Tag Archives: Russian natural gas

Sweden, Austria Start Bailing Out Energy Companies Triggering Europe’s “Minsky Moment”, by Tyler Durden

With far less gas and oil to sell because of Europe’s sanctions against Russia, European energy companies are running into trouble. From Tyler Durden at zerohedge.com:

Last weekend, Credit Suisse repo guru published what may have been the most insightful snippet of the entire European energy crisis (to date) when he extended the infamous “Minsky Moment” framework to Europe, and specifically Germany, which he said “can’t cover its payments without Russian gas and the government is asking citizens to conserve energy to leave more for industry.” He then elaborated that “Minsky moments are triggered by excessive financial leverage, and in the context of supply chains, leverage means excessive operating leverage: in Germany, $2 trillion of value added depends on $20 billion of gas from Russia… …that’s 100-times leverage – much more than Lehman’s.” (Zoltan’s entire note is a must read for everyone with a passing interest in what comes next).

But while Germany still pretends it can somehow avoid a devastating crisis this winter besides bailing out Uniper, one of the country’s biggest utilities (after all, admission would make Trump’s 2018 warning accurate and prescient, and everyone knows that according to Western intellectual snobs Trump can’t possibly ever be correct), other European nations are succumbing to what Zoltan dubbed a “supply-chain Minsky moment.”

On Wednesday it was Austria, which announced it would bail out the country’s main energy supplier with a two-billion-euro ($2 billion) loan, the AFP reported. Chancellor Karl Nehammer said the loan to Wien Energie was an “extraordinary rescue measure” to ensure its two million customers – mainly Vienna households – continue to receive electricity. It will run until next April.

Wien Energie asked for a bailout this weekend after suffering financial trouble amid soaring energy prices and speculation the company mismanaged their funds. Nehammer said Wien Energie, which is owned by Vienna, would have to answer questions as to how they got into trouble.

“The goal was to help people quickly… It has now been agreed that all of these questions, which are rightly raised, must be answered promptly by Vienna (and) the energy supplier,” he told reporters.

The company – almost entirely dependent on Russian gas – said earlier this week that it had been hit by the “price explosion” which it has not yet passed on to customers, assuring it remained solvent. As part of its rescue, the company is expected to pass through soaring costs, which means a historic price shock is coming to Austria next… and soon Sweden.

Following in Austria’s footsteps, on Saturday morning Sweden announced it will give emergency liquidity support to electricity producers after the government said it feared Russia’s decision to halt gas deliveries to Europe could place its financial system under severe strain.

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China Is Aggressively Reselling Russian Gas To Europe, by Tyler Durden

Not only have Western sanctions benefited Russia, they’ve benefited the other half of the Eurasian dynamic duo—China. Russia sells its gas to China, who then sells some of it to energy-starved Europe, at a marked up price that includes recompense for the Chinese. So, Western sanctions benefit not one but two of its prime competitors, or enemies if you want to call it that. From Tyler Durden at zerohedge.com:

One month ago, we were surprised to read how, despite a suppressed appetite for energy amid its housing crash and economic downturn (for which “zero covid” has emerged as a convenient scapegoat for emperor Xi), China has been soaking up more Russian natural gas so far this year, while imports from most other sources declined.

In July, the SCMP reported that according to Chinese customs data, in the first six months of the year, China bought a total of 2.35 million tonnes of liquefied natural gas (LNG) – valued at US$2.16 billion. The import volume increased by 28.7% year on year, with the value surging by 182%. It meant Russia has surpassed Indonesia and the United States to become China’s fourth-largest supplier of LNG so far this year!

This, of course, is not to be confused with pipeline gas, where Russian producer Gazprom recently announced that its daily supplies to China via the Power of Siberia pipeline had reached a new all-time high (Russia is China’s second-largest pipeline natural gas supplier after Turkmenistan), and earlier revealed that the supply of Russian pipeline gas to China had increased by 63.4% in the first half of 2022.

What was behind this bizarre surge in Russian LNG imports, analysts speculated? After all, while China imports over half of the natural gas it consumes, with around two-thirds in the form of LNG, demand this year had fallen sharply amid economic headwinds and widespread shutdowns. In other words, why the surge in Russian LNG  when i) domestic demand is just not there and ii) at the expense of everyone else?

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My Energy is Your Problem – The Birth of a New Europe, by Tom Luongo

Russia has the energy resources and Europe isn’t going to be able to get them anywhere else. From Tom Luongo at tomluongo.me:

“Energy makes energy anyhow
So spend yourself and get rich right now”

— Marillion “Rich”

This day has been a long time coming. From the moment, more than a decade ago, when it was finally admitted that Europe was destined to be an energy importer, we were going to see the climax of the showdown between the West and Russia.

Europe as energy importer always meant that time was on Russia’s side. All it had to do was draw the conflict out long enough, survive long enough, to force Europe into submission. Russia has the energy Europe needs, no one else can supply it, therefore the final decision will be to accept this fate.

No amount of financial wizardry, pathetic virtue signaling about Climate Change, malinvestment into inefficient and unsustainable ‘renewables,’ or military threats would ultimately change the outcome of this story.

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To Fight Russia, Europe’s Regimes Risk Impoverishment and Recession for Europe, by Ryan McMaken

Europe needs a lot of what Russia has. Cutting themselves off hurts them more than it hurts Russia. From Ryan McMaken at mises.org:

European politicians are eager to be seen as “doing something” to oppose the Russian regime following Moscow’s invasion of Ukraine. Most European regimes have wisely concluded—Polish and Baltic recklessness notwithstanding—that provoking a military conflict with nuclear-armed Russia is not a good idea. So, “doing something” consists primarily of trying to punish Moscow by cutting Europeans off from much-needed Russian oil and gas.

The problem is this tactic doesn’t do much to deter Russia in anything other than the short term because Russian oil can turn to numerous markets outside of Europe. Most of the world, after all, has declined to participate in the US and European embargoes and trade sanctions, opting for more measured approaches instead.

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Germany’s Russian Gas Problem, by Jack Raines

When a situation is really screwed up, it’s a good bet that not just one but multiple bad decisions have been made. Germany’s dependence on Russian gas is certainly such an instance. From Jack Raines at youngmoney.co:

“You have stolen my dreams and my childhood with your empty words. And yet I’m one of the lucky ones. People are suffering. People are dying. Entire ecosystems are collapsing. We are in the beginning of a mass extinction, and all you can talk about is money and fairy tales of eternal economic growth. How dare you!

…You are failing us. But the young people are starting to understand your betrayal. The eyes of all future generations are upon you. And if you choose to fail us, I say: We will never forgive you.

We will not let you get away with this. Right here, right now is where we draw the line. The world is waking up. And change is coming, whether you like it or not.”

– 16-year-old Greta Thunberg at the U.N.’s Climate Action Summit, 2019

*slow claps*

Climate change. The existential crisis that has filled every Gen-Zer with dread since they entered grade school. Politicians, CEOs, and other powerful figures fly their private jets to summits around the world each year to condemn the fossil fuel industry as a vile plague that must be destroyed at all costs.

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Why Renewables Can’t Solve Europe’s Energy Crisis, by Irina Slav

European energy was in crisis that renewables couldn’t address before Russia invaded Ukraine. From Irina Slav at oilprice.com:

  • Europe has been aggressively pursuing a clean energy future and the end of fossil fuels, but Russia’s invasion of Ukraine has highlighted the shortcomings of renewables.
  • The soaring prices of key metals and the length of time it takes to implement renewable energy projects have meant Europe is turning to fossil fuels to solve its energy crisis.
  • The EU is planning to replace Russian gas with LNG imports, coal, and even fuel oil, with a relatively small amount of the gas to be replaced by wind and solar.

Germany is preparing for gas rationing. France’s power grid operator is asking consumers to use less electricity. In the UK, protests are breaking out over the latest electricity price hike that plunged millions of households into what one local think tank called fuel stress. Europe has a serious energy problem.

The problem dates back years and points to a persistent complacency on the part of European governments that whatever happens, there will always be gas from Russia. After all, even during the Cold War Russia pumped billions of cubic meters of gas to European countries. Now, things are different, and it’s not just because of the war in Ukraine.

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‘Rublegas:’ the world’s new resource-based reserve currency, by Pepe Escobar

For the first time in many decades, a major government is moving away from pure fiat currency. From Pepe Escobar at thesaker.is:

Rublegas is the commodity currency du jour and it isn’t nearly as complicated as NATO pretends. If Europe wants gas, all it needs to do is send its Euros to a Russian account inside Russia.

The Russian ruble is sitting pretty right now, having regained its pre-sanctions value and set to become a major commodity currency. Photo Credit: The Cradle

Saddam, Gaddafi, Iran, Venezuela – they all tried but couldn’t do it. But Russia is on a different level altogether.

The beauty of the game-changing, gas-for-rubles, geoeconomic jujitsu applied by Moscow is its stark simplicity.

Russian President Vladimir Putin’s presidential decree on new payment terms for energy products, predictably, was misunderstood by the collective west. The Russian government is not exactly demanding straightforward payment for gas in rubles. What Moscow wants is to be paid at Gazprombank in Russia, in its currency of choice, and not at a Gazprom account in any banking institution in western capitals.

That’s the essence of less-is-more sophistication. Gazprombank will sell the foreign currency – dollars or euros – deposited by their customers on the Moscow Stock Exchange and credit it to different accounts in rubles within Gazprombank.

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German Chemical Giant Warns Of “Total Collapse” If Russian Gas Supply Cut, by Tyler Durden

After initial resistance, the Germans have decided it may be better to pay rubles for Russian natural gas after all. From Tyler Durden at zerohedge.com:

CEO of Germany’s multinational BASF SE, the world’s largest chemical producer, has warned that curbing or cutting off energy imports from Russia would bring into doubt the continued existence of small and medium-sized energy companies, and further would likely spiral Germany into its most “catastrophic” economic crisis going back to the end of World War 2.

Company CEO Martin Brudermuller issued the words in an interview with Frankfurter Allgemeine newspaper just ahead of German officials by midweek giving an “early warning” to industries and the population of possible natural gas shortages, as Russia appears ready to firmly hold to Putin’s recent declaration that “unfriendly countries” must settle energy payments in rubles, related to the Ukraine crisis and resultant Western sanctions.

According to Bloomberg he mused that while “Germany could be independent from Russia gas in four to five years” it remains that “LNG imports cannot be increased quickly enough to replace all Russian gas flows in the short term.”

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More Sanctions On Russia Will Destroy Europe, by Moon of Alabama

Now Russia wants rubles for its natural gas. How long before they demand gold? From Moon of Alabama at moonofalabama.com:

On February 21 Russia announced that it would recognize the Donbas republics. A day later it did so. The ‘west’ immediately announced sanctions which in fact had been prepared in advance. On February 24 Russian troops crossed the border into Ukraine.

The Russian ruble immediately took a big hit. It has since recovered a bit.


Today’s news will bring the ruble to a new heights.

Kommersant reports (machine translation):

Putin instructed to convert gas contracts with unfriendly countries into rubles

President Vladimir Putin instructed to issue a directive to Gazprom to convert contracts into rubles for unfriendly countries. In his opinion, supplying Russian goods to the EU, the USA and receiving payment in dollars and euros “does not make any sense for us.” Against this background, the ruble moved to growth on the Moscow Exchange.

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