The World This Week

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The World This Week
Russia's gas ultimatum to Europe

  GP Team

The World This Week #164, Vol. 4, No. 13

Sourina Bej

Europe: 'Pay for gas in rubles,' says Putin, EU leaders reject in unison 
What happened? 
On 31 March, President Vladimir Putin signed a decree mandating that countries purchase gas from Russia pay for their supplies in rubles. The decree says: from 1 April, buyers of Russian gas, mostly the Western European countries, would have to set up special 'K-accounts' to transfer their payments which will then be exchanged into rubles. The entire payment facility will be set up and run through Russia's Gazprombank, a subsidiary of state energy giant Gazprom. Kremlin also added that the gas supplies will not be stopped immediately, but if such payments are not made, it will be a default on the part of the buyers. "Nobody sells us anything for free…existing contracts will be stopped," Putin said in a televised statement in Moscow. 

On 31 March, the EU spokesperson said: "the EU will respond in a united manner to attempts by Russia to circumvent sanctions." The G7 countries have rejected Moscow's demand, describing it as a breach of contract. German Chancellor Olaf Scholz said the gas contracts stipulate payment mostly in euros and sometimes in dollars, and he had made clear to Putin in a phone call on 30 March "that it will stay that way." Italian Prime Minister Mario Draghi received assurances from Putin that Europe would not have to pay in rubles. Similarly, Britain does not plan to pay for Russian gas in rubles, said the spokesperson of Prime Minister Boris Johnson. Dutch energy firm Eneco responded that "it has a long-term contract with Wingas, a German subsidiary of Gazprom, for delivery until 2030 and expects its current contract for payment in euros to be honoured."

What is the background? 
First, the rising energy prices in Europe. Europe remains the largest importer of oil; gas from Russia has witnessed an increase in prices of 7 to 10 per cent since the decree. British and Dutch gas prices were up to five per cent after Putin's announcement. It is the fifth straight month of inflation in the eurozone. The Eurostat reported: "Annual inflation in the eurozone has reached 7.5 per cent in March, up from 5.9 per cent in February." With the highest inflation, Germany and Austria have set up emergency plan-details on ways to conserve gas and secure steady fuel supplies to every household.

Second, the plunging of Russia's ruble. The trading in ruble plunged since the 24 February invasion in Ukraine. The US ,and the EU have removed Russia from global payment systems, cut off its central bank from capital markets, and froze hundreds of billions of dollars of its reserves. The US Treasury Department announced a slew of new sanctions against hundreds of members of the Russian State Duma, dozens of Russian defense companies, and the CEO of Sberbank, which is Russia's largest financial institution. This has, in turn depreciated the ruble, lowering Russia's global economic position. 

Third, the energy dependency between Europe and Russia. Europe receives 40 per cent of its natural gas from Russia, through pipelines from Belarus, Ukraine, and Poland or under the Baltic Sea. Although energy exports remain Putin's leverage against western sanctions, the room for maneuver is limited because Europe is still Moscow's strong market. But, the ruble payment plan cements Gazprom's position at the heart of Russian gas trading. Amid the invasion of Ukraine and the sanctions, the ruble has had a freefall triggering difficulties to fund the military attacks. The Bank of Russia has already hiked its interest rates to 20 per cent to halt the ruble's depreciation.' Therefore, Putin's decree brings Russia's central bank back into the global financial system as major gas payments from Europe are due in May. Meanwhile, Denmark's Orsted, Poland's PGniG and Italy's Eni groups have received a demand from Gazprom Export to pay gas supplies in rubles.

What does it mean? 
The climate of uncertainty has led many European countries to look for alternate partners and alternate energy source such as green hydrogen that could replace coal as a steady energy source. With countries like Germany, France and several east European countries installing renewable energy circuits at the local level, Qatar, UAE and Saudi Arabia have emerged to be viable partners for hydrogen and natural gas. German economy minister Robert Habeck made a spontaneous visit to UAE on 21 March to set up an economic dialogue to purchase alternative green resources. Similarly, Boris Johnson's visit to Saudi Arabia on 16 March looked to channel an alternate partner for energy diplomacy. 

Also, in the news...
By Ashwin Dhanabalan, Angkuran Dey and Meghna Manoj 

East and Southeast Asia This Week
China: Wang Yi chairs Afghanistan Foreign Ministers' dialogue
On 31 March, Foreign Minister Wang Yi chaired the "Afghanistan's neighbours + Afghanistan," dialogue. Afghanistan's interim government's Foreign Minister Amir Khan Muttaqi attended the meeting along with Qatar's Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani and Indonesia's Foreign Minister Retno Marsudi. Wang said: "…we have expressed the shared view, demonstrated the unique role, and guided the international community's perceptions on the Afghan issue." He added that the countries should work toward cooperation rather than confrontation, adhere to openness rather than isolation and treat everyone as equals. 

China: Trial of Australian television anchor
On 31 March, Australian television anchor Cheng Lei was put on trial for sharing state secrets. The trial was held behind closed doors with heavy security. Cheng Lei was a former anchor for the Chinese state broadcasting agency, CGTN, who was formally arrested and detained in August 2020. On hearing about Cheng Lei's trial, the Australian Ambassador to China, Graham Fletcher, said: "We can have no confidence in the validity of a process which is conducted in secret." Australian Foreign Minister Marise Payne also said that he hoped the trial would be under international norms. 

China: Resignation of two British judges from the CFA
On 31 March, Hong Kong leader Carrie Lam said that the resignation of two senior British judges was politically motivated. She said: "They have been put under political pressure and that is a kind of political manipulation." The British judges were among the foreign jurists appointed to the Hong Kong of Final Appeal (CFA). The CFA is an arrangement seen as the cornerstone for the city's social and commercial freedoms. Lam said: "I remain very confident that we still have very fine judges in the judiciary, both local and from overseas. Hong Kong will continue to benefit significantly." 

China: Myanmar's Foreign Minister attends the third Foreign Ministers' meeting
On 1 April, China's Foreign Minister Wang Yi met with Myanmar's Foreign Minister U Wunna Maung Lwin in Tunxi, China. The two officials discussed their diplomatic relations on the sidelines of the third Foreign Ministers' meeting of the neighbouring countries of Afghanistan. Wang said: "No matter how the situation changes, China will support Myanmar in safeguarding its sovereignty, independence and territorial integrity." Further, the two Ministers also agreed to accelerate the construction of the China-Myanmar Economic Corridor (CMEC).

China: The summit with Europe
On 1 April, EU and China met virtually to discuss urgent issues concerning the war in Ukraine, climate change, and the COVID-19 pandemic. China's President Xi Jinping attended the virtual session and addressed the possible spillover of the crisis in the EU and China. The President of the European Commission, Ursula von der Leyen, while mentioning in the discussion about the war in Ukraine with Xi, also added: "We made it very clear that China should not interfere with our sanctions." Both the EU and China agreed that the war in Ukraine was threatening global security and the economy. 

South Korea: Seoul test-fires its first solid-fuel space rocket 
On 30 March, South Korea successfully test-fired its indigenously made first solid-fuel rocket, as it seeks to ramp up its defence bulwark in response to North Korea test-firing its long-range missile on 24 March. The South Korean Defence Ministry said that the launch was an important milestone as it seeks to launch satellites to spy on North Korea eventually. The Defence Ministry stated: "The success of the test launch of this solid-propelled space launch vehicle is an important milestone in strengthening the defence power of our military's independent space-based surveillance and reconnaissance field at a very critical time." 

The Philippines: SpaceX set to launch Starlink in the country
On 31 March, Philippines Trade Secretary Ramon Lopez announced that SpaceX would launch its Starlink satellite broadband service in the Philippines, making it the first in Southeast Asia. The Elon Musk-owned company will be setting up a wholly-owned subsidiary in the country and aims to develop three gateways in the first phase of its launch. However, there has been no timeline or an investment figure surrounding the launch in the public domain. 

Thailand: Bangkok faces stagflation
On 30 March, the Economic Intelligence Centre (EIC), a Thai Siam Commercial Bank research unit, said the country's economy is undergoing stagflation. The EIC downgraded Thailand's economic growth forecast from 3.2  per cent to 2.7  per cent, attributing it to the Russia-Ukraine war. An Economist at Siam Commercial Bank, Yunyong Thaicharoen, said the war in Ukraine would result in a lower footfall of tourists in Thailand but was hopeful that Asian and ASEAN travellers would offset it. However, he was concerned about the market volatility, external uncertainties, and the short-term depreciation of the Baht to the US dollar. 

South Asia This Week
India: Lavrov and Truss visit New Delhi 
On 1 April, Russia's Foreign Minister Sergei Lavrov visited New Delhi and hailed India for not taking a "one-sided view" on the war. He also tried to gain the country's support to discuss the circumvention of sanctions. He said: "It is absolutely clear that more and more transactions would be done through this system using national currencies, bypassing the dollar, euro, and other currencies." In contrast, the UK's Foreign Secretary LizTruss' visit comes as India had not condemned Russia's invasion of Ukraine. Truss further urged India's Minister of External Affairs S Jaishankar to work with other democracies to counter Russia's invasion of Ukraine. 

India: Jaishankar urges closer cooperation and connectivity at BIMSTEC summit
On 29 March, India's External Affairs Minister S Jaishankar discussed the war in Ukraine and the long-term implications of the pandemic at the summit. He urged for a closer BIMSTEC partnership and the creation of supply and value chains that would deter external shocks. He further added: "We need more working together in many more areas; we need more effective and fast-paced cooperation. We need to intensify and build on what we have achieved in the last 25 years." 

India: New Delhi defends Myanmar's participation in BIMSTEC
On 31 March, India's additional Secretary-Ministry of External Affairs Minister Rudrendra Tandon took a stand on New Delhi's policy to allow the participation of Myanmar in the BIMSTEC summit, amidst the US showing its disappointment. Tandon said: "Bimstec is multilateral, it's a regional cooperation platform, and the aim is to focus on economic and development cooperation, to do activities that genuinely deliver value to people." He further added that India and Myanmar share a direct border and that New Delhi's security concerns could only be dealt through cooperation with Myanmar. 

India: Germany's Foreign and Security Adviser Jens Plotner visits New Delhi
On 30 March, Germany's Foreign and Security Adviser, Jens Plotner, met with India's External Affairs Minister S Jaishankar to discuss the ongoing Ukraine crisis. Plotner said: "Because, if this [Russian action] goes unchecked, I think it will be really devastating for all of us…I do feel that there is a solid basis of commonality of view with our friends in India". Plotner also met with India's National Security Adviser Ajit Doval, who emphasised New Delhi's commitment to ending the war and establishing peace under international law and the principles of the UN Charter. 

Pakistan: PM Khan claims threatening letter came from the US
On 31 March, Pakistan's Prime Minister Imran Khan addressed the nation at the National Security Committee meeting and revealed that the US was behind the "threat letter." He further mentioned that he would not resign and face the opposition's no-confidence motion in the National Assembly. Furthermore, the National Security Committee (NSC) expressed grave concern about the letter and decided to send a strong demarche to the country in question. The NSC would also submit a protest note to US Charge d' Affaires in Islamabad and the State Department in Washington. 

Pakistan: Foreign Minister Shah Mahmood Qureshi meets Wang Yi
On 31 March, China's Foreign Minister Wang Yi met with Pakistan's Foreign Minister Shah Mahmood Qureshi to talk about regional and international concerns. Qureshi expressed that Islamabad was committed to the One-China policy and thanked Beijing for its consistent support to Pakistan. The two Ministers also discussed the situation in Afghanistan and Ukraine and spoke about the extension of the China-Pakistan Economic Corridor (CPEC) to Afghanistan. Qureshi also met with Russia's Foreign Minister and expressed hopes to find a diplomatic solution to the war.

Afghanistan: The US pledges USD 204 million in humanitarian aid
On 1 April, the US pledged to provide close to USD 204 million in humanitarian assistance for the people of Afghanistan. The pledge was made at a pledging event created to support the humanitarian response in Afghanistan. The US Department of State stated: "This assistance from the United States will support the scaled-up humanitarian response in Afghanistan and neighbouring countries through independent humanitarian organizations." The funding includes the USD 134 million funds from the State Department and about USD 70 million from USAID, showing America's consistent commitment to the welfare of the Afghan people. 

Nepal: New Delhi and Kathmandu launch train services
On 1 April, India's Prime Minister Narendra Modi and Nepal's Prime Minister Sher Bahadur Deuba announced that they would jointly flag off passenger train services between Jayanagar in India and Kurtha in Nepal. The East Central Railway Chief Public Relations Officer Birendra Kumar stated that India's Ministry of External Affairs had sanctioned Rs 784 crore for this project. The restoration of rail connectivity would boost bilateral relations between the two neighbours and provide impetus to trade activities in the region. 

Sri Lanka: Colombo and New Delhi signs an agreement for hybrid power plants 
On 29 March, Sri Lanka and India inked a pact for building three hybrid power projects on three islands off the coast of northern Jaffna. In 2021 China won the contract to build these hybrid renewable energy systems in the region. However, India opposed the Chinese contract citing security concerns over the proximity of the plants to the Indian state of Tamil Nadu. The agreement was signed by India's External Affairs Minister S. Jaishankar and Sri Lanka's Foreign Minister G L Peiris on the sidelines of the BIMSTEC Summit. 

Sri Lanka: State of emergency declared 
On 1 April, Sri Lanka's President Gotabaya Rajapaksa declared an emergency after public demonstrations erupted in front of his residence, demanding his resignation. A gazette notification stated: "in the interests of public security, the protection of public order and the maintenance of supplies and services essential to the life of the community." The protests have been widespread as the island nation faces a shortage of essential goods and services, rising fuel prices, and medicines. Furthermore, Rajapaksa accused the demonstrations of being incited by "organised extremists." 

Central Asia, the Middle East and Africa This Week
Georgia: South Ossetia seeks to hold a referendum on joining Russia 
On 31 March, the leader of Georgia's separatist region backed by Moscow, Anatoly Bibilov, said that the de-facto independent territory was looking to hold a referendum to join Russia. Bibilov stated: "I believe that unification with Russia is our strategic goal. It is our path. And South Ossetia will move on that path." Georgian Foreign Minister David Zalkaliani called the move unacceptable and mentioned that South Ossetia belonged to Georgia. He added, "The European Court of Human Rights has ruled that the Georgian region is occupied by Russia."

Turkey: Justice Minister approves transfer request of Khashoggi's murder trial to Saudi Arabia
On 1 April, Turkey's Justice Minister Bekir Bozdag said that his Ministry would approve the request to shift the trial of Jamal Khashoggi from a court in Istanbul to Saudi Arabia. Turkey has been meaning to mend ties with Saudi Arabia and this move could be seen as a response to it. However, Human Rights groups have condemned the move, stating that Saudi Arabia could not be expected to hold a free and fair trial. Khashoggi was killed at the Saudi consulate in Istanbul in 2018. 

Yemen: The Saudi-led coalition announces military truce 
On 30 March, the Saudi-led coalition engaged in fighting the Houthis in Yemen called for a cessation of military operations during the Muslim fasting month of Ramadan. The truce for a month has been the most significant step in peace efforts over the last three years, with the international community struggling to end the conflict that has killed tens of thousands and displaced millions. The truce comes as the UN called for a temporary ceasefire during the holy month of Ramadan in exchange for allowing fuel ships to dock at the Houthi-controlled Hodeidah port. 

Tunisia: President Kais Saied dissolves the parliament 
On 30 March, Tunisia's President Kais Saied announced the dissolution of the parliament. The move comes eight months after the Tunisian President had sacked the Prime Minister, Hicham Mechichi and suspended parliamentary proceedings after violent anti-government protests broke out in several Tunisian cities. Saied stated: "Today, at this historic moment, I announce the dissolution of the Assembly of Representatives of the people, to preserve the state and its institutions."

Mali: Russia sends military equipment to Bamako's government
On 31 March, Mali's military accepted two combat helicopters and two sophisticated radar systems from the Russian authorities to help fight against Islamist militants. With the withdrawal of French forces from the region, Russia has developed closer ties with the military regime. Russian mercenaries from the Wagner Group are believed to be helping the military in fighting the jihadist threat. The French Foreign Minister, Jean-Yves le Drian, conveyed that the military leaders of Mali had become hostage to the mercenaries. However, Mali's Defence Minister, Col. Sadio Camara, disregarded the criticism and pointed out that the Russian equipment provided autonomy to the military in battling the insurgents.  

Somalia: UNSC unanimously votes for a new peacekeeping force 
On 1 April, the UN Security Council passed a unanimous vote for a new peacekeeping force in Somalia. The statement released by the UNSC presidency, held by the UAE, pointed out that the UNSC has adopted a resolution for reconfiguration of the current African Union Mission in Somalia (AMISOM). The current mission comprises 20,000 soldiers, police, and civilians helping the local authorities fight the militia. The approved resolution has called for the gradual retreat of peacekeepers from the region in four phases until the last peacekeepers leave the country by the end of 2024.

Congo: Kinshasa becomes a member of the East African Community
On 29 March, the Democratic Republic of Congo became the seventh member of the East African Community (EAC), giving massive impetus towards expanding the trade territory under the bloc. The inclusion of the Democratic Republic of Congo will expand the consumer market of EAC to almost 300 million. The Congolese President, Felix Tshisekedi, lauded the association and stated: "I have always considered the East African community as the best compared to other sub-regional economic blocs in Africa, in terms of free movement of people and goods, infrastructure integration and trade."

Europe and the Americas This Week
Russia: Countries to pay in Rubles for Moscow's gas exports
On 29 March, Russian President Vladimir Putin announced that buyers of natural gas from Russia would have to pay in Rubles and not use any other medium of currency. In cases of failure of payment in Rubles, it would lead to the suspension of existing gas contracts. Putin commented: "In order to purchase Russian natural gas, they must open ruble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow." The move from Moscow comes at a time as it seeks to counter the sanctions imposed by Western countries since the invasion of Ukraine. 

Eurozone: Inflation hits record high 7.5 per cent
On 1 April, as cited in POLITICO, an exponential rise in inflation within the Eurozone was due to the war in Ukraine. Oxford Economics economist Maddalena Martini said: "The war in Ukraine has exacerbated some recent price dynamics." Energy and food prices are at an all-time high and are the primary drivers of inflation. Energy prices rose from 32 per cent in February to 44.7 per cent in March. This has further impacted the member states of the Eurozone; Germany saw a 7.6 per cent rise in inflation while France saw a 5.1 per cent rise and Spain experienced a 9.8 per cent rise.  

Brazil: Sergio Moro steps away from the Presidential race
On 31 March, former Judge Sergio Moro, who led the famous 'Car Wash' corruption case, declared that he would not be contesting the upcoming Brazilian Presidential elections of 2022. This declaration comes after Moro's election efforts failed to gain traction, with opinion polls putting his support numbers in single digits. As of now, the Presidential race of 2022 is being dominated by the leftist former President Luiz Inácio Lula da Silva and the far-right incumbent President, Jair Bolsonaro. Moro said: "Brazil needs an alternative to getting rid of the extremes of instability and radicalization. I will be a soldier of democracy to reclaim the dream of a better Brazil."

Venezuela: International Criminal Court to set up an office in Caracas 
On 31 March, the prosecutor's office of the International Criminal Court (ICC) said it was looking to set up an office in Venezuela. The ICC wanted to investigate allegations of humanitarian offences that the Venezuelan security forces had perpetrated. The Chief Prosecutor of ICC, Karim Khan, at the end of a three-day trip to Caracas, welcomed the efforts being made by Venezuelan President Nicolás Maduro in assisting the investigation of the alleged humanitarian crimes. Khan also added: "Any state that encounters difficulties in complying with the rule of law must be respected."  

Ecuador: President Guillermo Lasso threatens lawmakers of Quito
On 29 March, the President of Ecuador, Guillermo Lasso, said that he would use decrees, referendums, and other tools to reactivate the country's sluggish economy after his proposals could not bypass the national assembly. On 24 March, the national assembly rejected his proposed investment bill over fears that it would privatize public assets. During a radio interview, Lasso stated: "What it shows me is from here on out I should govern without considering that the National Assembly exists. It's evident that what they want is to block the national government."

About the authors
Sourina Bej is a doctoral candidate and KAS-EIZ Fellow at the University of Bonn. Ashwin Immanuel Dhanabalan is a Project Associate at the National Institute of Advanced Studies. Angkuran Dey and Meghna Manoj are Postgraduate scholars at the Centre for South Asian Studies at Pondicherry University.

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