth.” Other panels looking into faith-based communities globally, including into indigenous communities, spoke about the spiritual connections to nature as humans’ teacher, and humans as nature’s protector. These panels also expressed the idea that nature should have a voice, and that including nature as a stakeholder with legal and legitimate claims is imperative for equity.

The application of these beliefs can have practical consequences; several countries and their lower courts have passed laws ascribing legal rights to nature or individual lands and bodies of water, including Mexico, New Zealand, and India. Ecuador enshrined the rights of nature, or Pachamama (a goddess worshipped by indigenous peoples of the Andes) in its constitution. Other countries are calling for this to be done internationally. Giving nature legal rights internationally would open greater possibilities for holding actors responsible for devastating the environment through pollution from fossil fuels and suing perpetrators for ecocide and crimes against nature.

Religious leaders have also weighed in on some of the most important issues in ongoing climate negotiations. For instance, a group of Catholic nongovernmental organizations came together to create a joint statement calling on leaders of all faiths across the world to show their support for action on loss and damage. The statement stressed the moral case for action on loss damage, drawing on church teaching, scriptures, and ancient wisdom.

This first-ever inclusion of faith at COP in this way is a positive step toward inclusion of all impacted communities and helps provide a voice to the environment through faith and through the communities that aim to preserve it. However, one must pose the question: Have people turned to faith to save them, as they lose faith in the COP process and their governments to do so?

DECEMBER 7 | 4:56 AM GMT+4

City-led solutions have power—but they need funding

By Katherine Walla

Over the course of the first days of COP28, the Local Climate Action Summit took place and the leaders approved plans to operationalize the loss and damage fund—including a commitment to allocate some of the resources to subnational governments.

Those two events are exciting for cities; but they “will never be able to effectively tackle climate change without proper access to finance,” argued Mauricio Rodas, senior advisor for city diplomacy and heat at the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center and former mayor of Quito, Ecuador.

“Now, we need to make sure that cities will be participating in the discussions and decisions about how to make the loss and damage fund operational,” Rodas said.

Get up to speed on the role of mayors and city leaders

In recognition of the power of locally-led solutions, @BloombergDotOrg and the COP Presidency hosted the #LocalClimateActionSummit. @MauricioRodasEC explains its impact and what it means for city-led solutions. https://t.co/AuunaoGlz7 pic.twitter.com/pLkKxAxMMt
— Arsht-Rock Resilience Center (@ArshtRock) December 5, 2023

—Katherine Walla is the associate director of editorial at the Atlantic Council.

DECEMBER 7 | 1:26 AM GMT+4

Fusion is the future (these energy experts mean it this time)

By Frederick Kempe

This entry is part of the “Inflection Points Today” newsletter. To receive more quick-hit insight on a world in transition, subscribe here.

Charles de Gaulle is reported to have wryly said, “Brazil is the country of the future and always will be.” Energy tech geeks have long said the same about fusion—a miraculously clean and safe potential energy source whose breakthrough was always an unchanged thirty years in the future.

But here at the eighth annual Atlantic Council Global Energy Forum (at COP28 in Dubai this year), I witnessed that longstanding claim change in real time as John Kerry, the US special presidential envoy for climate, declared that fusion’s time had come, when the dangerously warming world needs it most.

He announced what he called a US International Engagement Plan for Fusion Energy, which he said would involve thirty-five nations and would focus on research and development, the supply chain and future marketplace, regulation, workforce issues, and public engagement.

“There is potential in fusion to revolutionize our world,” Kerry said, adding, “We are edging ever closer to a fusion-powered reality.” Though no one was willing to set an exact time frame for that, the panel of experts that followed Kerry’s remarks shared his optimism that the time for “the holy grail” of clean energy—as Commonwealth Fusion Systems CEO Bob Mumgaard called it—was growing closer.

As I understand it, fusion (the melding of two or more atomic nuclei to create energy) powers the sun and other stars, so the theory is that earthly scientists and investors ought to be able to replicate that with heat, pressure, lasers, and magnets, producing massive energy. “We are really entering a new era,” said Costas Samaras, who champions this work in the Biden White House; according to him, the private sector has spent six billion dollars trying to take fusion from the lab to the world.

One former fusion skeptic, former US Secretary of Energy Ernest Moniz, told the Global Energy Forum that he has been “blown away by the progress.” At the very least, he said smiling, “I believe the word ‘fusion’ was pronounced from a stage at COP for the first time.”

—Frederick Kempe is the president and chief executive officer of the Atlantic Council.

DAY SEVEN

Why COP28 is right to prioritize global methane and flaring reduction

Climate change and national security can’t be disentangled

Empowering women leaders can open a gateway to cooling solutions

The loss and damage fund is a step forward, but far short of what climate justice demands

John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

How countries are gearing up to cool the planet down

The declaration on climate-smart agriculture is a crucial—but underfunded—step forward

John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

See day six analysis

DECEMBER 6 | 10:50 PM GMT +4

Why COP28 is right to prioritize global methane and flaring reduction

By William Tobin

COP28 has yielded major announcements on lowering methane emissions, particularly from the oil and gas sector. The attention placed on methane at this COP is prudent, because methane is a far more potent greenhouse gas than carbon dioxide, and abating it is cost-effective with current technologies and business models. There is a clear pathway and a necessity to take action now.

Listen below and here for more on methane, then read this recently published report.

—William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy.

DECEMBER 6 | 9:03 PM GMT +4

Climate change and national security can’t be disentangled

By Jonathan Panikoff

It was fitting that both COP27 last year—and now COP28—were hosted in the Middle East. The region is likely to be hit harder by climate change and its impacts than potentially any other across the world. Since 2000, on average, Middle East temperatures have risen by 1.5 degrees Celsius, twice the global increase of 0.7 degrees Celsius. And given the region’s initially hotter and drier climate, in parallel with dwindling water access and rising sea levels, that rise in temperature reflects that the mean global temperature increase of 1.5 degrees Celsius that COP has long highlighted and is fighting to avoid has already hit the Middle East.

Threats to security in the Middle East are often thought of first in the context of Iran or terrorists such as Hamas, Hezbollah, or Shia groups in Iraq and Syria. That is unlikely to change, yet climate change is also coming into the spotlight as a significant.

On Monday and Tuesday, the Atlantic Council’s Scowcroft Middle East Security Initiative joined with Abu Dhabi-based Trends Research and Advisory for our third annual conference, but this iteration was unique. Held in the Green Zone of COP28, this year’s conference was entitled “Sustainable Security: The Soft and Hard Implications of Climate.” The resounding theme that panelists kept coming back to was the fundamental link between climate and the future of US and allies’ national security.

Over the two days of panels and insights from keynote speakers, the impact of global warming on the military, war fighting, operational capabilities, and broader strategic national security was abundant. Sessions that started broad, by addressing political and strategic issues challenging international climate action, and those that delved into the future of climate-financing and the energy transition, all led back to the same result: a need to fundamentally recognize climate change as a broad strategic threat, not just an environmental one.

Changes in weather patterns that are creating stronger, more frequent, and more dangerous hurricanes and storms are a threat to both facilities and operations in the Middle East. The erosion of coastlines is a threat to both US and allied naval facilities. And climate change could drive changes to great power competition with China as Indo-Pacific tensions rise over potentially climate-related changes to fishing stocks, river basins shared by China and a variety of southeast Asian countries, and the requirement for greater humanitarian assistance due to increasing numbers of weather-related natural disasters; assistance that will be fiercely competed for and required by Middle East states as well.

As a result, while US national security is directly impacted by climate change, so too is the economic and national security of Middle East allies who will have to confront rising temperatures and, by extension, dwindling resources, such as storms and drought that create unstable food supply chains, something that Middle East leaders are quite cognizant from recent history can lead to political consequences and even revolutions.

The insights from our conference broadened our understanding of the impact of climate change on national security, but also enabled us to contribute to strengthening efforts aimed at elevating for policymakers the need for sustainable security.

—Jonathan Panikoff is the director of the Scowcroft Middle East Security Initiative at the Atlantic Council’s Middle East Program.

DECEMBER 6 | 2:01 PM GMT+4

Empowering women leaders can open a gateway to cooling solutions

By Katherine Walla

As countries and cities hurriedly search for cooling solutions to protect their populations amid extreme heat, North Dhaka, Bangladesh, is employing a tree planting program in neighborhoods of predominantly informal settlements.

Bushra Afreen, chief heat officer of North Dhaka at the Adrienne Arsht-Rockefeller Foundation Resilience Center, explained that these areas are densely populated, often hosting climate migrants. “These people are already very vulnerable; they have limited resources [and] limited access to shade, income, and trees.”

“Women,” Afreen continued, “are the most vulnerable in these communities; they are on the frontlines of their families when facing extreme heat because they are taking care of everybody else and then themselves.”

“So, I wanted to make them the front line of the solution,” Afreen said. North Dhaka worked with women, she explained, to decide which trees to plant and where to plant them—and to find ways to motivate the community to grow and protect the trees.”

“In doing so,” she said, “we opened a gateway to more cooling solutions and more strategies that will eventually be implemented.”

Dive into how North Dhaka is cooling its community.

Hear from our Chief Heat Officer for Dhaka North Bushra Afreen. She explains how community-led afforestation can protect the neighborhoods most exposed to heat.

Want to hear more? You can watch our Chief Heat Officers talk about climate resilience now: https://t.co/AuunaoGlz7 pic.twitter.com/fa3dSmpUMm
— Arsht-Rock Resilience Center (@ArshtRock) December 5, 2023

—Katherine Walla is the associate director of editorial at the Atlantic Council.

DECEMBER 6 | 1:01 PM GMT+4

The loss and damage fund is a step forward, but far short of what climate justice demands

By Lama El Hatow

On the first day of COP28, the parties agreed to operationalize a loss and damage fund, with initial pledged contributions reaching $725 million as of December 5. While the decision to operationalize the fund was historic, it remains to be seen whether this plan, hurriedly agreed to on the first day of the conference, will provide the necessary support to the affected communities it is meant to help. There is much to be done going forward, including holding polluters accountable and establishing a mechanism for reliable long-term funding that meets the scale of loss and damage that must be addressed.

Much of the language in the decision was watered down by developed countries to escape their responsibility for historical emissions. Going forward, it is essential that polluters be held accountable. There were no references to equity or to Common but Differentiated Responsibilities in the decision. The decision also places developed countries—those most responsible for the emissions changing the climate—in control of almost 50 percent of the fund’s board. Moreover, the pledges for developed countries’ contributions to the fund are “voluntary” rather than obligatory, as the fund only “urges” developed countries to contribute. This raises serious questions about how the fund will be replenished once the initial contributions are disbursed.

Even if developed countries meet their voluntary commitments to the fund, however, it must be noted that the millions pledged for loss and damage so far are a mere drop in the bucket. Billions are needed globally to ensure climate justice to vulnerable communities facing the most severe loss and damage. A report from the International Institute for Environment and Development estimates that up to $580 billion will be needed to help countries facing extreme weather by 2030. Developing countries have argued that the new fund should provide at least one hundred billion dollars annually by 2030. To raise funds more commensurate with the scale of the problem and help ensure this financing can be replenished, Barbados Prime Minister Mia Mottley proposed taxing polluting industries as a source for the fund. She has estimated that her proposed tax rates would provide two hundred billion dollars from oil and gas profits, seventy billion dollars from the value of international shipping, and forty to billion dollars from the international air travel industry annually for the fund. She has also argued that a financial transaction tax could help build resilience in frontline communities.

The fund’s operationalization is a step toward progress, but still falls short of promoting climate justice and placing human rights at the forefront of the climate debate.

DECEMBER 6 | 11:27 AM GMT +4

John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

By Katherine Walla

US Special Presidential Envoy for Climate John Kerry on Tuesday announced a new strategy for international cooperation on the development of nuclear fusion, which he said would be—alongside other energy sources, such as wind, solar, and nuclear fission—”a critical piece of our energy future.” The strategy, Kerry explained at the Atlantic Council’s Global Energy Forum at COP28, focuses on research and development, supply-chain improvements, regulation, workforce development, and education.

If “all of our countries are threatened, and they are, [and if] all life is threatened, and it is, then we need to pull ourselves together with every strength we have,” Kerry said. “We cannot realize this grand ambition—perhaps not at all, but certainly not at the pace we need to—doing it alone.”

The need for alternative fuels such as fusion is apparent because “science clearly tells us, without any question whatsoever, that the cause of this crisis… [is] emissions. It’s the way we burn fossil fuels,” Kerry said.

Kerry noted that “we’ve had a little debate in the last few days about what the evidence shows or doesn’t show,” a reference to controversies during the United Nations Climate Change Conference in Dubai over what role oil and gas will play in the global energy future.

“We have two options,” Kerry explained. “Either capture the emissions or don’t burn [fossil fuels].”

Kerry explained that the evidence of warming across the planet makes it “clear” that the world needs to “move faster” to limit global temperature rise. “We need to figure out what we’re going to do at a critical pace,” Kerry warned.

Read more highlights from Kerry’s remarks

New Atlanticist

Dec 6, 2023

John Kerry unveils a ‘critical’ new US strategy to expand fusion energy

By Katherine Walla

“We need to pull ourselves together with every strength we have,” Kerry said on the first day of the Global Energy Forum.

Africa Climate Change & Climate Action

DECEMBER 6 | 9:35 AM GMT+4

How countries are gearing up to cool the planet down

By Katherine Walla

On Tuesday, sixty-three countries signed a pledge to raise the level of ambition on cooling, as the planet’s temperature continues to rise, and heatwaves become more frequent.

The pledge commits countries to cutting cooling-related emissions and improving access to cooling for people across the globe.

“Cooling is not a luxury. It is a life-saving necessity,” explained Owen Gow, associate director of the Extreme Heat Initiative at the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center.

When expanding access to cooling, countries will need to ensure that it is “sustainable and efficient cooling,” Gow added. “If we increase access to cooling, we need to make sure that it doesn’t accelerate climate change at the same time.”

Eleni Myrivili, global chief heat officer with UN-Habitat and Arsht-Rock, noted that the pledge incorporates subnational governments as well “to make sure the type of cooling they do in their cities is sustainable and efficient.”

Get up to speed on the Global Cooling Pledge.

The pivotal moment for cooling has arrived! @COP28_UAE Presidency, supported by @UNEP & @ActOnCooling, launched the #GlobalCoolingPledge, a commitment to reduce cooling-related emissions. Learn what the Pledge means for #COP28: https://t.co/vkCyErMsCL pic.twitter.com/SWfhJ34YRT
— Arsht-Rock Resilience Center (@ArshtRock) December 5, 2023

—Katherine Walla is the associate director of editorial at the Atlantic Council.

DECEMBER 6 | 5:52 AM GMT+4

The declaration on climate-smart agriculture is a crucial—but underfunded—step forward

By Raul Brens Jr.

While everyone was fixed on the loss and damage breakthrough, few headlines mentioned a global commitment, signed just a day later, to address global food systems and their impact on the climate. Over 130 world leaders signed the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action; the leaders represent countries that, altogether, are responsible for 76 percent of global food systems emissions. Also announced: a $2.5 billion fund to support food security while the climate-change fight continues.

That there isn’t more attention on this declaration is surprising, considering that the agri-food system counts for a third of all human-induced greenhouse gas emissions. But it is worth noting: The declaration is only the latest sign that the topic of food systems, and the role they play in the climate crisis, is becoming more and more prominent at COPs.

In addition, the declaration has managed to unite countries despite geopolitical tensions today, showcasing global solidarity around the health of the planet and the wellbeing of future generations. For example, the United States and China are signatories—however, some key significant emitters, such as India, have not signed on, indicating that challenges remain in ensuring broader alignment.

Succeeding in the commitment to future-proof the food system will require countries to focus on climate-smart agriculture techniques that improve crop and land resilience and reduce greenhouse gas emissions from farming—all while increasing agricultural output. Climate-smart agriculture harnesses technologies ranging from Earth observation satellite systems (to monitor crop conditions) to genome editing tools that help develop resilient crop varieties.

Deploying these climate-smart technologies raises challenges around access and cost, especially for low- and middle-income countries. The signatories must work together to ensure that technology is shared and developed fairly and collaboratively. It is especially important that developed and developing nations join in this work, to achieve truly sustainable and resilient global food systems.

But the declaration may need to reassess one thing: its funding. While $2.5 billion is a noteworthy start, it doesn’t accurately match the scale of the challenge the world faces in reforming global food systems—especially if the sum winds up being spread over several years. In comparison, a United States and United Arab Emirates joint initiative called Agriculture Innovation Mission for Climate (AIM for Climate) has mobilized over eight billion dollars in investment across fifty-five partner countries.

The declaration represents a crucial step forward in global climate efforts. However, the journey ahead demands sustained commitments and increasing financial investment to truly realize the goals of the Paris Agreement.

—Raul Brens Jr. is the deputy director and a senior fellow at the Atlantic Council’s GeoTech Center.

DAY SIX

A familiar concern—but with new urgency

See day five analysis

DECEMBER 5 | 5:14 PM GMT+4

A familiar concern—but with new urgency

By Jorge Gastelumendi

COP28, with its many pledges and announcements, certainly has plenty that is new. But there’s also a sentiment here on the ground that is rather familiar: Concern about the fact that public finance is not even close to covering worldwide needs for adaptation funding.

Reaching the levels of financing necessary to do so will require “unlocking global capital markets.” Putting all those technical terms aside, what it really comes down to is having policies that support the development of adaptation and resilience markets and having policymakers and private finance leaders that talk to each other. Bringing together these actors will drive transformative collaboration.

Yesterday, with our partners, the Adrienne Arsht–Rockefeller Foundation Resilience Center launched the first-ever Call for Collaboration, calling upon policymakers and the banking, investment, and insurance sectors to work together to improve the investment environment and, in so doing, mobilize more private finance. It is backed by five governments from developed and developing countries; on top of that, leaders and thinkers from private finance, academia, and over thirty governments helped shape this call.

Like many issues related to the changing climate, adaptation and resilience funding requires all hands on deck. Fortunately, with all the momentum on this issue that I’ve seen here in Dubai, there has never been a better moment to collaborate and advance urgent action on this front.

And here’s a sneak peek at next year’s COP: We will mobilize even more players in the climate finance space—private finance actors, regulators, policymakers, and philanthropic organizations (who launched a Call to Action at this COP for accelerating climate adaptation). Their participation will be needed to create public policies that support adaptation finance and set much-needed standards.

—Jorge Gastelumendi is the interim director of the Atlantic Council’s Adrienne Arsht–Rockefeller Foundation Resilience Center.

Get up to speed on the Call for Collaboration

DAY FIVE

Trade is starting to have its say in the COP process—at last

A big idea to address the biggest killer of the climate crisis

Solar is surprisingly out of the spotlight at COP28, as Saudi Arabia and China show

See day four analysis

DECEMBER 4 | 11:12 PM GMT+4

Trade is starting to have its say in the COP process—at last

By Reed Blakemore

If you want a “watch this space” recommendation coming out of COP28, look no further than Monday’s theme, “Trade Day”—the first time a COP thematic day has been devoted to the role of trade in the energy transition. Smatterings of urgently needed conversations on critical minerals and decarbonizing trade value chains have begun to find their place this year.

These “operating system” features of a Paris-aligned world are going to demand more attention. Yet outside of these issues being highlighted through panels and discussion (an important start), the inaugural Trade Day yielded few real action items.

It’s still the early days of the conference, but the trade space must be front and center, as World Trade Organization President Ngozi Okonjo-Iweala said on Saturday at COP28. Global trade is directly responsible for 20 to 30 percent of global CO2 emissions (strictly as a reflection of international freight), while embodied carbon in widely traded goods (specifically energy-intensive trade-exposed goods) remains a huge challenge for industry to curb. Reaching climate targets requires the development of a new resource base to build clean energy technologies, demanding that markets in which those resources are traded mature. International carbon markets, meanwhile, remain a long-awaited, but unfulfilled ambition of the Paris Agreement.

The challenge, however, is that the economic opportunities of the energy transition have overlaid a competitiveness agenda on top of the climate action imperative. Many in the United States and the European Union are wary of what China’s dominance in mineral supply chains means for economic and national security in a net-zero world. In the absence of global markets for carbon, countries are seeing carbon border adjustments (or similar mechanisms) as ways to nominally support low-carbon industries, but in doing so, they are throwing up barriers to trade. The opportunities inherent in the “global green economy” are creating a race for countries to lead in clean tech industries to seize both emerging labor and export markets, bringing an increasingly protectionist hue to energy policy.

Perhaps most critical is whether the lack of attention to these issues is complicating efforts of a “just and equitable energy transition.” Concerns that Europe’s Carbon Border Adjustment Mechanism, and the proliferation of other similar measures, might undercut the economic development of the Global South where many energy-intensive trade-exposed goods are manufactured, but decarbonization is still very much underway. Many mineral-rich nations are eager to shed the “resource-client” relationship with the Global North, yet they are concerned (if not frustrated) with the possibility that they will end up exporting cheap ores that are transformed and re-imported as expensive renewable energy technologies.

Simply put, whether the energy system is being transformed or built anew, geoeconomics matter. And even if it doesn’t take center stage at COPs to come, trade will have its say in the climate future.

—Reed Blakemore is director for research and programs at the Atlantic Council Global Energy Center, where he is responsible for the center’s research, strategy, and program development.

On Tuesday, December 5, at 2:00 pm in Dubai (GMT+4) (5:00 am ET) check out “Remaking trade for a clean energy future,” a discussion on this topic live from the Green Zone at COP28.

DECEMBER 4 | 10:56 PM GMT+4

A big idea to address the biggest killer of the climate crisis

By Frederick Kempe

This entry is part of the “Inflection Points Today” newsletter. To receive more quick-hit insight on a world in transition, subscribe here.

Where former US Secretary of State Hillary Rodham Clinton goes in Dubai this week, she draws a crowd.

People from all corners of the world packed the room, and it was standing room only at our COP28 Resilience Hub, where she held court as the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center (Arsht-Rock) ambassador for heat, health, and gender.

“Extreme heat has to be viewed as one of the most dangerous results of the changing climate,” she said, recounting a trip to India, where she saw the harm done to livelihoods, particularly those of women working outdoors as farmers, street vendors, waste collectors, and salt pan and construction workers. “This is not just a health issue,” Clinton warned. “It’s an economic issue, a social issue, [and] a political issue.”

Working with Clinton and with Reema Nanavaty, director of the nearly three-million-member Self-Employed Women’s Association, the Atlantic Council has been implementing a parametric insurance program as a part of Arsht-Rock’s Extreme Heat Protection Initiative. This program protects women working in India’s informal sector from having to make an impossible choice: pausing their work during heat waves (to protect their health) or continuing to work and earn money, while putting their wellbeing at risk.

What has been winning the headlines here so far at this twenty-eighth United Nations Climate Change Conference has been the announcement on the first day of a landmark, $400-milllion loss and damage fund, a mechanism that provides financial assistance to the countries most affected by, but often least responsible for, the climate crisis. There has also been media attention on the hydrocarbon companies that have come to this conference in greater numbers than ever before—many with concrete commitments and plans to reduce emissions.

With over seventy thousand delegates and observers at COP28, actions that aim to improve lives—such as insurance programs to support workers in the informal economy, many of them women—deserve notice. For these workers especially, “their lives and livelihoods are at stake,” said Eleni Myrivili, the global chief heat officer for United Nations-Habitat and Arsht-Rock.

—Frederick Kempe is the president and chief executive officer of the Atlantic Council.

DECEMBER 4 | 10:10 PM GMT+4

Solar is surprisingly out of the spotlight at COP28, as Saudi Arabia and China show

By Joseph Webster

Until recently a star at climate-focused conferences, solar energy is being upstaged at COP28 in Dubai by other decarbonizing technologies: namely, nuclear energy and methane abatement. Deploying more nuclear energy and cutting methane emissions will help reduce carbon emissions, but the world should not lose sight of solar’s transformative potential. The global glut of solar panels and the Middle East’s lack of solar deployment presents an enormous opportunity to quickly achieve huge climate benefits. While government leaders at COP28 pledged to triple the world’s renewable energy capacity by 2030, it will be very difficult to reach this target without Middle Eastern participation, especially from Saudi Arabia, the region’s largest economy.

Saudi Arabia is arguably one of the world’s best places to build solar, given its abundant solar irradiance, deep financial reserves, and significant land mass. Yet the country has traditionally been a laggard at deploying the technology.

Saudi Arabia generated only 0.8 terawatt hours of solar electricity in 2022, about as much as the US state of Iowa. Saudi Arabia will not even approach its modest 2023 renewables capacity target of 27.3 gigawatts (GW) (20 GW of solar photovoltaics and 7 GW of wind), according to S&P Global, as less than 3 GW of renewables capacity were operational in August 2023.

The obstacles to Saudi solar deployment appear to be political, not technical. While deploying solar in the desert is not without challenges, including distance from demand centers, transmission siting, and dust storms, these obstacles have not prevented desert projects from taking shape across the world—including in China. Earlier this year, the first phase of a massive solar project in the Tengger Desert started generating power.

If Saudi Arabia turned to solar, the kingdom and the world could reap immense benefits. Solar farms tend to require little water after installation, especially compared to other resources; renewables don’t produce air pollutants; and some studies show that utility-scale solar in the desert can increase precipitation and vegetation coverage. Finally, Saudi Arabia’s failure to deploy solar harms its own economic interests, as it could allow fuel oil to be exported rather than burned for the domestic power market. Astonishingly, fuel oil accounted for 39 percent of Saudi Arabia’s power mix in 2021. At the Green Initiative Forum at COP28, the Saudi Minister of Energy identified carbon capture technology and renewables, apparently in that order, as the kingdom’s net-zero priorities.

There is some movement. For example, Saudi Arabia is launching more utility-scale solar and is in advanced talks to open a solar factory. Still, the kingdom’s solar ambitions remain very limited. The region’s dawdling pace of solar deployment comes at a huge cost—most of all for itself, but also for the world.

Even more surprising is that the lack of buzz around solar at COP28 extends to major solar producers. Despite its own dominant position in solar value chains, China doesn’t appear to be advertising its solar exports at COP28 in Dubai. China’s pavilion at COP features the China State Construction Engineering Corporation, which has weak ties to solar project development. The pavilion at COP doesn’t prominently showcase China’s solar suppliers, and so far, the author hasn’t seen Chinese solar companies represented (although the convening is very large).

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center, where he leads the center’s efforts on Chinese energy security, offshore wind, and hydrogen.

DAY FOUR

This is the biggest COP ever—for more reasons than one

Fifty oil and gas companies just announced plans to cut methane emissions. Can they do it?

A plan to triple nuclear energy was just announced. Here’s what to know.

Hillary Clinton, Reema Nanavaty, and Eleni Myrivili on gender-responsive solutions for extreme heat

See day three analysis

DECEMBER 3 | 11:24 PM GMT+4

This is the biggest COP ever—for more reasons than one

By Aubrey Hruby

On the fourth day of COP28, I can’t help but notice how big the convening has become. Over seventy thousand people (me included) have descended on Dubai for a week of meetings—official and unofficial—on climate and the future of finance. This is about a 40 percent increase from COP27 in Sharm el Sheikh, Egypt, and about an 80 percent increase from COP26 in Glasglow, Scotland.

There’s some irony to the fact that so many people who gathered here to talk about global climate change and environmental damage arrived by plane (some even by private jet) and are now sitting in cars in heavy traffic and squinting through pollution in Dubai. On the ground, it has been suggested that countries—particularly big ones with large populations (and COP delegations)—should limit the number of representatives they bring so as to not overwhelm and disadvantage the smaller nations that cannot field such large teams.

Another thing that is big about this COP: The United Arab Emirates’ (UAE) announcement yesterday of a thirty-billion-dollar fund that will invest in climate-resilient infrastructure projects with a focus on the Global South. This will likely help offset criticism the UAE received in the leadup to the convening for planning to use COP as a platform to discuss future oil deals. But, importantly, the new fund overshadows the smaller commitments made by developed countries to help developing countries address the loss and damage caused by climate disasters

In addition, at this COP, the list of topics is bigger. For example, more than twenty countries committed to triple nuclear energy production, and discussions about the future of critical mineral supply chains are currently underway, highlighting the critical role that African countries play in ensuring that green-energy industries are more resilient and diversified globally.

In global climate discussions, the issues of justice and hypocrisy are at the forefront as those countries that have emitted the least greenhouse gases historically—particularly African nations—are suffering the most from the carbon-intensive growth that fueled wealth accumulation in developed markets. Calls to completely phase out fossil fuels fail to recognize the economic and social realities of many developing countries that have a dual imperative: They must grow green while somehow simultaneously reducing poverty through job creation and increasing reliable access to electricity for hundreds of millions of people. It’s a complex challenge that requires respect, reframing, and massive resources.

—Aubrey Hruby is a nonresident senior fellow with the Atlantic Council’s Africa Center and leader of the Center’s work on climate and energy issues.

DECEMBER 3 | 10:41 PM GMT+4

Fifty oil and gas companies just announced plans to cut methane emissions. Can they do it?

By William Tobin

At the opening of the COP28 conference, United Nations Framework Convention on Climate Change Executive Secretary Simon Stiell said this was the “most significant COP since Paris,” referring to COP21, where 196 parties signed a legally binding treaty to address climate change and keep global warming levels to below 2 degrees Celsius.

In order to keep the vision of Paris alive and reach net-zero by the middle of the century, COP28 is being viewed by many here in Dubai as the absolute last opportunity available to tackle one of the most potent contributors to global warming: methane, particularly from the oil and gas sector.

Methane is responsible for at least 30 percent of global warming in the past two hundred years, and perhaps more. Cutting methane emissions from all sectors—including oil and gas, agriculture, and waste—could avoid over 0.2 degrees Celsius of warming by 2050. This is because methane is a short-lived climate pollutant, meaning its shelf life in the atmosphere is rather brief, but its warming impact is more than eighty times that of carbon dioxide in a twenty-year time span.

Thankfully, methane emissions from oil and gas can be brough to near-zero with available technologies and business models—in fact, around 40 percent of reductions can be achieved at no net cost.

The opening weekend of COP28 presents a moment for celebration, as perhaps the most impactful initiative in years of pledges has been launched: the Oil and Gas Decarbonization Charter (OGDC).

While the value of such a charter may be counterintuitive, remember that emissions from oil and gas operations account for 15 percent of all emissions—more than all emissions from cars globally, for example—roughly half of which is methane. The OGDC, through its fifty signatories, covers 40 percent of global oil production, offering a window to make substantial, tangible, and verifiable greenhouse gas emissions reductions. The OGDC commits signatories to end routine flaring (wasteful combustion of methane gas) and achieve near-zero upstream methane emissions by 2030. Achieving these emissions reductions from charter signatories would be approximately equivalent to zeroing out emissions from aviation worldwide. Furthermore, the OGDC signatories have committed to being transparent through monitoring, reporting, and independent verification of emissions.

The OGDC is no less significant in the substance of its commitments, however, versus its reach. Critically, the group of fifty signatories includes twenty-nine national oil companies. These entities control more than half of global oil production and a higher proportion of methane emissions. Through signing this pledge, the national oil companies are articulating a desire to play a constructive role in emissions mitigation, several for the first time. Having these companies at the table is a significant expansion in ambition within the sector. It paves a way to constructive engagement and sharing of best practices to realize the goal of bringing methane emissions to near-zero, as is required to reach net-zero by the middle of the century.

Achieving net-zero emissions will require the deployment of vast amounts of renewable and clean electricity generation, the electrification of end uses, reform of land use, rapid increase in carbon capture and removal, increases in energy efficiency, and much more. However, in the short term, slashing methane emissions from oil and gas is a highly constructive deliverable, and this announcement at COP28 has shown a reason to be optimistic. However, as is always the case with ambitious plans, implementation is what matters most.

—William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy.

DECEMBER 3 | 8:28 PM GMT+4

A plan to triple nuclear energy was just announced. Here’s what to know.

By Jennifer T. Gordon

With energy demand projected to triple by 2050, the recent pledge at COP28 by the United States and more than twenty countries to triple nuclear energy is a welcome development in the fight against climate change. Although nuclear energy only accounts for 10 percent of global electricity generation, it provides 30 percent of global low-carbon electricity. The amount of nuclear energy generation will have to increase in order to meet increased energy demand through clean, baseload power. Looking beyond the grid, nuclear energy has a crucial role to play in decarbonizing so-called “hard-to-abate sectors”—areas such as hydrogen production, desalination, process heat, mining, and shipping—in which it is particularly difficult to reduce emissions.

Furthermore, the significance of this announcement occurring at COP28 cannot be underestimated. Previous COP meetings have tended to leave nuclear energy on the sidelines, and an announcement of this magnitude in the early days of the world’s premier climate conference can be interpreted as recognition of nuclear energy’s tremendous decarbonization benefits. This international recognition could help gain support in various countries for technology-neutral policies that incentivize the use of zero-carbon energy, with nuclear energy continuing to be included in legislation such as the Inflation Reduction Act in the United States or the European Union’s Green Taxonomy.

However, while the pledge to triple nuclear energy is a positive step, more needs to be done in order to deploy nuclear reactors globally and at scale. For example, the United States and like-minded countries will need to cooperate on financing to compete effectively against state-owned nuclear enterprises in Russia and China; regulatory collaboration is also key to minimizing time and costs. Ultimately, for the fight against climate change to succeed, more barriers to nuclear energy deployment must fall.

—Jennifer T. Gordon is the director for the Nuclear Energy Policy Initiative at the Atlantic Council’s Global Energy Center. She was a co-director of the Atlantic Council Task Force on US Nuclear Energy Leadership, and she currently runs the Atlantic Council’s Women in Energy and Climate Fellowship.

DECEMBER 3 | 5:17 PM GMT+4

Hillary Clinton, Reema Nanavaty, and Eleni Myrivili on gender-responsive solutions for extreme heat

By Daniel Hojnacki

“Extreme heat has to be viewed as one of the most dangerous results of the changing climate,” said former US Secretary of State Hillary Clinton on Sunday at a COP28 Resilience Hub discussion on the need for gender-responsive climate solutions to address extreme heat. The panel was hosted by the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center (Arsht-Rock).

Clinton was joined by Reema Nanavaty, director of the Self-Employed Women’s Association (SEWA), a trade union promoting the rights of independently employed female workers in India. In February, the Clinton Global Initiative and SEWA, along with several other organizations, launched the Global Climate Resilience Fund to empower women to combat climate change and adapt to extreme heat. The panel was moderated by Eleni Myrivili, the global chief heat officer for United Nations-Habitat and Arsht-Rock.

Clinton said that as the world works to advance climate mitigation efforts, “we have to worry about what’s happening on the ground with so many people, in particular women.”

Hillary Clinton, Reema Nanavaty, and Eleni Myrivili on gender-responsive solutions for extreme heat

By Daniel Hojnacki

At an Atlantic Council event at COP28, the former US secretary of state discussed the importance of empowering women to develop innovations for extreme heat resilience.

Economy & Business Resilience & Society

DAY THREE

Africa’s priorities at COP28, from climate finance to a brand-new narrative

A landmark thirty-billion-dollar fund for global climate solutions

See day two analysis

DECEMBER 2 | 9:47 PM GMT+4

Africa’s priorities at COP28, from climate finance to a brand-new narrative

By Africa Center experts

On the first day of the United Nations Climate Change Conference (also known as COP28) in Dubai, global leaders reached a deal on where to house and how to fund loss and damage costs for the countries most vulnerable to climate change. It’s an important development for African stakeholders, who are concerned about the escalating impact of climate change on the continent. As African heads of state and government wrote in their Nairobi Declaration—adopted at the Africa Climate Summit in September—the continent is warming faster than the rest of the world, despite it being responsible for a small fraction of global carbon emissions. These changes will gravely impact the continent’s economies and societies.

But will COP28 give Africa the attention it deserves on other climate needs? Our experts, some of whom are headed to Dubai, outline what is at stake for Africa.

Read our experts’ responses

AfricaSource

Dec 2, 2023

Africa’s priorities at COP28, from climate finance to a brand-new narrative

By the Africa Center

Our experts outline what is at stake for Africa at the UN Climate Change Conference in Dubai.

Africa Climate Change & Climate Action

DECEMBER 2 | 8:16 AM GMT+4

A landmark thirty-billion-dollar fund for global climate solutions

By Mahmoud Abouelnaga

On Friday, COP28 host, the United Arab Emirates, launched a thirty-billion-dollar climate fund to bridge the climate finance gap globally and facilitate climate investment flows into the Global South. The new climate fund will aim to stimulate $250 billion by 2030.

This thirty-billion-dollar private investment fund, Alterra, is now the world’s largest private investment fund dedicated to addressing the climate crisis. For comparison, it took the United Nations’ Green Climate Fund (GCF) almost ten years to mobilize less funding through the initial resource mobilization in 2014, the first replenishment in 2019, and the second replenishment in 2023.

Alterra will be split into a large fund of twenty-five billion dollars that will deploy capital globally with the aim to accelerate the transition to a net-zero economy by scaling climate investments, and a smaller fund of five billion dollars that can remove barriers and incentivize investment flows into the Global South.

This announcement came after countries agreed on the operationalization of the loss and damage fund to help the adversely vulnerable developing countries cope with climate impacts. While the $420 million loss and damage pledges gave a good signal for progress, they are not commensurate with the scale of the costly climate disasters borne by poor countries. Unlike the loss and damage pledges, the new private investment commitments are proportional to the needed scale to address the climate crisis.

Going forward, the new climate fund will need a rigorous and transparent climate impact framework to ensure that these investments are deployed at the needed speed and scale to align with global climate targets. This framework should establish clear criteria for these investments (such as emissions reductions, impacts on local communities, deployment of large-scale projects, and the reducing of costs of innovative climate solutions) to align with global climate targets.

—Mahmoud Abouelnaga is a nonresident senior fellow at the GeoTech Center of the Atlantic Council and leads the carbon management portfolio at the Center for Climate and Energy Solutions (C2ES).

Note: This piece was edited to provide more detail on the author’s recommended framework.

DAY TWO

Why India could play a pivotal role as climate mediator

Can climate leaders maintain the momentum?

See day one analysis

DECEMBER 1 | 10:12 PM GMT+4

Why India could play a pivotal role as climate mediator

By Rachel Rizzo and Théophile Pouget-Abadie

As Indian Prime Minister Narendra Modi prepared for a historic visit to Washington, DC this year, Apple CEO Tim Cook made a journey in the other direction: He flew to Mumbai to celebrate Apple’s twenty-five-year presence in the South Asian nation. “I really feel that India is at a tipping point,” Cook declared, joining the ranks of business leaders and economists who have spent the last three decades forecasting that the twenty-first century will belong to India.

If it’s true that this is the “Indian century,” it is not just because the country is now the most populous on Earth and on track to become the world’s largest economy; it is because India will play a central role in the global energy transition.

India’s success in this area will be measured by a few obvious targets: its ability to bring down emissions domestically, the example it sets for how other nations of the Global South can undergo their own successful energy transitions, and India’s ability to partner with other nations on climate solutions.

But there may be another just as important, but less obvious, role for India to play: an unofficial mediator between the United States and China to ensure global international decarbonization targets remain in reach amid intensifying competition. The United Nations (UN) Climate Change Conference, also known as COP28—taking place only months after India hosted the Group of Twenty (G20) Summit in New Delhi—is a good opportunity for India to begin to flex its climate muscles on the world stage.

New Atlanticist

Dec 1, 2023

Why India could play a pivotal role as climate mediator

By Rachel Rizzo, Théophile Pouget-Abadie

COP28 is a good opportunity for India to begin to flex its climate muscles on the world stage.

China Climate Change & Climate Action

DECEMBER 1 | 3:35 PM GMT+4

Can climate leaders maintain the momentum?

By Landon Derentz

After a year of painstaking negotiations and debate, COP28 kicked off with a breakthrough.

That’s because on day one of COP28—and only one year since countries agreed at COP27 to establish a “loss and damage” fund—countries raked together more than $425 million to help developing economies cope with the adverse effects of climate change. The United Arab Emirates and Germany, most notably, each pledged $100 million.

The news of the funding signals that real progress remains possible within the confines of the formal negotiation process. Yet, the fund remains well short of the hundreds of billions—not millions—of dollars that the United Nations estimates will be necessary to address the fallout of inevitable near-term climate disasters. It’s a stark reminder of why it is important to pursue all pathways to keep the global temperature rise within 1.5 degrees Celsius.

With that breakthrough behind us, all eyes should now turn to December 2. Saturday’s announcements are likely to be big: Don’t be surprised to see declarations on tripling the deployment of nuclear and renewable energy, progress on the formation of a global methane fund, and momentum in the establishment of an Oil and Gas Decarbonization Charter. This charter will outline how over fifty oil and gas companies intend to spur climate action for the sector. It’s the best chance for the United Arab Emirates—which has faced skepticism about its ability to galvanize action to reduce the energy sector’s greenhouse gas emissions—to prove the veracity of its vision for COP28. That vision: Industry can breathe new life into the COP process by helping to catalyze action towards achieving national climate goals.

The next few days are an important litmus test for the United Arab Emirates’ credibility in hosting the climate conference.

—Landon Derentz is senior director and Morningstar Chair for Global Energy Security at the Atlantic Council Global Energy Center.

DAY ONE

An early deal brings signs of hope for COP28

Long-term climate financing remains elusive. A NATO-style spending target could help.

Kicking off with a bang on loss and damage

COP28 is here. These are the Global South’s demands and expectations.

NOVEMBER 30 | 8:12 PM GMT+4

An early deal brings signs of hope for COP28

By Sabrina Nagel

The first day of COP28 has opened with a historical deal: The parties agreed on the implementation of the loss and damage fund that was first announced last year at COP27. While parties agreed at COP27 to create the fund, it was unclear where the fund would be located and how much money developed countries would commit to it.

Now, with this new announcement, countries are beginning to commit to the fund. The United Arab Emirates and Germany each committed one hundred million dollars, while the United States and Japan have also contributed. The fund is central to climate justice for the countries that have contributed the least to climate change but are the most vulnerable to its effects.

Only weeks ago, negotiators and world leaders expected COP28 to be a difficult climate conference with uncertainty and disagreements about how the fund should be implemented and operationalized. Nevertheless, this early deal on the loss and damage fund will set the scene for hopeful negotiations as the week continues.

—Sabrina Nagel is senior advisor for global policy and finance at the Adrienne Arsht-Rockefeller Foundation Resilience Center

NOVEMBER 30 | 7:45 PM GMT+4

Long-term climate financing remains elusive. A NATO-style spending target could help.

By Francis Shin and Théophile Pouget-Abadie

At the 2006 Riga summit, NATO leaders made a pledge to spend 2 percent of their gross domestic product (GDP) on defense. This moment marked a significant shift for the alliance, offering a way to both measure political will and ensure that existing and new members meaningfully contributed to the Alliance’s efforts. The target is remarkably simple: It essentially tracks members’ defense ministry budgets. Could the establishment of a spending target for the energy transition spark a similarly significant global shift?

Decarbonizing has emerged as one of most important tools for the European Union (EU) to ensure its long-term security and sovereignty: both to address the physical risks stemming from climate change and to reduce oil and gas dependencies, particularly on Russia. So far, European member states have committed insufficient funds to meet their decarbonization objectives. The European Commission estimates that an additional seven hundred billion euros of combined public and private investment is needed each year across the entire EU bloc to meet its energy transition targets and combat climate change.

Europe is currently far off track, with a spending gap equivalent to 0.73 percent of the EU’s GDP for non-transport investment and public spending, or about 101 billion euros. All but two EU countries (Lithuania and Czechia) have national spending gaps incapable of being filled by EU spending alone due to these members not having enough grants available to them. While the EU has set ambitious energy-transition goals through programs such as NextGenerationEU, the European Green Deal (and the associated Fit for 55 package), and the REPowerEU Plan, it now needs the means to finance them.

To turn the tide, EU members and like-minded allies should set national-level climate spending targets, based on a percentage of their respective annual GDPs, to address these deficits. Within Europe, a climate spending target would put pressure on countries that have expressed reservations about joining in EU-level decarbonization goals. Poland, which retains the most reliance on coal for its energy needs, suggested that it would appeal against the Fit for 55 program, raising concern among other EU members on how staunchly committed Poland might be to cut carbon emissions.

Agora Energiewende and the European Commission concluded the overall annual GDP percentage investments required for hitting existing 2030 carbon emissions targets was 2.5 percent. That’s where discussions should start.

Of course, EU members’ needs will vary. Countries that haven’t spent as much on their energy transitions—or that are still reliant on fossil fuels—will need to spend more to address decarbonization deficits and improve electricity grids. And while some countries have already spent significant amounts and are closer to reaching their decarbonization goals, they should still seek to meet the 2.5 percent target, instead directing the funds to developing countries or international climate-change mitigation projects. This would express solidarity with fellow EU members as well as encourage decarbonization beyond Europe itself.

—Francis Shin is a research assistant at the Atlantic Council’s Europe Center. Théophile Pouget-Abadie is a nonresident fellow with the Atlantic Council’s Europe Center and a policy fellow with the Jain Family Institute

NOVEMBER 30, 2023 | 6:27 PM GMT+4

Kicking off with a bang on loss and damage

What should climate watchers take away from day one of COP28? “Movement and progress,” Jorge Gastelumendi, interim director of the Adrienne Arsht-Rockefeller Foundation Resilience Center, tells us from Dubai.

Before the first day closed, countries were able to reach a deal on a loss and damage startup fund, with both the United Arab Emirates and Germany pledging one hundred million dollars to offset disaster-induced costs in vulnerable countries.

It will also create an “open window” for insurance companies to support developing countries, Gastelumendi notes.

Watch more

WATCH | On the ground in Dubai, @ArshtRock’s @Gasteluj shares the latest insights from #COP28 about the launch of a new loss and damage fund for developing nations on the first day of the conference. #ACatCOP28 pic.twitter.com/rdVUJmj8N5
— Atlantic Council (@AtlanticCouncil) November 30, 2023

NOVEMBER 30 | 10:37 AM GMT+4

COP28 is here. These are the Global South’s demands and expectations.

With the 2023 United Nations Climate Change Conference (also known as COP28) having started, the world is shifting its focus to the United Arab Emirates (UAE) to assess how it will deal with the climate crisis, but with particular attention on the COP presidency…

The COP28 negotiations will prove to be challenging given all the demands and expectations on the table. In order to ensure that the needs of the Global South are met, the global community needs to unite to swiftly implement the recommended actions and the host country and the Emirati COP presidency need to display strong ambitions to address the climate crisis.

MENASource

Nov 30, 2023

COP28 is here. These are the Global South’s demands and expectations.

By Lama El Hatow

The COP28 negotiations will prove to be challenging given all the demands and expectations on the table in this COP.

Civil Society Energy & Environment

The post Expert analysis: The successes and shortcomings in the fight against climate change at COP28 appeared first on Atlantic Council.

The 2024 Global Energy Agenda

Landon Derentz, Christine Suh, Paul Kielstra (Editors) — Thu, 30 Nov 2023 14:00:00 +0000

The energy landscape of 2023 faced great challenges from a series of geopolitical and economic stressors, not the least of which are a sustained conflict in Ukraine, growing instability in the Middle East, and persistent inflation. Yet, the transition to clean energy notched significant gains, including historic new investments in renewables.

The urgency for leaders to shore up access to affordable and reliable energy, while taking bold action toward climate mitigation is greater than ever in 2024. The first-ever global stocktake—an inventory of the world’s progress toward emissions reductions—occurred this fall at the UN Climate Change Conference in Dubai (COP28), confirming that efforts to limit warming to 1.5 degrees C are falling short of aspirations agreed upon at COP21 in Paris. Even if countries follow through on their Paris pledges, the world would face 2.5 to 2.9 degrees C of warming this century.

STAY CONNECTED

In response to this enormous challenge, global leaders must implement nothing short of equally monumental solutions. Through this compilation of essays, as part of the Atlantic Council’s fourth edition of the Global Energy Agenda, finance experts, corporate leaders, and government officials provide their perspectives on how the world can rise to the occasion. Together with these essays, our in-depth analysis of views from the energy community will set the agenda for the world to achieve net-zero emissions and an energy-secure future for all.

DOWNLOAD PDF

Global Energy Agenda

Feb 14, 2024

Global Energy Agenda full survey results

In the fall of 2023, the Atlantic Council’s Global Energy Center surveyed global energy and climate experts for an in-depth analysis to set the agenda for the world to achieve net-zero emissions and an energy-secure future for all.

Africa Americas

ESSAYS

The energy transition can shape a more inclusive world

By Damilola Ogunbiyi

Europe needs a Green Deal that can meet the moment

By Michał Kurtyka

Countries can only achieve carbon neutrality together

By Shin Hosaka

Public funds alone can’t solve the climate crisis

By Mafalda Duarte

Accelerating clean energy in emerging markets

By Sebastian Kind

Toward net zero with a new generation of nuclear energy

By John Wagner

Partner perspective: A catalyst for cleaner energy

By Scott Strazik

Partner perspective: Climate policies must reflect developing world’s needs

By Majid Jafar

A people-centric energy transformation

By H.E. Leila Benali

Energy security as the foundation for Ukraine’s formula for peace

By German Galushchenko

Partner perspective: Energy companies are essential to global climate solutions

By Mansoor Mohamed Al Hamed

Energy security is global security

By Geoffrey R. Pyatt

PREVIOUS GLOBAL ENERGY AGENDA

Global Energy Agenda

Jan 13, 2023

The 2023 Global Energy Agenda

By Landon Derentz, Christine Suh, Ameya Hadap, Paul Kielstra (Editors)

The third edition of the Global Energy Agenda provides context for the year that has passed. It features a survey of thought leaders in the energy sector, as well as a series of essays by the leading figures in energy, to set the energy agenda for 2023.

Energy & Environment Geopolitics & Energy Security

EDITORS

Landon Derentz is senior director at the Atlantic Council Global Energy Center; Christine Suh is the managing editor for the Atlantic Council Global Energy Center; and Paul Kielstra is a freelance editor, analyst, and writer based outside of London.

Staff

Landon Derentz

Senior Director

Managing Editor, Global Energy Center

Energy & Environment Middle East

Staff

Christine Suh

Energy & Environment French

In cooperation with

Presenting partner/co-chair

Transformation partner

Innovation partner

International media partner

Media partner

RELATED WORK

Global Energy Center at COP28

The post The 2024 Global Energy Agenda appeared first on Atlantic Council.

Goldwyn quoted in S&P Global on the US Treasury’s move to ramp up sanctions on Iran

bmathews — Wed, 29 Nov 2023 19:49:39 +0000

The post Goldwyn quoted in S&P Global on the US Treasury’s move to ramp up sanctions on Iran appeared first on Atlantic Council.

Beyond promises: Pathways to deliver on methane commitments

David L. Goldwyn, Andrea Clabough — Tue, 21 Nov 2023 14:20:43 +0000

Two years ago, the announcement of the Global Methane Pledge at COP26 in Glasgow was one of the most intriguing and potentially impactful developments of that conference. The pledge has since committed its now over one hundred adherents, together responsible for 45 percent of global methane emissions, to collectively reduce their methane emissions by 30 percent by 2030. Its announcement was a crucial moment of reckoning with a highly potent greenhouse gas, of which 40 percent of human-caused emissions come from the energy sector alone.

As the proverbial saying goes, that was then. In the here and now, the methane challenge seems as intractable as it ever was. The latest iteration of the International Energy Agency’s Global Methane Tracker estimates that global energy sector methane emissions rose about 2 percent last year to nearly 135 million metric tons (MT) despite more efforts to track, contain, and monitor leaks. Oil and gas production is a major source of energy sector methane emissions, particularly through operational practices like venting and flaring of gas. Although IEA projects that global average methane intensity of oil and gas production has fallen by around 5 percent since 2019, the overall growth in actual methane emissions in the energy sector remains alarming. Despite all of this, methane abatement remains highly cost-effective; an estimated $100 billion in investment (a fraction of oil and gas industry’s profits) are estimated as sufficient to deploy all necessary abatement measures by 2030.

The continuing malaise around methane should galvanize those delegations representing major oil and gas producing countries at COP28. While there are multiple reasons for the limited progress on abating the potent greenhouse gas, the fundamental obstacle to curbing it is that the existing and even proposed frameworks to achieve reductions are overwhelmingly voluntary in nature. Thus far, concrete actions to address the methane challenge have been limited to a handful of wealthy producer countries and have no market-driven enforcement mechanisms.

The Global Methane Pledge Itself is a voluntary commitment made by countries that choose to join. It therefore implicitly relies on the ability of countries to promulgate effective regulations and enforce them among their own local industries, or to disburse donated funds to support measurement and mitigation in countries that cannot afford it. The COP28 presidency is reportedly seeking to elevate the level of commitment through a new voluntary initiative, whereby producing companies would make substantial pledges on methane reduction and subject themselves to self-reporting and measurement.

Some countries are taking enforceable measures to meet their commitment. The United States, for example, is pursuing a number of initiatives to tackle its energy sector methane emissions including a historic methane fee integrated into the 2022 Inflation Reduction Act, in addition to imminent Environmental Protection Agency methane performance standards. The European Union is developing its own binding 2030 methane reduction target for its oil and gas sector, as well as a methane intensity threshold for imported fuels. The United Arab Emirates, host of this year’s COP, has made its own commitments on methane: in July, its national oil company ADNOC committed to achieving zero methane emissions by 2030.

In time, these and similar efforts will likely produce fruit. But while these unilateral and multilateral voluntary measures are important, they are not sufficient to the challenge at hand. Crucially, they do not address the challenge of methane emissions in those countries not party to the Global Methane Pledge (or similar bodies) where energy-sector methane emissions are high and there is far less pressure or incentives to reduce them. Many high-emitting countries have not taken any enforceable measures to meet the pledge. Some of these, such as Russia, have adversarial relationships with the United States and may eschew efforts which are largely Western-led. Others, such as China, have announced aspirational methane strategies, but they often lack concrete targets or clear accountability mechanisms. In the case of oil and gas producers in developing countries, both within and outside the Global Methane Pledge (such as Turkmenistan and Venezuela), the price tag and infrastructure complexity of systemic methane abatement represents an entirely different barrier.

COP28 cannot resolve all these complex, interwoven issues, but those delegations that are mindful of the methane abatement challenge could demonstrate a renewed commitment to addressing it on a global scale.

An obvious starting point is financial support to fund methane abatement in those countries unable or hesitant to expend limited resources. A multilateral financing push for those countries interested in such support need not be a singular fund (such as the in-development Loss and Damage Fund), but it could involve a collective agreement to leverage a certain percentage of foreign investment and development resources for this explicit purpose. Multilateral development banks, particularly those hesitant to engage with any fossil-related financing, might clarify their parameters for such financing and signal which sorts of projects would qualify for favorable loans or other assistance, as many will require technology access to capture gas flared from oil production and covert it to some productive use.

To meaningfully impact the behavior of countries and companies that are not taking action to reduce methane emissions, the world will also need market-based mechanisms that penalize producers who do not adhere to an acceptable standard. Committed delegations should agree to raise the bar on methane abatement by incentivizing highly-efficient, low-emission fossil fuels through regulatory and trade alignment. Flickers of progress in this space are evident: the Joint Declaration from Energy Importers and Exporters, published in November 2022, theoretically aligned the United States, EU, Norway, UK, Canada, Singapore and Japan around the need to reduce methane emissions throughout the fossil fuels sectors. The incoming EU methane threshold for imported fuels takes this approach one step further; a similar approach in any future US border adjustment mechanism remains an open question. However, the US Department of Energy has recently announced a new Measuring, Monitoring, Reporting and Verification (MMRV) Working Group which will “advance comparable and reliable information about greenhouse gas emissions across the natural gas supply chain to drive global emissions reductions.” Notable participants include the United Kingdom, the European Commission, Germany, Japan, Australia and Brazil.

Even an early version of an agreeable gold standard (or agreed group of standards) for the methane emissions of traded fossil fuels products could be a valuable COP28 deliverable, particularly within a wider framework that promotes independent monitoring, reporting, and verification across a range of major stakeholders. A number of existing platforms that could inform such a gold standard (such as those of GTI Veritas Initiative) could be applied or leveraged. If global demand for fossil fuels must necessarily decline in a net-zero outlook, producers and consumers of fossil fuels can collectively lay the groundwork for those supplies with the most sustainable methane profiles to also be the most competitive. Such an approach to trade and regulatory policy could be tailored to favor those oil and gas companies (including both international and national oil companies) that maintain a high standard of emissions reductions across all of their multinational operations, reducing emissions across the full scope of their operational profiles and not just in those countries with robust requirements. Such a trade framework would compel producers who today decline to take methane mitigation measures to do so, in order to remain competitive in the global market.

There are many complex, entrenched challenges to realizing a global energy transition; responsible management of methane should not be among them. Reasonable solutions in this space already exist at scale and could be deployed worldwide at relatively little cost compared to the trillions that must ultimately be expended on deep decarbonization. Any steps forward on this front at COP28 could pay dividends now and for years to come. At a conference where every success is set to be hard-fought, methane is one area where important wins should be achievable.

Andrea Clabough is a senior associate at Goldwyn Global Strategies, LLC, and a nonresident fellow with the Council’s Global Energy Center.

EnergySource

Global Energy Center at COP28

Nonresident Senior Fellow

Meet the authors

Fellow

David L. Goldwyn

Adrienne Arsht Latin America Center Global Energy Center

Caribbean Climate Change & Climate Action

Fellow

Andrea Clabough

Climate Change & Climate Action Energy & Environment

EnergySource Nov 16, 2023

Six steps Guyana can take to avoid the resource curse

By David L. Goldwyn

Guyana is on a rapid path to potentially becoming the fourth largest oil producer in the world. Now, the government has an opportunity to show the world how to do resource development right.

Energy & Environment Geopolitics & Energy Security

EnergySource Sep 11, 2023

The IRA’s best kept climate secret: Moving oil and gas toward operational net zero

By William Tobin

The IRA contains a suite of provisions to help oil and gas move toward scope one and two climate neutrality, potentially comprising some of the law’s most impactful climate measures.

Energy & Environment Energy Transitions

EnergySource Aug 7, 2023

A year after the IRA, industrial policy has gone global. Now what?

By David L. Goldwyn, Andrea Clabough

The domestic impacts of the IRA are undeniable. It is less certain what it means for the global energy transition. One year later, officials must prioritize opportunities to align with like-minded allies overseas.

Energy & Environment Energy Transitions

Learn more about the Global Energy Center

Flagship Event Tue, November 14, 2023 • 1:00 pm ET

The post Beyond promises: Pathways to deliver on methane commitments appeared first on Atlantic Council.

What the EU and US want to get done at COP28

Katherine Walla — Thu, 16 Nov 2023 22:40:02 +0000

Watch the full event

EU-US Defense & Future Forum

The third annual EU-US Defense & Future Forum gathers policymakers from both sides of the Atlantic to discuss how the EU-US relationship can further strengthen collective prosperity and security. This Forum will take place from Nov 14 – 15, 2023.

Economy & Business Energy & Environment Europe & Eurasia European Union

Two hundred countries are hurriedly assembling inventories on how they are doing on climate change—and where gaps remain—in the global stocktake. EU climate envoy Anthony Agotha predicted that the survey, set to conclude at this year’s United Nations Climate Change Conference (known as COP28), won’t say that countries are “still on the path” to limiting global warming to 1.5 degrees Celsius.

Despite that outlook, Sue Biniaz, US deputy special envoy for climate change, said the landmark agreement from COP21 holds up: “The Paris Agreement is working,” she said, “it’s just not working fast enough, and we need to accelerate.

The two climate leaders spoke Wednesday at the EU-US Defense & Future Forum, cohosted by the Delegation of the European Union to the United States and the Atlantic Council’s Europe Center. There, the officials outlined their priorities for COP28.

At last year’s COP27 in Egypt, there was a “concerted effort” to focus on loss and damage and to hold the line on climate change mitigation commitments set at COP26 in Scotland. “We were going in hoping to get Glasgow plus, [but] it almost turned out Glasgow minus,” Agotha said.

And now, he explained, it has become clear that “there is no dollar or euro [amount] in the world enough to redress the loss and damage that will happen,” even if global warming is kept in check. Biniaz and Agotha said they hoped that countries can design and adopt the loss and damage fund in the coming weeks at COP28 in Dubai, considering the urgency.

Below are more highlights from their conversation at the forum, moderated by Atlantic Council Global Energy Center Senior Director Landon Derentz, which touched upon the EU’s and United States’ COP priorities and ways that the transatlantic partners are working together on mitigating and adapting to climate change.

Adapting for a climate-changed future

At COP28, “fossil fuels [have] to be on the table,” Agotha said, explaining how Russia’s war in Ukraine and supply chain crises have highlighted the world’s dependence on oil and gas. “We reduced our dependence on Russian gas,” he explained, adding that countries need to raise their ambitions to reduce their fuel usage. Currently, he said, many in the energy industry are only looking to extract fuel to “the last drop of oil” and counterbalance with carbon capture.
Agotha said that the EU is trying to take a “whole of government approach” to securing a climate-changed future. For both him and Biniaz, that means more than reducing their militaries’ emissions: It means preparing forces to operate in changing environments and adjusting to a new world in which the risk of conflict is increased by climate change.
As leaders meet at COP28, they’ll be considering a new effort to attain global agreement on tripling renewable energy deployment and doubling energy efficiency. Agotha and Biniaz said that climate financing will be necessary for those goals. Biniaz said that the “forgotten goal” of the Paris Agreement is to make finance flows consistent across the world. “There has not been enough attention paid to that goal; it’s something that [the EU and United States] together are trying to highlight.”
Currently, countries are racing to fulfill their commitment to mobilize one hundred billion dollars in annual climate financing for low-income countries. Biniaz said that developed countries are “on track” to meet the goal, albeit running behind. Even then, that funding “is not going to get us to 1.5 or to sufficient adaptation,” she warned. “We need to be talking about the trillions.”

Can allies on separate tracks work together?

In talking about the EU’s Carbon Border Adjustment Mechanism, which imposes carbon emissions tariffs on imported goods, Agotha recalled the difficulty in designing a measure that is “watertight.” “Any country in the world that goes through a green transition will have to deal with the issue of carbon leakage”—when industries leave to manufacture elsewhere, using practices that damage the climate. “We would love the US to have a carbon price, which would harmonize this much better.”
Biniaz acknowledged that the US Inflation Reduction Act (IRA) sparked “a little bit of a mixed reaction in the world, including from the EU,” but she explained that with the Paris Agreement calling on countries to take more and more ambitious action, “almost by definition, you’re going to have national laws that have trade-related provisions in them. It’s kind of inevitable.”
Despite that initial shock from the EU, Agotha said that the IRA and the EU’s Green Deal Industrial Plan are proof that “the road on the transition is the right one to take.” He added that despite “some discriminatory effects,” the EU and United States do “find channels to discuss this and to see if we can smooth things out.”
With the world “ripping at its seams,” as Agotha argued, maintaining the transatlantic relationship is critical: “We need to continue to work, even where we disagree.”
On Tuesday, the United States and China issued a statement on enhancing their climate cooperation—despite tensions in the US-China bilateral relationship. “We have been treating climate as a kind of separate track from bilateral issues. Because… it’s an existential issue,” Biniaz explained. “We should not be holding it hostage to whether we disagree on some bilateral issue.”
The EU climate commissioner is set to meet with China’s top climate envoy to continue climate and environment dialogues. Agotha explained that, because they have “mostly the same point of view on climate,” the EU and United States essentially “[reinforce] each other” when they work bilaterally with China. Biniaz warned that in the past, China has “tried to divide us, at least in the global negotiations,” so there may be a benefit to hosting “trilateral” talks instead.

Katherine Walla is an associate director of editorial at the Atlantic Council.

Watch the full event

The post What the EU and US want to get done at COP28 appeared first on Atlantic Council.

Ukraine vows to strike back if Russia resumes energy infrastructure attacks

Marcel Plichta — Thu, 16 Nov 2023 19:22:15 +0000

Last winter, Russia launched a massive bombing campaign targeting Ukraine’s civilian energy infrastructure in a bid to freeze the country into submission. For five months beginning in October 2022, regular waves of Russian missile and drone strikes terrorized the Ukrainian population, leaving millions in darkness and without access to power, heating, and water amid freezing winter temperatures.

With the new winter season now just days away, Russia is widely believed to be preparing a repeat of last year’s air offensive. While this could potentially spark a humanitarian catastrophe, there are some indications that Ukraine may actually be better prepared to defend itself that it was in late 2022. Crucially, the country is now also in a position to retaliate.

Russia’s previous bombing campaign was extremely costly for Ukraine. During the most intense bombing period in November and December 2022, there were fears that Kyiv itself would need to be evacuated. By January 2023, an estimated 40% of the country’s entire energy infrastructure had been damaged. As spring approached, the continued intensity of Russian attacks led to concerns that Ukraine would run out of air defense ammunition before Russia exhausted its missile and drone reserves.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

Russia’s air strike campaign caused widespread damage and disruption to everyday life across Ukraine but ultimately failed to achieve its goals. The Ukrainian civilian population did not lose the will to resist and did not pressure their own government to end the war; on the contrary, the Kremlin’s terror bombing tactics visibly strengthened Ukrainian resolve.

Despite five months of regular bombardments, Russia was unable to strike a decisive blow against Ukraine’s power grid. While individual Russian missiles and drones frequently managed to penetrate the country’s often patchy air defenses, Ukraine’s energy sector engineers and administrators rose to the challenge with a range of improvised solutions that succeeded in keeping the lights on.

As the bombing campaign unfolded and Russia’s destructive intentions became clearer, Ukraine’s partners responded by sending additional air defense systems to the country. As this defensive shield grew more formidable, the percentage of intercepted Russian missiles and drones in each new attack rose from around 50 percent to 75 percent or higher.

While the bombing campaign targeting Ukraine’s energy infrastructure eventually wound down with the arrival of spring, Russian air attacks have continued across Ukraine throughout 2023. Since April, there has been a sharp rise in drone attacks, with Russia using drones supplied by Iran and also also manufacturing its own versions domestically. Russian missiles continue to pose a threat, with earlier expectations that supplies would run low proving inaccurate. In recent months, Russia is believed to have been stockpiling missiles and drones for the coming winter campaign.

Eurasia Center events

Nonresident Senior Fellow

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

Russia’s apparent preparations for a new bombing campaign are certainly alarming, but Ukraine has also not been idle. Over the past year, the Ukrainian military has been developing its own drone capabilities, and has carried out a number of air strikes on targets inside Russia. Some attacks on Russian sites including airbases and missile production plants have also been attributed Ukrainian Special Forces teams operating deep in enemy territory.

Ukraine’s proven ability to conduct offensive operations inside the Russian Federation should give the Kremlin food for thought. In recent weeks, officials in Kyiv have publicly warned that if Russia resumes the large-scale bombardment of Ukrainian civilian infrastructure, they will hit back. “This year we will not only defend ourselves, but also respond,” Ukrainian President Volodymyr Zelenskyy commented in late October.

Ukraine’s air strike arsenal is not limited to drones. The delivery of Storm Shadow and ATACMS missiles in recent months has significantly increased Ukraine’s ability to hit Russian targets in occupied regions of Ukraine including Crimea. A combination of Ukrainian drone and missile strikes on the Russian Black Sea Fleet has already forced Putin to withdraw many of his warships from their naval base in occupied Crimea, including ships previously used to launch cruise missile attacks on Ukraine.

While Ukraine now has much better capacity to strike back against Russia, the biggest issue remains the country’s air defenses. Ukraine’s air defenses have improved dramatically over the past year, with new systems regularly supplied by the country’s partners. However, shooting down large volumes of Russian missiles and drones has depleted Ukraine’s stocks of ammunition, much of which is extremely expensive and in relatively limited supply. With Russia now believed to be manufacturing its own cheap domestic drones in growing quantities, the Kremlin may seek to overwhelm Ukraine’s air defenses with waves of drones before using missiles to land a series of crushing blows.

One solution is to explore hybrid air defense options incorporating elements of Soviet-era air defense systems with those from the US and other Western partners. This approach has already been adopted with some success by the Ukrainian military, and could help overcome supply and cost issues while resulting in a further strengthening of Ukraine’s air shield.

As Ukrainians prepare for the winter season, there is no room for complacency. After all, Russia has doubtless learned valuable lessons from last year’s devastating but ultimately failed bombing campaign. Nevertheless, Ukraine’s air defenses are currently stronger than ever and will continue to improve as more systems arrive in the coming weeks. The country also now has the ability to strike back against Russia in ways that were not possible one year ago.

Marcel Plichta is a PhD candidate at the University of St Andrews and former analyst for the US Department of Defense. All views are his own.

In some instances where governments seek outside expertise, the US government has offered technical assistance to mitigate or prevent these outcomes. When I served in the State Department in the early days of the Obama administration, we created an Energy Governance and Capacity Initiative. Its purpose was to identify potential oil and gas producers, then leverage the expertise of the Treasury Department, Interior Department, and USAID to equip new regulatory bodies to manage resource rents. This support encouraged new producers to develop strong regulatory frameworks to govern their new industries before resource development brought in resource rents.

I visited Guyana in 2010 with an interagency team to offer that assistance to then President Bharrat Jagdeo. I returned this month, thirteen years later, on a trip supported by the Centre for Local Business Development, a backer of small-business development in Guyana that receives funding from the consortium of companies engaged in offshore oil and gas production in the country. It was both fascinating and instructive to learn how the country has evolved.

There have been a number of impressive accomplishments, made all the more commendable given the brief timeframe that Guyana has been allotted by circumstances to prepare for a massive influx of resource wealth. Guyana’s headline policies recognize the risk of the curse with sharp clarity and aim to chart a different path. The Natural Resource Fund (NRF) stewards resource rents, caps the amounts that can be used for the national budget and publishes inflows and outflows. A new regulatory reform law aims to make it easier to launch a business. The passage of the Petroleum Activities Bill earlier this year modernized the management of the oil and gas sector.

Similarly, a local content law and policy aims to ensure that Guyanese citizens have a major share of the jobs that will be produced and that Guyanese companies are preferred in forty or so categories where the required capacity and skills are available. Guyana has established an Extractive Industries Transparency Initiative program and, after some negotiations, is on a path to report the reconciliation of company payments with government income. There are robust plans to invest in the Guyanese people through roads, bridges, health, education, and power generation, and to diversify the economy by promotion of agriculture and eco-tourism. These are important, impressive, and laudable steps for phase one of a resource boom.

Looking ahead, President Irfaan Ali’s administration has an opportunity to establish a historic legacy for equitable and efficient growth. There is a clear chance to ensure Guyana joins a very short list of countries that have avoided the “curse” by launching phase two of Guyana’s national development strategy before the steep rise in income arrives in 2027. Six steps are critical:

1. Independent professional management of the natural resource fund. The most successful funds, like Norway’s Government Pension Fund and the UAE’s trio of sovereign wealth funds, insulate their governments from the temptation of risky investments or favoring their preferred partners by independent management. The government appoints a chair of the fund, and national legislation sets the fiscal rules, but the committee is constituted by management professionals charged with maximizing returns. Such a step would support the current and future Guyanese governments and offer a powerful signal of transparency to the citizenry and the investment community.

2. Establish civil service protections and scale up staff. The ministries responsible for managing the oil, gas, and mining industries are understaffed, underpaid, and significantly populated by contract employees and political appointees. Government jobs are therefore high risk (compared to the private sector), and staff are structurally disincentivized to express professional disagreement to political appointees. The country needs deep and stable expertise to fulfill its role in monitoring and regulating the extractive sector. It needs to establish significantly greater capacity (personnel and otherwise) to plan and manage procurement and then monitor the massive public expenditure to come. Civil service reform would be a signal of stability to investors in all industries. One need only look to Norway’s Petroleum Directorate or Brazil’s National Agency for Petroleum, Natural Gas and Biofuels for examples of professional regulators that provide stable investment climates even when political winds shift dramatically.

3. Provide a long-term national development plan. The reality for Guyana is that it will take time, perhaps a decade, to make progress in all the areas announced for development. Citizens are already demanding to see the benefits of the oil boom before the government has the scale of resources it needs to invest. The government might address those legitimate aspirations by announcing a roadmap for national development, with clear priorities and timelines. Planning for national infrastructure such as a national transmission backbone or road system is an extensive process. It can take years to identify routes, address local impact, consider environmental impact and plan for tenders. These efforts should commence immediately.

4. Create the conditions for high quality spending. A major characteristic of the resource curse is poor procurement and uncoordinated spending. Major projects can be steered to unqualified bidders who produce substandard work or often no work at all. Governments need to create the capacity, or hire it, to establish pre-qualification of bidders, fair and open tenders, and then active monitoring that the work is being done at the standards required. Guyana’s government should prioritize developing this capacity, which would assure both citizens and investors that Guyana’s major procurements will meet international standards of quality and transparency.

5. Refresh local content policy. Guyana has wisely established a local content law and a professional secretariat tasked with implementing it. It could evolve in three important ways. First, it needs to include the major tender and procurements for national infrastructure, which are likely to be far greater generators of local jobs than the oil and gas sector. Second, Guyana might examine whether the 51 percent ownership requirement is working. Majority ownership can deter investors if a country lacks partners with the capital to fund their share. Some investors will not risk sharing their best technology without a controlling interest. In some countries a 51 percent requirement is a corruption risk, as “paper owners” who do not really participate in the business sell their name to satisfy a legal requirement. It may be possible to adjust the local content requirements to center workforce training and continuing education, and thus provide ongoing benefits to the Guyanese people. Guyana also might emphasize vocational training (and appropriate wages) for the vast array of local technicians and tradespeople who will have leading roles in transforming their country.

6. Provide financing support for Guyanese businesses. The greatest challenge faced by Guyanese businesses seeking to participate in local content development is the lack of access to financing for short term cash flow or borrowing of equipment. Guyana’s banking system requires physical collateral, like real estate, to borrow. This blocks new market entrants and potential local entrepreneurs. Lack of financing risks undermining the entire local content effort. It may also foster resentment or worry in the business community that it will be unable to participate in the growth of the economy. There can be multiple solutions for this challenge, including creative banking regulations and creative financing options, such as a Guyanese version of the US Small Business Administration or some national enterprise fund.

Guyana has achieved a great deal in an astonishingly short space of time. Now, the government has an opportunity to show the world how to do resource development right. The core elements to its ongoing success are an inclusive, well-planned, carefully monitored and properly staffed effort to promote diversified national development. The Ali administration can create a lasting national, and international, legacy by taking the steps needed to ensure Guyana’s wealth is stewarded well. Many of the steps they must take may not pay benefits until far in the future, but that is how legacy is made. Guyana’s external friends like the United States, Canada, the UK, and the European Union should stand ready to support the Guyanese government if and when assistance is requested. The Ali administration is right to expect patience from its friends and citizens, but the time is ripe to launch phase two of Guyana’s governance.

EnergySource

Meet the author

Fellow

David L. Goldwyn

Adrienne Arsht Latin America Center Global Energy Center

Caribbean Climate Change & Climate Action

EnergySource Aug 7, 2023

A year after the IRA, industrial policy has gone global. Now what?

By David L. Goldwyn, Andrea Clabough

Energy & Environment Energy Transitions

EnergySource Feb 24, 2023

Lula is back. Are Brazil’s climate credentials?

By Lizi Bowen, Maia Sparkman, William Tobin

Lula’s return to office in Brazil heralded a renewed commitment to environmental stewardship. But steps must be taken to ensure that renewal becomes as concrete and effective as possible.

Brazil Climate Change & Climate Action

EnergySource Sep 11, 2023

The IRA’s best kept climate secret: Moving oil and gas toward operational net zero

By William Tobin

The IRA contains a suite of provisions to help oil and gas move toward scope one and two climate neutrality, potentially comprising some of the law’s most impactful climate measures.

Energy & Environment Energy Transitions

Learn more about the Global Energy Center

The post Six steps Guyana can take to avoid the resource curse appeared first on Atlantic Council.

Khakova quoted in iNews on the G7 coalition’s failure to stop Russia’s shadow fleet

cakers — Tue, 14 Nov 2023 15:03:25 +0000

The post Khakova quoted in iNews on the G7 coalition’s failure to stop Russia’s shadow fleet appeared first on Atlantic Council.

Ellinas in Cyprus Mail on Cyprus’ gas as a catalyst for peace

cakers — Mon, 13 Nov 2023 15:12:34 +0000

The post Ellinas in Cyprus Mail on Cyprus’ gas as a catalyst for peace appeared first on Atlantic Council.

Rich Outzen joins Arab News for an interview on Iraq-Turkey pipeline

aozen — Mon, 13 Nov 2023 14:14:04 +0000

ORIGINAL SOURCE

The post Rich Outzen joins Arab News for an interview on Iraq-Turkey pipeline appeared first on Atlantic Council.

Derentz quoted in Politico on OPEC engagement in addressing climate emissions

cakers — Fri, 10 Nov 2023 14:32:15 +0000

The post Derentz quoted in Politico on OPEC engagement in addressing climate emissions appeared first on Atlantic Council.

Rebooting the Russian oil price cap

Brian O’Toole, Olga Khakova, Tomasz Wlostowski, and Charles Lichfield — Thu, 09 Nov 2023 20:50:21 +0000

The policy of capping the price of Russian oil exports reaches its first anniversary in less than a month. The idea was born just a few months after Russia launched its full-scale invasion of Ukraine, as the sanctions-wielding coalition identified record oil and gas export income as Moscow’s lifeline against an otherwise gloomy economic backdrop.

Most observers agree that the cap has played a role in limiting export income for Russia this year after a bumper 2022. Yet, as global prices have risen in recent months, the average price of an exported barrel of Russian oil has teetered above the sixty-dollar cap. September saw Russia’s monthly oil export earnings increase to $18.8 billion, the highest value since July 2022. A large fiscal deficit for 2023 seemed inevitable only a few months ago, but higher revenues captured through regular and special quarterly taxation mean Russia’s deficit may now be as small as 1 percent of gross domestic product or may even be replaced by a small surplus.

Alongside Western headlines on the price cap’s woes, Russian decision makers have become more brazen in their dismissal of the cap as a failure. In October, Deputy Prime Minister Alexander Novak called the cap “not only ineffective, but harmful” to Western consumers. In her long and technical briefing of the Russian Central Bank’s latest decision to raise interest rates, Central Bank Governor Elvira Nabiullina made a subtle dig by saying her forecasting teams would start using the Brent oil benchmark in their models instead of the Urals benchmark. It’s hard not to see a link to the price cap’s purported failure here. One of the reasons she gave for the switch was that it would allow the bank to better predict the Russian government’s tax take.

In June 2022, the Atlantic Council was among the first to showcase the nascent debate on the relative merits and risks of imposing a price cap. In the same format as the earlier article, experts offer several ideas on how the policy should be rebooted now. The three proposals below offer different views on how much can be expected of the cap, but all make useful policy recommendations on how to tighten implementation.

Keep the price cap as a cost to Russia without cutting off supply

Take on the “shadow fleet” helping Russian oil avoid the cap

Go after refined products and dodgy attestations

Keep the price cap as a cost to Russia without cutting off supply

The oil price cap mechanism always had a twofold goal: depressing Russia’s oil export revenues while keeping Russian supply on the market. Barrels sold by Russia have been systematically exceeding the sixty-dollar level prescribed by the cap in recent months as Brent has inched closer to one hundred dollars a barrel. But it’s still been possible to argue that the cap has dragged the average price of a Russian barrel down even as global prices have risen, thus depressing revenue for Moscow. Recent reports of significant tax revenues call more into question how long this argument can hold.

Beyond what the West needs to do to tighten obvious enforcement gaps, it also faces a communications problem. A slew of “the price cap isn’t working” headlines have hit front pages in recent weeks and months. It’s hard to disagree that the policy is failing to keep buyers of Russian barrels from paying above the sixty-dollar cap set in December of last year. But Western policymakers are more focused on how much harm Russia’s economy faces, suggesting that lens is better for evaluation than whether this complex price cap mechanism actually works.

Russia has lost more than $47.3 billion in income from oil exports since the price cap was introduced, according to estimates by the Atlantic Council’s GeoEconomics Center. This is over half of the $88.3 billion which Russia has made from exporting crude over the same period, according to customs data. This does not represent failure. The discount that Russian oil was already selling at compared to global prices has been entrenched by the cap. Even after the average price of a Russian barrel broke the cap in September, the discount to rising global prices has remained.

So far, the West’s attempts to tighten enforcement have been cautious, suggesting that the priority of keeping Russian oil on the market remains at least as important as limiting revenue. The first sanctions imposed by the US Treasury in relation to the price cap, imposed in October, were relatively low-profile, with only two new designations on firms based outside the coalition of countries that impose the cap. The justification provided is that the firms used US-based services—presumably insurance—for shipments that were not cap-compliant. US policymakers say this first attempt to sanction for cap circumvention is meant to serve as a deterrent and that a longer list of entities could be designated later. The European Union’s (EU’s) next package of sanctions—the twelfth—is expected to include measures against price cap circumvention too.

But as this all moves forward, those seeking to figure out what the West will do should pay less attention to the stories about whether a very complicated mechanism is “working.” Instead, they should focus on how policymakers are balancing between two priorities: keeping Russian oil on the market, and thus limiting price increases, while causing at least some impact on Russia’s income.

—Brian O’Toole is a nonresident senior fellow with the Atlantic Council’s GeoEconomics Center and global head of sanctions at Wells Fargo, where he oversees sanctions compliance and list-based screening efforts across the enterprise.

Take on the “shadow fleet” helping Russian oil avoid the cap

September marked a noticeable turning point for the oil price cap, as export income exceeded nine billion dollars for crude alone, according to calculations by the GeoEconomics Center. Russia has spent over a year and billions of dollars investing in a scrap-quality “shadow fleet” of oil tankers and seeking alternative insurance services. This has allowed it to shift 35 percent of its oil exports to providers based in jurisdictions that don’t apply the cap, while engaging in fraud—usually overinflated transport services and fake attestations—to sell oil above the sixty-dollar cap when using Western services for the other 65 percent. A multi-pronged approach is necessary to regain the lead in the sanctions game of cat and mouse. The sanctions-wielding coalition needs to improve transparency on the shadow fleet’s operations, strengthen attestation verification, and add a tariff to future ship sales to Russia by firms based in sanctions-wielding jurisdictions.

Russia’s recently acquired oil tankers play all the tricks in the book. Their ownership and management are opaque, with frequent “flag hopping,” or swapping a vessel’s flags to circumvent laws. The owners charge inconsistent freight rates with hidden trader and broker fees. Crew members spoof their vessel’s location or turn off their automatic identification system transponder, especially for ship-to-ship transfers (which are dangerous). The tankers are likely to exhibit severe maintenance deficiencies, too. The aged shadow fleet is a perfect recipe for an environmental disaster. For any ships passing through EU or UK territorial waters, authorities should mandate greater transparency and safety standards. Capitals that have decided against applying sanctions should also tighten supervision, if only to avoid an environmental disaster near their shores.

The foundation for this already exists in the eleventh sanctions package, which prohibits “access [to] EU ports for vessels that engage in ship-to-ship transfers suspected to be in breach of the Russian oil import ban or G7 [Group of Seven] Coalition price cap” and “for vessels which manipulate or turn off their navigation tracking system when transporting Russian oil subject to the oil import ban or G7 price cap.” This ban should be expanded to European territorial waters and not just the ports. Additionally, the ships should have up-to-date special survey inspections and be approved by a member of the International Association of Classification Societies Ships Registrations. Ships registered in countries with notoriously poor safety oversight, such as Cameroon, should also be banned from European territorial waters. Vessels moving through these areas should also showcase a clear and transparent ownership and management system, which will force greater accountability in case of an incident. And as suggested by former US Ambassador to Russia Michael McFaul’s International Working Group on Russian Sanctions, these ships should hold proper spill insurance.

How might all this help Ukraine and reduce Moscow’s revenues? Older ships are exceptionally expensive to maintain. Before Russia’s buying spree, ships more than fifteen years old were often worth more as metal scraps and parts. Moscow’s urgent and desperate need for alternative export methods has inflated their value. Forcing Russia to invest more into surveying and maintaining this fleet will reduce their net income and the amount they can devote to the war. For example, a special survey of one ship costs between three and four million dollars. Alongside the cost of longer shipping routes to reach Asian markets in lieu of European consumers and investments in launching insurance services, like-minded countries should use the cost of compliance to make it unviable for the shadow fleet to operate, forcing Russia to utilize reliable G7 services and sell its oil at cap-compliant prices.

There is an untapped space for cooperation between the West and the top buyers of Russian oil on ensuring the shadow fleet’s safety enforcements. China and India have already held back Russian ships for weeks due to safety concerns.

The G7 Coalition missed the boat on the first wave of shadow fleet acquisition by Russia, but something still can be done about future sales. European ship owners have made tidy profits by selling ships due for scrapping to Russia. All future sales should be taxed at a high level, but one where it still makes sense to pay the tax rather than to sell to Russia via circuitous measures and shell corporations. Though difficult to reach as new tax measures require the unanimous approval of member states, such a setup would protect European sellers while also making them more accountable for dealing with Russia.

—Olga Khakova is the deputy director for European energy security at the Atlantic Council’s Global Energy Center.

Go after refined products and dodgy attestations

As the one-year anniversary of the introduction of the Russian oil and petroleum products price cap in the EU approaches, this sanctions instrument is coming under increasing strain. With press reports of an ever-growing share of Russian oil trading outside the jurisdiction of the “price cap coalition” and many examples of Indian and Turkish petroleum products made from Russian crude entering the EU, it is fair to ask what the purpose of the policy is at this stage.

The European Commission will release its own proposals in the twelfth sanctions package next week, which are likely to require notification of tanker sales and banning trade with sanctioned vessels, as well as possibly some other measures. But three main problems are likely to remain unaddressed and they, too, require immediate attention.

The first one is a lack of review. The European Commission and the Council of Ministers have so far failed to review the level of the cap, though the legislation clearly sets out that the cap should be reviewed every two months. While the intention was to lower the cap, this could, in theory, have allowed the cap to be increased as long as it remained “at least 5 percent below the average market price for Russian oil and petroleum products.” But many member states still want to lower the cap, while others are closer to the United States in having Russian supply staying on the market as a priority. The lack of review remains puzzling, disheartening, and corrosive to the idea that EU law and compromises struck in the Council are followed. Although jurisdiction of the European Court of Justice on these matters is limited, one of the more hawkish EU member states could eventually try to sue the Council out of desperation and to highlight the problem.

The second problem is imports of petroleum products manufactured in third countries, such as India and Turkey, from Russian crude oil. Imports of petroleum products from countries that have clearly increased their imports of Russian crude as feedstock have increased. While the EU can hardly afford a complete ban on imports of petroleum products produced from Russian crude, it can afford to use the power of the EU import market to ensure full compliance with the price cap in line with the original spirit. Specifically, the EU should require that all imports into the EU of petroleum products manufactured from Russian crude abroad prove that Russian crude had been bought under the cap. This could be linked with a duty forcing third country refiners to log their imports of Russian crude to prove compliance. Opponents of this system will invoke complexity, but import procedures are already full of paperwork and documentation, which importers are used to dealing with. There is also the risk of fraud through false attestations, but that exists today. The system could work and any penalties should be high.

The third problem is the ease with which EU entities can claim to be complying with the cap, even if the underlying transactions they are engaged in do not. Under EU sanctions, EU insurance and shipping providers cannot service the export of Russian crude and petroleum, unless the transaction complies with the price cap. But the proof they are meant to demand varies. The EU’s guidelines have put actors into tiers depending on their access to pricing information. The closer one’s tier is to the underlying oil transaction, the more detailed the paperwork that is required to prove compliance.

For most, the documentation required is extremely light. Many entities can rely on generic attestations—often in the form of contract clauses—from other parties closer to the transaction stating they have complied or will comply in the future. This may partly be justified by the nature of the oil business: At the time the service provider is contracted, the price of the oil cargo is not yet known as the underlying transaction has not yet materialized. If increasing the burden of proof before the transaction is not an option, the new guidelines should at least require that EU entities verify—even ex post—the cargo was compliant with the cap once the transaction materialized. When billions of dollars are at stake, relying on parties’ promises to comply with the law is simply not good enough. The EU should not tolerate willful blindness when tens of thousands of innocent people are killed by weapons bought with money that EU companies helped Russia make.

Whatever the solution, the EU must do more to ensure the price cap is not routinely circumvented, as it seems to be today.

—Tomasz Wlostowski is a dual-trained EU/US sanctions lawyer with more than twenty years of experience in sanctions and export controls and the managing partner of EU Strategies, a consultancy.

The post Rebooting the Russian oil price cap appeared first on Atlantic Council.

Wald joins Bloomberg’s Surveillance podcast to discuss the global oil market as crude prices remain low

cakers — Thu, 09 Nov 2023 14:58:18 +0000

The post Wald joins Bloomberg’s Surveillance podcast to discuss the global oil market as crude prices remain low appeared first on Atlantic Council.

Ellinas in Cyprus Mail: Crunch time for Aphrodite amid Mid East crisis

bmathews — Sun, 29 Oct 2023 12:27:41 +0000

The post Ellinas in Cyprus Mail: Crunch time for Aphrodite amid Mid East crisis appeared first on Atlantic Council.

Webster quoted in The Wire China on the limits of a China-Russia partnership

bmathews — Sun, 29 Oct 2023 12:24:45 +0000

The post Webster quoted in The Wire China on the limits of a China-Russia partnership appeared first on Atlantic Council.

Goldwyn quoted in News Room on Guyana’s strategies to manage its new oil and gas industry

bmathews — Wed, 25 Oct 2023 13:06:37 +0000

The post Goldwyn quoted in News Room on Guyana’s strategies to manage its new oil and gas industry appeared first on Atlantic Council.

Why COP28 is right to prioritize global methane and flaring reduction

Mark Davis, Landon Derentz, and William Tobin — Tue, 24 Oct 2023 18:39:32 +0000

The 2023 UN Climate Change Conference (known as COP28) is poised to provide a platform for the oil and gas industry to increase its ambition in reducing operational emissions, which are responsible for roughly 15 percent of greenhouse gas emissions globally. As such, COP28 will be a litmus test for the oil and gas industry’s commitment in contributing to global climate change mitigation efforts.

Emissions from flaring, venting, and leaking methane or carbon dioxide gas in the global oil and gas supply chain account for 2.7 gigatons of CO₂-equivalent emissions annually, more than double that of aviation. Reductions in the oil and gas industry’s scope one and two emissions present a near-term opportunity for constructive, quantifiable, and verifiable action.

Figure 1. An overview of the scale of flaring, venting, and leaking opportunity

It is increasingly evident that the funding, technology, and business practices are in place to bring methane emissions to near-zero industry-wide, and to end the practice of routine flaring. Methane gas that would otherwise be leaked or released into the atmosphere can now be captured and sold in a way that is economically viable. Methane abatement is thus not a climate solution alone, it is a commercial opportunity, with benefits for both energy security and climate mitigation.

To make material reductions in flaring and methane, policy makers must recognize the international nature of the challenge. The top five countries with the most significant improvement opportunity are Russia, the United States, Iran, Iraq, and Venezuela (in absolute terms). The top five countries in emission intensity (a measure of waste from flaring, venting, and leaking per unit of oil and gas production) are Venezuela, Turkmenistan, Libya, Nigeria, and Algeria.

The most striking insight comes through a comparison of countries that have endorsed the Global Methane Pledge (GMP) with those that have not. Forty-six percent of the emissions reduction opportunity is within the countries that have not endorsed the GMP. The emission intensity of non-GMP countries is 1.8 times that of GMP countries.

Figure 2. Geographical breakdown of flaring, venting, and leaking

Therefore, engaging with the non-GMP countries is a critical outcome of COP28 if there is to be any chance of meeting net-zero emissions by 2050. Fortunately, there are clear economic incentives: By reducing methane flaring, venting, and leaking, countries can capture the gas and bring it to market as natural gas, generate revenue, and generate attractive returns. Fourteen countries have a revenue opportunity of more than one billion dollars annually (see Table 1 in the report).

To ensure success in this area, COP28 must prioritize three objectives: First, it should focus on developing committed engagement by emphasizing positive economic opportunities associated with methane capture and return on investment for methane abatement projects. Second, it should establish a project development fund that identifies, prioritizes, and de-risks investments, or provides technical assistance to generate investment-grade projects for operators in emerging markets and developing economies. Third, COP28 should unlock and diversify capital to scale up the deployment of proven methane abatement solutions while also showcasing and celebrating recent success cases.

READ REPORT

ACKNOWLEDGEMENTS

As the need to address climate change becomes ever more urgent, it is important to hear from industry leaders who see each day how these challenges are playing out.

Mark Davis, the primary author of this analysis, works in this market and thus has first-hand experience as the CEO of Capterio, a company that provides analytics and solutions to methane flaring. In support of finding new solutions to the issue of methane abatement, we are publishing these recommendations and data-based analysis to help solve this global challenge.

AUTHORS

Mark Davis is the CEO and founder of Capterio, a gas flaring solutions company, and has more than twenty years of experience in the oil and gas industry. Prior to founding Capterio, he was CEO of the downstream oil and gas quality assurance business at Intertek, where he was responsible for global operations and strategy in more than one hundred countries. He also led projects on strategy, operations, and organization at McKinsey & Company, and has worked in upstream exploration and business development at Shell International.

Davis has an MA in natural sciences from the University of Cambridge, a PhD in geophysics from the University of Liverpool, and an MBA from IMD in Lausanne, Switzerland. He is a fellow of the Geological Society of London.

Landon Derentz is senior director and Morningstar Chair for Global Energy Security at the Atlantic Council Global Energy Center. Under his leadership, the Global Energy Center devises solutions to the geopolitical, sustainability, and economic challenges of the changing global energy landscape.

During his career, Derentz has engaged in all facets of US energy and climate policy, including as director for energy at the White House, director for Middle Eastern and African affairs at the US Department of Energy, as an energy policy advisor in the US Department of State’s Bureau of Energy Resources, and as a presidential management fellow in the Office of Energy Efficiency and Renewable Energy at the Department of Energy. Derentz has deep experience building diverse coalitions across governments, the private sector, and civil society. He led US efforts to establish the Net-Zero Producers Forum and served as the US representative and vice chairman of the International Energy Agency’s standing groups on emergency questions and the oil market. Additionally, Derentz proudly served as an officer in the United States Air Force.

Derentz graduated with a juris doctor from Pepperdine University School of Law, a master of public policy from the Trachtenberg School of Public Policy and Public Administration at The George Washington University, and a bachelor of arts in communication from the University of Southern California.

William Tobin is an assistant director at the Atlantic Council’s Global Energy Center, where he focuses on international energy and climate policy. His research efforts center on energy transitions in emerging markets, clean energy supply chains and critical materials, oil and gas operational emissions, and emerging clean energy technologies.

Tobin is also active in planning and executing programming in Washington, DC, as well as internationally at the United Nations Climate Change Conference, also known as the Conference of Parties, and the Atlantic Council’s annual Global Energy Forum. He worked previously for the Department of State at a Regional Environment, Science & Technology, and Health Office; and served two members of the US House of Representatives. He is a graduate of the University of Florida, where he earned a bachelor of science in biology.

stay connected

Global Energy Center at COP28

The post Why COP28 is right to prioritize global methane and flaring reduction appeared first on Atlantic Council.

Derentz joins CNBC to discuss the energy market in the wake of the Israel-Hamas war

bmathews — Tue, 24 Oct 2023 12:41:42 +0000

The post Derentz joins CNBC to discuss the energy market in the wake of the Israel-Hamas war appeared first on Atlantic Council.

Ellinas in Financial Mirror: Green future needs natural gas

bmathews — Sun, 22 Oct 2023 13:30:20 +0000

The post Ellinas in Financial Mirror: Green future needs natural gas appeared first on Atlantic Council.

Ellinas in Financial Mirror: Green future needs natural gas

bmathews — Sun, 22 Oct 2023 12:58:32 +0000

The post Ellinas in Financial Mirror: Green future needs natural gas appeared first on Atlantic Council.

Ellinas in Financial Mirror: Supply shortage, conflicts keep oil prices high

bmathews — Sat, 21 Oct 2023 13:02:02 +0000

Online Event Thu, October 19, 2023 • 8:30 am ET

The post Ellinas in Financial Mirror: Supply shortage, conflicts keep oil prices high appeared first on Atlantic Council.

Goldwyn was quoted in World Ports on Venezuelan oil sanctions relief

bmathews — Fri, 20 Oct 2023 14:10:43 +0000

original Source

The post Goldwyn was quoted in World Ports on Venezuelan oil sanctions relief appeared first on Atlantic Council.

US Senator Joe Manchin on hydrogen’s role in the clean energy transition

Atlantic Council — Thu, 19 Oct 2023 16:18:10 +0000

Watch the event

Senator Joe Manchin on driving US industrial competitiveness with hydrogen

AN #ACFRONTPAGE EVENT – A conversation with US Senator Joe Manchin of West Virginia on US industrial competitiveness and global leadership in the hydrogen sector.

Energy Transitions Politics & Diplomacy United States and Canada

Event transcript

Uncorrected transcript: Check against delivery

Speaker

US Senator Joe Manchin (D-WV)
Chairman of the Senate Energy and Natural Resources Committee

Moderator

Frederick Kempe

President and CEO, Atlantic Council

FREDERICK KEMPE: Good morning. I’m Fred Kempe. I’m president and CEO of the Atlantic Council. Thanks for joining us today for a conversation with Senator Joe Manchin on US industrial competitiveness amid a rapidly evolving energy system.

So in recent years, the US government has allocated significant resources to large legislative packages intended to grow the US domestic industrial base—the Bipartisan Infrastructure Law, Inflation Reduction Act. Senator Manchin, you had a lot to do with those things. Building on these efforts, last week President Biden traveled to Philadelphia to announce deployment of a seven billion dollar fund to fund regional clean energy hubs through the Bipartisan Infrastructure Law. The US Treasury is also developing guidelines for the hydrogen tax credits included in the Inflation Reduction Act, which seek to balance environmental objectives and practical economic concerns, and US energy leadership. Hydrogen is seen as a key energy resource that will help enable net zero industrial and transportation sectors by 2050. So, with an abundance of our natural resources and strong labor force, we as a country are pretty well positioned to lead the hydrogen economy of the future and, at the same time, to be a net-zero industrial powerhouse.

That’s what we’re going to be talking about today, with a person who knows more about this than maybe anybody else anywhere, but certainly in the Senate. Senator Joe Manchin of West Virginia, chairman of the US Senate Energy and Natural Resources Committee, also serves on the Senate Committee on Appropriations, Senate Committee on Armed Services, and Senate Committee on Veteran Affairs. Longtime advocate of a balanced, common-sense approach to energy policy that considers the needs of our environment, for sure, the demands of the economy, and—let’s underline this—the strategic value of energy independence and industrial competitiveness to US national security and leadership.

So, Senator Manchin, welcome.

JOE MANCHIN: Fred, thanks for having me. It’s great to be here.

FREDERICK KEMPE: It’s terrific to have you here and terrific to have worked with you over many years.

So the first question is a broad one, before we get to hydrogen. Talking about the resurgence of policies that promote domestic manufacturing, a stronger US industrial base. You’ve been a big part of all of those. Where is this coming from and how is this underpinning a new vision for the economy?

JOE MANCHIN: Well, Fred, how everything came to came to light, you know, we’ve lived through historical times. We’ve gone through a pandemic that we’ve never, ever experienced in any of our lifetimes. I remember hearing about it from my grandparents, because my great-grandfather died of influenza in 1918. So I remember hearing about this horrible pandemic back then. Knowing it came to us in the twenty-first century was not preparing us for it. We never thought it would ever happen and we’re too advanced as a culture and a society. But it happened and it could repeat itself if we don’t learn from our—from our past.

So with that happening it changed who we are, how we do things, what we expect government to do. A lot of people got more dependent on government and a lot of the government people got more relaxed, if you will.

So then we see this horrific war in Ukraine. We were told it was going to be two weeks. Well, that wasn’t true. We were told inflation would be transitory. That wasn’t true. And then all of a sudden, we saw Putin weaponize energy and we’ve heard and we’ve seen this before. Many wars have been fought over energy and here we are in the twenty-first century, a land war in Europe and Putin has weaponized it.

And I’m thinking if he’s weaponized energy I guarantee you Xi Jinping can weaponize all of the things. The building blocks that they’re making for us at a lower price we’re thinking we’re getting a heck of a bargain. But they have control over the supply chain. They could cripple us.

So everything started coming to a reality that something’s wrong here and we’ve got to change. So I says, we’re not energy independent and now our European allies are held hostage because of the lack of energy and here’s the defender, the superpower of the world, United States of America, didn’t have the energy supply to be independent ourselves let alone be able to help our allies. That’s how this got started. That was the crux of all of this.

The bipartisan infrastructure bill was a spinoff of that big BBB bill. I could not do that whatsoever. I told the president—I said, this is a piece of legislation—

FREDERICK KEMPE: And BBB stands for?

JOE MANCHIN: Build back better. That was his, basically, marquee piece of legislation. I said, Mr. President, we respectfully disagree on this because I think it changes the psyche of our nation. I’m of the generation of “ask not what your country can do for you, what you can do for your country,” that John Kennedy said. I said, this piece of legislation is changing the psyche of our nation to how much more can my country do for me, and I couldn’t get there, just no way, shape, or form.

So, but the infrastructure, which we hadn’t done anything for thirty years, was there. We took that piece of legislation. I agreed that we could move forward, not guaranteeing my vote because I would never vote for BBB. But I needed to separate the bipartisan infrastructure bill and then we—my committee wrote the energy portion of that bill and that’s where hydrogen came in, and then from there we went to the IRA, which—and I will just say the results of the IRA, it was an energy security bill. The administration and the president have sold that as an environmental bill and that’s good because it does have a lot.

I will just say this. We are responsible as a nation to be energy independent and secure. If you want to be the superpower of the world you have to—you have to be self-reliant on your energy and we have all the resources to do it—oil, coal, gas—and we can do it better and cleaner than anywhere in the world.

FREDERICK KEMPE: And you were just saying on the way into this room that we’re producing more than we’ve ever produced.

JOE MANCHIN: And I’ll give you that. First of all, I’ve always said this. You cannot eliminate your way to a cleaner environment. You can innovate your way to it and the rest of the world will follow. You can’t eliminate and say: OK, I know you have these resources in your country, but you can’t use them. They’re going to use them.

FREDERICK KEMPE: So talk about this. I mean, we all talk about energy transition, energy transition. Could you translate that into plain English—what that means for America and the United States?

JOE MANCHIN: Energy transition means that basically every one of us are responsible for the climate. So my friends who say, oh, this is—this is the hoax, climate’s not real, well, they’re deniers, same as people who said that elections aren’t real and the—and the insurrection wasn’t real. I was there when that happened. It’s real. Those were all real.

So on that I just said here, to show the proof of the pudding, we are producing more energy today than ever in the history of the United States of America. We’ll be 4.6 billion barrels of oil this year. Thirty-seven trillion cubic feet of gas will be produced. Thirteen-and-a-half billion cubic feet of LNG is going out. That’s when we go up to twenty-five. That really helps backfill all of Europe’s needs.

So we’re doing our job and also we’ve increased the amount of production we get from wind and solar. We’ve doubled it in one year. So, the bill did what it was supposed to. The difference of the United States of America, what we did when we wrote these bills, we used the government as your partner and we incentivized and took some of the risk away.

So if we’re removing 15-20 percent of the risks you’re taking for a mega investment, investors will say, OK, I think I can take that risk. I can’t take 100 percent of it. And Europe has been using the carbon pricing forever, but they never took the proceeds to spur innovation and technology. So they were upset with us, and if you’ve talked to our European friends from government were upset because they’re hearing that sucking sound. Everyone’s coming to America to do this investment. And we’re getting more in my state of West Virginia than ever before.

So we’re going to be able to help innovate the new technologies that will help decarbonize the world. And the best way to say it is, we’re producing the energy that we need today and investing in the energy we’ll need for tomorrow. So we’re giving you what you need and we’re investing in what you want.

FREDERICK KEMPE: That’s a great way to describe the transition. In fact, it’s maybe the best way I’ve heard it described. So, let’s get to hydrogen and West Virginia. So, Department of Energy announces last week, this seven billion dollars for hydrogen hubs. And it includes the Appalachian Regional Clean Hydrogen Hub, incorporating West Virginia.

JOE MANCHIN: Well, it started—that’s where it is now. It’s going to be—that’s the majority of it. And we have some in Ohio and some in Pennsylvania. But we have that region, which is really—it’s hot as a firecracker as far as energy. We’ve always been coal, as you know. And now we have a tremendous amount of Marcellus Shale. We have Utica Shale. We’re one of the largest gas producers in the world.

FREDERICK KEMPE: Well, let’s talk about—why is hydrogen so important?

JOE MANCHIN: Hydrogen basically does everything that petroleum does for you. You know, it’ll do everything that hydrocarbons are doing, because of horsepower. But it has very low—and you can also make it very green with very low carbon emissions, or no carbon emissions. So if you’re going to be—if you need to do the job—you need to fly your planes, you need to run your trains, you need to basically run your trucks and things of that sort, electric’s not going to do it, OK? You need that horsepower; you need that torque. And hydrogen can give you that torque.

We’ve known it for a long time, but it was expensive, so when you had oil and you have all the refineries of diesel and all that that did it so much cheaper. But now, with our responsibilities to our climate—and the climate, basically, is real. We have a responsibility. This was a natural way to go. We’ve never matured it. So when I looked at, OK, where should we be investing? Where should we incentivize people to do things? It was based on technology that’s already been proven. We just never—we don’t have to go out and reinvent the wheel. It’s already been—just smooth it out, balance it. And we have to invest into that. And we never did that before.

China’s done an awful lot in hydrogen, OK? Electrolyzers and things of that sort. We’re still in first, maybe one and a half to second generation. And we can do an awful lot more. The United States of America, everyone said we’re playing catch-up. We cannot only play catchup; we will surpass quicker than anyplace in the world because of our innovative and creative dynamics.

FREDERICK KEMPE: Well, because you went to China, let’s stay there for a minute. How concerned are you about Chinese domination? Let’s stick with the hydrogen situation.

JOE MANCHIN: No, no, I know what you’re talking—I know where you’re going, Fred.

FREDERICK KEMPE: I mean, you know, because we’re competing in a lot of different areas. And energy is one of them. But let’s talk about the energy part, but put it in context of the overall competition.

JOE MANCHIN: Well, here, so basically, this administration wants to move to EVs, electric vehicles. I’m a market person. I’m a capitalist and the market person. So I believe that the market will take us at a time in this—if there’s that much demand for the product, there’ll be that much production. I think that basically that Elon Musk was the only person that jumped out when we had the crash into 2008-2009, and then there was some incentives put in there for electric vehicles to try to help the automotive industry. He’s the only one took advantage of it. He saw—he had the vision for that and did extremely well. Now everybody’s trying to play catch-up. And now they want us to continue to give $7,500 credit. That’s going to end. That has to end.

But the bottom line is, I was very reluctant to do that at all. And it went round and round with our—with our big three producers in America. And I said, listen, if you want the taxpayers to invest, then you’re going to have to give us something back. And that’s going to be critical minerals and processing has to be done in either North America or countries that we have reliable relations, with free trading agreements, so we don’t be held—so we’re not held hostage by China, by Russia, by Iran, and by North Korea, or countries that don’t have our values. That was our biggest problem that we’ve done. We’ve allowed the building blocks of the United States of America to be relied upon in areas of the world that don’t have our values.

FREDERICK KEMPE: And that’s where we are now.

JOE MANCHIN: That’s where we are now. And we’ve got to change that as quickly as we can. The administration, I think, in their desire to put so many vehicles out, they’re still going to be reliant on China, because China has an 80 percent lock on critical minerals processing—anodes, cathodes, everything for the battery. We’re trying to change that as quickly as we can. That’s the—that was a part of why we have—you get 3,750 dollars of credit for your car if you processed and you sourced the materials in North America or our free trade—our allies and friends. If you produced it in North America, you get the other 3,750 dollars. So we’re bringing manufacturing back. You’re having all these battery factories and this and that going on.

But what happens is you don’t have that horsepower, and that’s where hydrogen came in. So now you see these hubs. And in West Virginia, we’re in a transitional state. We probably rely more on fossil than any state in the nation, but we’ve been carrying this—I mean, filling that void for a long time. The coal-fired units we have, 93 percent of our energy in West Virginia comes from coal-fired. We can infuse hydrogen into our coal-fired units and reduce our emissions. There’s so much more we can do with it. With gas, we can make blue hydrogen all day long. We can make blue hydrogen almost carbon-free by carbon capture/sequestration, and we have the geological formations to do that. So we are a natural. That was a natural hub for this to prove that we can do with hydrogen as we transition and not really threaten any of the jobs that we have now, but complement them.

FREDERICK KEMPE: So on the supply chain in China, what is the problem in the supply chain with hydrogen? And then, more to the point, are we behind with China in this field?

JOE MANCHIN: Well, China’s—I mean, they’ve been doing hydrogen for quite—China has such an appetite for cheap energy they’re doing everything they can. They’re still the largest polluter in the world. And now, with India coming on, they’re going to fight each other who will pollute more.

So, with that, how can we help them? You can only do it by us accelerating through our creativity and our innovation. We can do that better and we always have. But now, when it comes to producing, you know, they have—their labor force was much cheaper. India’s labor force is going to be much more competitive. The technology will come from America, which it always has in everything they’ve done. But now we’re going to be utilizing the technology that we’re using, too.

People—I tell people, I say, you know, it’s global climate. Global climate’s not West Virginia climate. It’s not the United States climate. It’s not North—it’s the globe. So if 90 percent of all emissions are coming from one continent, Asia, then you can either, you know, throw stones at it or you can basically create the activity and create new technology that they’re able to use too. We’re not going to hold that from them; we’re just not going to be reliant on them to provide it to us.

So the electrolyzers, you will see us leapfrog so quickly in the new technology of electrolyzers to make—to make hydrogen, whether it’s going to be green hydrogen, it’s going to be pink hydrogen, blue hydrogen, all of these. And I’m just—I’m excited about it.

FREDERICK KEMPE: Senator, I hear the excitement. Some people of a certain age remember in a movie called “The Graduate” where Dustin Hoffman was told for the future you have to go—

JOE MANCHIN: Oh, now you’re—now you’re aging me.

FREDERICK KEMPE: —you have to go into plastics.

JOE MANCHIN: Yeah.

FREDERICK KEMPE: People in energy say now that current plastics is hydrogen, so maybe that’s true.

We’re the Atlantic Council, and we certainly think about transatlantic cooperation but we’re really about global cooperation. Our mission is working together with partners and allies to shape the global future. In this field, how can the US work with allies and partners to accelerate the development of the global hydrogen economy? So how does this—how does this apply to hydrogen?

JOE MANCHIN: Here’s the thing. You know, you have to look—these are all sovereign countries. They’re going to make their own decisions. They’re going to say: What’s best for my country? OK? So if they have resources that we know that might be more harmful to the climate, and we have that technology and we’ve proven—let’s use coal because I know about the coal –

FREDERICK KEMPE: Yeah.

JOE MANCHIN: I was a young person that grew up in the coalmines, coalfields, and all this. My family’s worked in coalmines, and we’ve—we’ve lost—I lost my uncle in coal disasters. So we’ve been through the real horrible part of all this. But also, they’re the most patriotic people you’ve ever seen. They produce the energy that won every war we’ve had. And if anything, they were deferred from going to the military because they needed to mine the coal that made the guns and—made the steel that built the guns and ships. So they’re very patriotic towards that.

The United States is this: With our technology but with our economy, we can allow developing nations that are using coal-fired plants, first generation, without scrubbers, without low-NOx boilers, without baghouses—if we can entice them to use this new technology when they’re putting these new coal-fired plants up that they’re going to build anyway, and we entice them by giving them access to our market, you can incentivize them to, OK, use the best technology that’s available and we will share that with you. We will help you. But this is our incentive to you to do that. You can’t force them, OK, which we’re not. And now, if you are an Indian in rural India, years ago I was there and there were people basically taking animal waste and cooking it in the sun, letting it bake, and then using it for fuel at night to heat their home, cook their food. Now, do you think that a person that had to go through that to have any type of substance of life is going to worry about what’s coming out of a smokestack with a new coal-fired plant? I don’t think so.

FREDERICK KEMPE: Talk to them about hydrogen, right?

JOE MANCHIN: Yeah. So, we have to accelerate that. And I think that’s the leadership that United States can give.

FREDERICK KEMPE: An accelerator but working with partners and allies.

JOE MANCHIN: You work with them. You basically show them—you can have the World Bank, Ex-Im Bank, all this now to give them financing. Help them start out. If you’re going from—there are six hundred million people in the world have no energy at all. And there’s probably a couple—close to a couple billion that have first-generation energy that we used in the forties and fifties. This is what we’re dealing with.

FREDERICK KEMPE: So we’re just about out of time, but maybe just finally, this whole balancing between decarbonization goals and energy security, how does the US pull that off? And as you’re balancing this, how do you—how do you strike that balance?

JOE MANCHIN: Fred, let me just say this, I’m a staunch believer that just because you have a desire that you think this would be better, well, in a perfect world, you’re probably right. This would be better than this. It’s not a perfect world. But we have to balance it out the best we can. I am not going to remove something that’s dispatchable 24/7, dependable, reliable, and affordable, with something that I’m betting on that only gives you five, or six, or intermittent power. I’m not going to replace dispatchable with intermittent until the intermittent can give me dispatchable reliability. We don’t have that yet.

I will say that all the younger people watching, listening to us, will probably end up in their lifetime and our children’s lifetime with fusion being the main source, OK? And that solves a lot of the world problems because a lot of the world has been disrupted because of the fight over energy. And I was—I’ve been to France. I’ve been to Provence area France, ITER. You’ve heard of ITER. If you—if you haven’t, just Google ITER, I-T-E-R and Provence, France. And it’ll tell you all about fusion. Thirty-seven countries. China’s still involved. They’re working side-by-side. The Russians are there. We’re there. The Koreans are there. Everybody that you hear all this turmoil going on around the world are trying to unlock—

FREDERICK KEMPE: Have you—have you—we’re at the end, but when does fusion come in as something—

JOE MANCHIN: Let me just tell you right now, OK, I’ll be going tomorrow back home to West Virginia. And we’re going to break ground for Nucor Steel, one of the largest steel companies in the world. They’re building a three billion dollar new plant with arc furnaces. They just signed a contract with Helion. Helion is a new fusion company. And they’re going to build—they’re planning to build a Helion factory—a power fusion factory—beside the steel factory that will be making the most—the cleanest steel in the world. And they think that that’ll be feasible by 2028.

FREDERICK KEMPE: 2028? All right. You heard it here. 2028, fusion and—

JOE MANCHIN: Well, we’re hoping—

FREDERICK KEMPE: And the cleanest steel factory in the—well, look, this is just a terrific conversation. It brings us to the end of our discussion today. I want to thank Joe Manchin, Senator Joe Manchin, for joining us for today’s edition of Atlantic Council Front Page. This is our platform for global leaders on these issues.

JOE MANCHIN: Let me just say, Fred, if I can, this: The United States of America is producing more energy, cleaner than anywhere in the world today. More energy, cleaner than anywhere in the world. We’re investing more than any place else in the world on the cleanest energy for the future. And with that, you can’t leave anybody behind. The transition is basically, how do we transition into a lower carbon or a zero-carbon environment, and still have people that have quality jobs? That’s what’s going on. Hydrogen is that great, natural gas is that great transition. That’s what—that’s what we’re working on.

What happened when they went to wind and solar, and during the 2009-10 years they did it, and bringing the cost of sixteen to eighteen cents a kilowatt hour down to five and six cents, left a lot of people behind, OK? And West Virginia was one of those states. It’s always been a heavy lifting, done everything that’s been asked of them, and got left behind. That’s not happening anymore. And it won’t happen with what we’re doing now.

FREDERICK KEMPE: I think that’s the place to close.

JOE MANCHIN: OK.

FREDERICK KEMPE: I think anyone watching here in our offices, virtually around the world, has got to be infected by your enthusiasm for all this.

JOE MANCHIN: It’s going to happen. It’s a great time to be an American.

FREDERICK KEMPE: Yeah. It’s a great time. I share your enthusiasm about the technology. And I think sometimes people don’t focus enough on the technology and where it’s going. So thank you for that. Thank you for joining us for Atlantic Council page one. Tune in for more sessions with the Atlantic Council. We’ll see you again soon. And please also here and the audience here, join me in thanking Senator Joe Manchin.

JOE MANCHIN: Thank you. Thank you. Appreciate it.

Watch the event

The post US Senator Joe Manchin on hydrogen’s role in the clean energy transition appeared first on Atlantic Council.

Wald quoted in Univision on the US’ suspension of Venezuelan oil sanctions

bmathews — Thu, 19 Oct 2023 14:15:17 +0000

The post Wald quoted in Univision on the US’ suspension of Venezuelan oil sanctions appeared first on Atlantic Council.

Wald quoted in Axios on Venezuelan partial oil sanction relief

cakers — Thu, 19 Oct 2023 14:13:02 +0000

The post Wald quoted in Axios on Venezuelan partial oil sanction relief appeared first on Atlantic Council.

Shaffer quoted in S&P Global on Venezuelan partial oil sanctions relief

cakers — Thu, 19 Oct 2023 14:10:39 +0000

Jason Marczak: A step forward for quiet diplomacy

The post Shaffer quoted in S&P Global on Venezuelan partial oil sanctions relief appeared first on Atlantic Council.

Experts react: Will Venezuela now hold freer elections and get sanctions relief?

Atlantic Council experts — Wed, 18 Oct 2023 22:29:41 +0000

It’s not yet 2024, but next year’s elections are already resulting in surprises. On Tuesday, Venezuela’s government and members of the opposition met in Barbados and signed an agreement to work toward making Venezuela’s presidential election next year more free and fair. The agreement is part of ongoing negotiations between Venezuela and the United States that could see Washington ease sanctions on the government of President Nicolás Maduro in exchange for electoral reforms. Could Venezuelans finally see free elections in their country? And what can the United States do to make this emerging deal a reality?

Below, our experts share their insights on this agreement and its implications for Venezuela’s future.

Click to jump to an expert analysis:

Geoff Ramsey: The opposition got significant concessions. Now comes the hard part.

Ellen R. Wald: Heartening progress for freedom, but no quick fix for Venezuela’s oil industry

David Goldwyn: A new direction for US sanctions on Venezuela comes not a moment too soon

William Tobin: Rebuilding Venezuela’s oil industry has a hefty price tag

A step forward for quiet diplomacy

The restart of negotiations between the Venezuelan government and the opposition is a significant development that brings renewed, but cautious, hope for an eventual peaceful and democratic resolution to the systemic injustices in the country. Reports of an agreement by the United States to progressively ease certain sanctions in exchange for concrete democratic guarantees is a pragmatic step forward—though vigilant monitoring of any deal will be essential, as Maduro is not one whose words can be trusted.

This development, reached in Barbados in the presence of representatives of twelve countries and the European Union, comes amid news that last year’s major United Nations humanitarian accord to benefit the Venezuelan people will finally be implemented—an accord that we at the Atlantic Council have sought to advance since its signature. Releasing political prisoners and ensuring competitive conditions for the upcoming 2024 presidential elections are vital steps toward an inclusive process that can be internationally recognized. But these steps must mean all the international pre-, post- and day-of electoral conditions for a free and fair process be respected, including allowing the opposition to run a candidate without restrictions.

The road to reconciliation and genuine democratic progress remains a challenging one. Much work will be necessary to ensure vigilant monitoring and enforcement of any agreement to ensure that Maduro upholds his side of the bargain. The United States and the broader international community will have to keep a watchful eye, holding Maduro accountable for his promises and actions moving forward.

The resumption of talks is a step forward for quiet diplomacy and comes after months of groundwork. The global community should offer its support and assistance to democratic actors at the negotiating table in any way possible to help ensure that these negotiations lead to lasting peace and a brighter future for Venezuela. This calls for optimism and international cooperation, but also realism and greater multilateral coordination as we wait to see if this marks a potential turning point.

—Jason Marczak is senior director of the Atlantic Council’s Adrienne Arsht Latin America Center.

The opposition got significant concessions. Now comes the hard part.

In the agreement signed Tuesday in Barbados, opposition negotiators managed to secure some very significant concessions, including a commitment from the government to hold next year’s presidential elections in the second half of 2024—giving the opposition more time to prepare—and a commitment to allow credible international electoral observation. They also obtained key technical conditions that are vital to making the vote more competitive, including an audit of electoral systems and an update of the voter registry.

By signing this agreement, the opposition has managed to force the government to budge ever so slightly. Now it’s up to the opposition, with the help of the United States and international community, to use this wiggle room to put Maduro off balance. The opposition, in its upcoming primaries on October 22, has a chance to reconnect with voters who have grown weary of politics in the absence of change. What Maduro fears most, more than any one political opponent, is a disciplined opposition that is popular, organized, and ready to mobilize its base in 2024. The prospect for renewed mobilization, in combination with the conditions achieved by the opposition in Tuesday’s agreement, create a golden opportunity.

In some ways, the most important agreements are still private. It’s an open secret that the Biden administration will announce some form of sanctions relief in response to Tuesday’s agreement and resumption of talks with the opposition. And reports indicate that the Maduro government will free multiple political prisoners in the coming days. These developments, if they occur, are unlikely to be isolated exchanges. The past few months of quiet backchanneling, in coordination with opposition negotiators, will almost certainly produce further agreements as the US-Venezuela relationship keeps shifting.

Now comes the hard part. Moving forward, the White House will have to monitor compliance and implementation in order to ensure that Maduro holds up his end of the bargain. But questions remain about whether and how the United States can snap back the pressure if the regime veers off course.

—Geoff Ramsey is a senior fellow at the Atlantic Council’s Adrienne Arsht Latin America Center.

Heartening progress for freedom, but no quick fix for Venezuela’s oil industry

Although it is heartening to see progress towards freedom in Venezuela, the likelihood that these developments will materially impact the oil market is negligible. The troubles faced by the Venezuelan oil industry predate US sanctions and will continue to plague the country long after sanctions are eased. Even if sanctions were eased immediately, Venezuelan oil output might only increase by a mere 200,000 barrels per day (bpd). According to S&P Global, Venezuela produced only 770,000 bpd in September 2023. This is actually much improved since Venezuela hit a low of 500,000 bpd in 2020 but still far below the 2.6 million bpd Venezuela produced in 2005.

Venezuela has the largest oil reserves of any country in the world, but most of that oil is a sludgy, heavy, sour crude that is locked in the Orinoco belt. To increase Venezuela’s oil production and bring that oil to market will require huge amounts of investment and expertise. Venezuela’s heavy oil must be run through upgraders that mix it with diluents just to transport it through pipelines to ports. Many of the companies that used to work with Venezuela’s state oil company, PdVSA, will likely be hesitant to reinvest their money and manpower in Venezuela given the likelihood that sanctions could be reimposed or that foreign nationals could be imprisoned. Even if the Maduro government does meet the Biden administration’s conditions and the sanctions are eased, there is no quick or easy fix for Venezuela’s oil industry.

—Ellen R. Wald is a nonresident senior fellow with the Atlantic Council Global Energy Center and the president of Transversal Consulting.

A new direction for US sanctions on Venezuela comes not a moment too soon

The Venezuelan-led political agreement reached in Barbados, and its subsequent joint statement, will now open the door to a long overdue redirection of the current US sanctions regime against Venezuela.

The series of economic sanctions imposed by the Trump administration, a “maximum pressure” strategy intended to dislodge the Maduro regime beginning in 2017, have had the perverse effect of causing both significant humanitarian distress inside Venezuela and undermining US strategic interests in the region and elsewhere. The sanctions, which prohibited trade in Venezuelan crude oil and products, even in exchange for debt owed by the regime, have been deeply unpopular with the Venezuelan public including those opposed to the regime because they caused enormous privation throughout Venezuelan society.

As a result, Venezuela has been short of crucial fuel supplies—fuel to transport food from farms to tables, fuel to power the electric grid, and gasoline essential for public mobility. The sanctions have not dislodged the regime, of course, but they have had the effect of increasing migration pressure on Venezuela’s neighbors as well as on the United States at a time of already significant immigration challenges in US cities.

Meanwhile, the sanctions have led to the redirection of nearly all exports of Venezuelan crude to China (at significant discounts) and created a major role for Iran as supplier of condensate needed to produce domestic gasoline. Deprived of access to Venezuelan crude, countries such as India (also barred from importing Iranian crude) saw increased demand for Russian crude, which matches the grade and quality their refineries require for domestic consumption. While China and Russia have been able to retire a significant part of the Venezuelan debt owed to them and improve living conditions in Venezuela, US and European creditors have been barred from doing so. Although Chevron has been allowed to resume operations to produce crude oil under conditions that provide minimal benefits to the regime, current US sanctions prohibit companies in France, Spain, and Italy from doing the same. Importantly, these countries have been key diplomatic partners in the effort to ensure the Venezuelan opposition can compete in legitimate elections in 2024, and they share the wider strategic goals and interests of the United States.

A refresh of the US sanctions program thus comes at a crucial moment—and not a moment too soon. Importantly, this revision should not be seen as a concession to the Maduro regime. Rather, it is a timely effort to mitigate the humanitarian crisis inside Venezuela and reduce migration pressure to the United States and its allies in Latin America. Furthermore, this necessary revision will enable Western companies (those which act with integrity) to return to Venezuela and increase crude oil production, which can be used to repay the debt owed to them. All of this is possible while also depriving China of discounted crude oil and potentially lessening demand for Russian crude oil as well. This change in posture has notable benefits to Venezuela’s developing country neighbors such as Trinidad and Tobago. Trinidad has just received an amended license from the United States that will allow it to pay Venezuela in cash for the natural gas it will import from Venezuela’s Dragon Field. This gas will keep Trinidad’s ammonia and liquefied natural gas industries afloat and support its role on regional food and energy security.

If the sanctions revisions come to pass, allowing trade in Venezuelan oil and products as long as Venezuela keeps its electoral commitments, there is great potential to relieve humanitarian distress inside of Venezuela and throughout the region. At the same time, Washington will have redirected its policy to one that serves US interests as well as Venezuela’s.

—David L. Goldwyn is a nonresident senior fellow at the Atlantic Council’s Global Energy Center and co-chair of the Caribbean Energy Working Group at the Adrienne Arsht Latin America Center’s Caribbean Initiative. He is the president of Goldwyn Global Strategies, an international energy advisory consultancy.

Rebuilding Venezuela’s oil industry has a hefty price tag

The Venezuelan National Oil Company, Petróleos de Venezuela (PdVSA), is poorly positioned to bring anything but cursory relief to tightening global oil markets in the near term.

The company has been subjected to a mass flight of technical and commercial expertise, epitomized when President Hugo Chávez fired 19,000 employees in 2003 following a general strike, filling vacant positions with regime loyalists. This purge comprised 55 percent of the company’s highly skilled professional and technical workers—including engineers skilled in the specialized extraction of the extra heavy crude found in Venezuela’s Orinoco basin—and 70 percent of the company’s executives, according to reports at the time.

Since these interventions, PdVSA has declined from a world-class oil and gas operator and the third-largest supplier of crude oil to the United States as recently as 2013 to an inkling of its former self. Its crude production has declined by 70 percent over the past decade.

Persistent underinvestment due to sanctions and a fledgling economy have left PdVSA’s production infrastructure in disrepair. To restore Venezuela’s oil industry to 1998 levels, when production totaled 3.4 million barrels per day (versus 730,000 barrels per day in August 2023), it is estimated that an investment of fifty-eight billion dollars would be required, perhaps more.

Most of this funding would need to be sourced from the international private sector. In any case, foreign investment and technical cooperation will be necessary to restore the country’s economic engine. This could yield both humanitarian and environmental benefits. In 2022, Venezuela’s oil production was the most carbon-intensive globally, and its “leakiness” pollutes local communities—a problem fixed only by reinvestment in the country’s infrastructure.

—William Tobin is an assistant director at the Atlantic Council Global Energy Center, where he focuses on international energy and climate policy.

The post Experts react: Will Venezuela now hold freer elections and get sanctions relief? appeared first on Atlantic Council.

Shaffer in The Central Asia – Caucasus Analyst: A New Spring for Caspian Transit and Trade

cakers — Tue, 17 Oct 2023 14:06:18 +0000

Gabriel “Gabo” Alvarado: New crises give Beijing an opportunity to blame the West

The post Shaffer in The Central Asia – Caucasus Analyst: A New Spring for Caspian Transit and Trade appeared first on Atlantic Council.

What to look for as Putin and Xi meet at the Belt and Road Forum

Atlantic Council experts — Mon, 16 Oct 2023 20:19:12 +0000

“Tell me who your friend is, and I’ll tell you who you are.” When Russian President Vladimir Putin shared this adage with state-run China Media Group on Monday, just ahead of his trip to Beijing to meet with Chinese leader Xi Jinping, he seemed to intend it as a compliment to Xi and himself. But it’s the duo’s decidedly negative traits—an autocratic grip on power and a hostility toward the global order—that are the most apparent shared characteristics of their “no limits” friendship.

Putin and Xi are expected to meet during the October 17-18 Belt and Road Initiative (BRI) forum, which marks ten years since China’s landmark program launched. It comes after Xi visited Moscow in March and amid Russia’s ongoing and brutal war in Ukraine. Below, Atlantic Council experts share their insights on what to look for from the leaders and at the forum.

Click to jump to an expert analysis:

Niva Yau: The BRI is working—as a global information manipulation campaign

Joseph Webster: Will Beijing’s support of Russia in Ukraine continue to creep up?

Jeremy Mark: The BRI debt crisis is hitting full force

Niels Graham: The BRI forum is another chance for Russia to align its economy with China

New crises give Beijing an opportunity to blame the West

Xi and Putin will likely discuss the ongoing Israel-Hamas conflict if they meet on the margins of the BRI forum. Both will also likely reiterate previous remarks about the need for a ceasefire and a political solution to the conflict. On the latter, we can probably expect Beijing to include its various initiatives, namely the Global Development Initiative (GDI) and the Global Security Initiative (GSI)—along with BRI—in any subsequent statements around the forum. As seen in its approach to the war in Ukraine, Beijing is keen to sell the GDI and the GSI as better models for addressing the world’s problems. In reality, however, these initiatives are more about reshaping the global order to suit Beijing’s interests.

Put bluntly, new crises give Beijing an opportunity to blame the West for the current state of the world and promote its alternative vision for global governance—in essence, a system that governs more like, or at minimum accepts, how the Communist Party of China rules. That Beijing and Washington are at the same time paving the way for a Biden-Xi meeting in November in San Francisco does not change Beijing’s calculus.

—Gabriel “Gabo” Alvarado is a nonresident senior fellow in the Atlantic Council’s Global China Hub.

The BRI is working—as a global information manipulation campaign

The BRI is failing as a grand connectivity project, but it’s still an instrumental part of Beijing’s global information manipulation campaign in the Global South. So far, Beijing’s information strategy to boost positive narratives to crowd out and neutralize criticisms finds its foundation in the economic ties it has with the host country. These narratives are often grounded in language of the Belt and Road Initiative, exaggerating project contributions to local communities, including employing misleading figures of investment and promises of a bright future the BRI will bring to the host country, if it stays on the path of strong relations with Beijing.

Disseminated through local networks of Beijing-friendly media partners—while at the same time incentivizing local governments to restrict the space for independent journalists to freely report—this tactic has worked to weaken civil society in the Global South and the ability to monitor and hold Chinese projects accountable to local laws.

—Niva Yau is a nonresident fellow with the Atlantic Council’s Global China Hub.

Will Beijing’s support of Russia in Ukraine continue to creep up?

The Xi-Putin meeting could be a defining geopolitical moment, especially if the two sides agree to the Power of Siberia-2. The massive Russia-to-northern China natural gas pipeline would draw from basins that have traditionally supplied European demand, deepening Moscow’s pivot to the east—and its reliance on Beijing.

A major pipeline agreement between the two sides would have big geopolitical ramifications, especially as the economics of the pipeline appear highly unfavorable.

Of course, it’s also possible that the two sides will reach a smaller, more limited energy deal. This could, for example, include agreeing to more oil and liquefied natural gas cooperation or installing additional compressor stations on the existing Power of Siberia pipeline.

In any event, the meeting could reveal if Beijing will continue to escalate its pro-Russia “neutrality.” While the West has gradually and carefully increased its military support for Ukraine in the form of tanks, missiles, and fighter jets, Beijing has also doubled down on its support for Moscow. In addition to surging bilateral trade flows, Beijing has assiduously and progressively provided Moscow with dual-use goods, including trench-digging equipment, ball bearings, semiconductors, and more.

Beijing has provided “nonlethal” assistance to the Kremlin that has resulted in deadly consequences for Ukrainian forces. The Xi-Putin meeting this week may reveal if Beijing will continue to escalate its role in the conflict.

—Joseph Webster is a senior fellow at the Atlantic Council’s Global Energy Center, where he leads the center’s efforts on Chinese energy security, offshore wind, and hydrogen.

The BRI debt crisis is hitting full force

While Beijing will trumpet the BRI’s achievements at the tenth anniversary gathering, behind the bluster it will be working hard to address the indebtedness that has accompanied the infrastructure projects. Efforts to restructure this debt—which totals hundreds of billions of dollars—have been slowed by China’s unwillingness to participate in multilateral negotiations in several countries. Instead, it has preferred to proceed on a bilateral basis, as in the preliminary agreement that its Export-Import Bank is reported to have reached with Sri Lanka last month.

China’s BRI conferences focused on the debt issue as early as 2019, when then International Monetary Fund Managing Director Christine Lagarde—in Xi’s presence—declared that “history has taught us that, if not managed carefully, infrastructure investments can lead to a problematic increase in debt.” Since that time, what has changed is that China has cut back its new lending, but the debt crisis has hit full force. And while Beijing has received cautious praise for its willingness earlier this year to join a preliminary restructuring agreement with Zambia, it continues to place speed bumps in the way of efforts to resolve the debt crisis in many other countries.

—Jeremy Mark is a nonresident senior fellow at the Atlantic Council’s GeoEconomics Center and a specialist in political, economic, and financial issues related to Asia and Africa.

The BRI forum is another chance for Russia to align its economy with China

The collapse of Russian car manufacturing exemplifies the powerful impact Western sanctions and export controls have had on the Russian economy. Its slow rebirth epitomizes the new influence China is gaining over it. Western sanctions halted the domestic production of Russian cars. After a period of painful adjustment in which prices surged and sales collapsed by nearly 60 percent, Moscow was able to secure new imports from China. The next step, which Russian President Vladimir Putin will likely further during his visit to China this week, will be to convince new Chinese manufacturers to restore production within Russia’s own borders.

Western restrictions, in conjunction with an exodus of their companies, forced the shutdown eighteen of Russia’s twenty automobile manufacturing plants. To stabilize its domestic car market, Moscow turned to Beijing. Chinese car exports surged five-fold. As of June 2023, imported Chinese cars accounted for 49 percent of Russia’s market compared with a pre-war share of just 7 percent in June 2021. With the market stable, the Kremlin now hopes to bring its own idle plants back online. For that, it will need to replace blocked Western components and know-how with new Chinese joint-ventures.

This transaction has already begun. Shortly after the impact of Western controls became clear, Moscow announced the relaunch of a Soviet-era car manufacturer, the Moskvich. In November, production resumed at a nationalized plant formerly owned by the French car manufacturer Renault. Critical to this was a partnership with China’s JAC Motors which supplied the design, engineering, and production platform. Moscow is now hoping to replicate this partnership to resume production across a number of other automobile manufacturing plants. Without Western collaboration, it will need new joint-ventures if it hopes to go from the around 800,000 cars the government expects to produce this year to its prewar average of 1.3 million. A warm meeting between Putin and Chinese leader Xi Jinping exploring new ways to link their respective economies, could support this.

These efforts are not without risks. While China is happy to export goods to the Russian consumer market, it seems reluctant to invest in the heavily sanctioned, high-risk market. For Russia, Chinese support may allow it to resume domestic production more quickly but also further entrenches its economy to its much larger southern neighbor, giving Beijing immense sway over its future economic prospects.

—Niels Graham is an associate director for the Atlantic Council GeoEconomics Center.

The post What to look for as Putin and Xi meet at the Belt and Road Forum appeared first on Atlantic Council.

Ellinas in Cyprus Mail: Energy security in the East Med

bmathews — Sun, 15 Oct 2023 13:32:53 +0000

The post Ellinas in Cyprus Mail: Energy security in the East Med appeared first on Atlantic Council.

The West must learn hard lessons from years of failed Russia policies

Kira Rudik — Thu, 12 Oct 2023 20:56:38 +0000

Following the end of World War II, the entire international community declared “never again” and began searching for ways to implement this motto in practice. Most people soon agreed that the key to securing a sustainable peace was to make war unprofitable by deepening international cooperation and economic inter-dependency. This led directly to the creation of the European Coal and Steel Community, which would later become the European Union.

The idea that it is more profitable to trade than fight works well in Europe and has helped secure an unprecedented period of peace across much of the continent. Unfortunately, many European political leaders drew the wrong conclusion from this success story and assumed the same principle could be applied to relations with Russia. Germany in particular spent years expanding energy sector ties with Russia in the mistaken belief that this lucrative trade would serve to moderate Russia’s more aggressive instincts.

Nor was Germany alone in such thinking. Many European countries were happy to ignore Russia’s steady turn toward authoritarianism under Vladimir Putin as long as they could secure cheap energy supplies and other financial benefits. Most were primarily concerned with making money, but many also saw deepening economic ties as an insurance policy against any revival of Russian imperialism. It is now clear that this was a disastrous miscalculation.

Stay updated

As the world watches the Russian invasion of Ukraine unfold, UkraineAlert delivers the best Atlantic Council expert insight and analysis on Ukraine twice a week directly to your inbox.

While the Western world was busy repeating the “never again” mantra, Putin’s Russia was increasingly embracing a very different sentiment. From the early years of his reign, Putin actively revived lingering Cold War era antagonism toward the West within Russian society. He also transformed traditional reverence for the Soviet role in the defeat of Nazi Germany into something akin to a state religion, complete with its own dogmas, heretics, rituals, and feast days. People across Russia soon began to repeat the menacing slogan, “we can do it again.” Whereas Soviet troops had once marched to Berlin and occupied half Europe, today’s Russia was now threatening defeat the West through a combination of economic, informational, cyber, and if necessary, military tools.

In this confrontational climate, Europe’s faith in the moderating impact of international trade was perceived by Russia as a fundamental weakness. When viewed from the Kremlin, the profitability of Europe’s growing economic ties with Russia was actually seen as a green light for Moscow to pursue policies of aggression against third parties without fear of consequences.

Members of the Russian establishment remained convinced that while their Western counterparts enjoyed making idealistic speeches, they were ultimately driven by a far baser hunger for money. This Russian contempt for so-called Western values was further strengthened by experience, particularly the indecently rapid clamor for a return to business-as-usual following Moscow’s 2008 invasion of Georgia. The same was true in the wake of Russia’s 2014 annexation of Crimea and invasion of eastern Ukraine.

Russian perceptions of Western weakness and hypocrisy directly paved the way for the full-scale invasion of Ukraine in February 2022. Moscow expected the West to loudly protect the invasion before meekly accepting the new geopolitical realities and resuming economic cooperation with Russia. Based on prior experience, this was an entirely reasonable expectation. It appears to have taken the Kremlin completely by surprise when Western leaders imposed unprecedented sanctions, and when European nations began working to drastically reduce their reliance on Russian energy imports. For Ukraine, however, this show of resolve came too late to avert the devastating consequences of the invasion.

The tragedy of Russia’s criminal invasion could have been avoided if the West had sent an unambiguous message to Moscow indicating that the days of imperial aggression were over. Instead, too much trust was placed in the ability of deepening economic ties to deter international aggression, while modern Russia’s retreat into old-style imperialism was not taken sufficiently seriously.

The failure of trade-based diplomacy is also relevant in relation to China. Economic ties between Beijing and the West are often characterized as being mutually dependent, with some arguing that this makes any serious deterioration in relations unlikely. The same argument is sometimes applied to China and Taiwan, which have a robust economic relationship despite political tensions. However, this flawed logic has already been exposed by the West’s failed Russia policies.

Publicly, at least, China has declared a neutral position toward the Russian invasion of Ukraine. In practice, China is reaping the benefits of closer ties with an isolated Russia, while at the same time avoiding any sanctions pressure from the West. Regardless of the outcome in Ukraine, Beijing stands to benefit; a Russian victory would strengthen China, while a Russian defeat would increase Moscow’s dependency on Beijing.

Eurasia Center events

Ukraine’s advance in Kursk: What’s next and implications

Conflict Russia Security & Defense Ukraine

If Russia is able to achieve even a partial victory in Ukraine, the consequences for global security would be catastrophic. Western leaders must escalate their support for Ukraine to prevent this outcome and make sure Putin’s invasion ends in decisive defeat.

Looking ahead, it is clear that while economic inter-dependency can help maintain peace among like-minded democracies such as EU member states, it is utterly ineffective in terms of authoritarian regimes like Putin’s Russia. Instead, new approaches are needed that prioritize human values over trade balances or financial interests. Above all, the West must rid itself of the naive illusions that set the stage for today’s Russian war in Ukraine.

It is also vital to speak to dictators in the language of strength. After all, this is the only language that leaders like Vladimir Putin truly understand. To Putin and his fellow dictators, any talk of win-win situations and mutually beneficial cooperation is interpreted as a sign of weakness. Instead, today’s world requires institutions capable of imposing powerful sanctions on countries that break international law.

This process should begin with Ukraine. As Western leaders continue to shape their response to Russia’s ongoing invasion of Ukraine, they have an opportunity to build a new system of international relations capable of deterring future dictators from embracing aggressive foreign policies. Immediate priorities should include tougher sanctions against Russia, dramatically increased military aid for Ukraine, and the confiscation of Russian assets to finance the Ukrainian recovery process. Ultimately, Ukrainian victory and Russian defeat will be the greatest deterrent of all for any authoritarian rulers contemplating their own wars of aggression.

Kira Rudik is leader of the Golos party, member of the Ukrainian parliament, and Vice President of the Alliance of Liberals and Democrats for Europe (ALDE).

bmathews — Wed, 11 Oct 2023 13:31:14 +0000

The post Webster quoted in The New York Times on the Power of Siberia 2 gas pipeline appeared first on Atlantic Council.

Novak quoted in Sydney Morning Herald on developing Timor-Leste—PRC partnership

kyusko — Tue, 10 Oct 2023 13:22:04 +0000

ORIGINAL SOURCE

On October 9, IPSI nonresident fellow Parker Novak was quoted in the Sydney Morning Herald on the signing of a new Comprehensive Strategic Framework agreement between Timor-Leste and the PRC. Novak explained that the agreement was not a surprise, and in fact “codifies a lot of things that were already happening between the two countries at the ground level. It’s also a reflection of Timor-Leste’s ‘friends with everybody’ approach to foreign policy.”

Fellow

Parker Novak

Global China Hub Indo-Pacific Security Initiative

Australia Democratic Transitions

The post Novak quoted in Sydney Morning Herald on developing Timor-Leste—PRC partnership appeared first on Atlantic Council.

Wald joins Bloomberg Surveillance to discuss the oil markets in the wake of Hamas’ attack on Israel

bmathews — Mon, 09 Oct 2023 13:39:38 +0000