Photo : REUTERS-Loren Elliott
20 May 2022, Friday| NIAS Europe Daily Brief #206
IN FOCUS
Circumventing its sanctions, the EU drafts legal plans to buy Russian gas
By Ashwin Dhanabalan
On 17 May, Reuters reported that the European Commission said it plans to open payment accounts at a Russian bank. This would allow states dependent on Russian energy to pay for their gas without breaching the EU’s sanctions against Moscow. The EU clarified that its previous guidelines did not prevent companies from opening an account at Gazprom which would allow them to continue purchasing Russian gas.
Disclaimers included
While paying it to the Russian bank, the companies would have to make it clear that they were paying in EUR or USD. This was according to the obligations stipulated under the existing contracts between the company/entity and Moscow. However, according to Russia’s decree, two separate accounts would be needed, one to accept the foreign currency and the other to convert it into rubles. But, the new draft plan would place the ball in Russia’s court as Moscow would be legally bound to accept the payments made to a Russian central bank as per the contracts.
Thus, the draft plan would help states dependent on Russia’s gas to continue importing it. This comes as Russia cut Bulgaria and Poland’s supplies as they refused to pay in roubles, and the deadline for payments of other states was also closing in. Bloomberg further reported: “Gazprom provided buyers with additional assurances that the central bank would not be involved in the conversion process.”
Divisions within
On 17 May, Finland’s energy company, Gasum, said that it would not make payments under the proposed plan. Gasum CEO Mika Wiljanen said they would instead take arbitrary proceedings against Russia. While France’s energy firm Engie said that the next payment would be made in EUR by month-end. Germany’s Uniper stated that it would follow the EU’s draft plan to pay for gas in EUR.
Way forward for the EU
On 18 May, the European Commission also unveiled a EUR 210 billion plan to lessen the bloc’s reliance on Russian oil. The plan hopes to fasten the transition away from Russia’s fossil fuels to green energy by 2027. The plan consists of three steps: First, a switch to import more non-Russian gas, second, a faster rollout of renewable energy, and third, more effort to save energy.
References
Ewa Krukowska and Alberto Nardelli, “EU Drafts Plan for Buying Russian Gas Without Breaking Sanctions,” Bloomberg, 20 May 2022
“EU clarifies how companies can legally pay for Russian gas, ENI and RWE open bank accounts,” Euractiv, 17 May 2022
Ewa Krukowska and Alberto Nardelli, “EU gives companies green light to buy gas from Russia,” Al Jazeera, 16 May 2022
Harry Dempsey, Niko Kommenda, Leslie Hook, Chris Campbell, Caroline Nevitt and Sam Joiner, “Can the EU wean itself off Russian gas?” Financial Times, 19 April 2022
Kate Abnett, “EU says legal Russian gas payments possible, warns against rouble accounts,” Reuters, 17 May 2022
War in Ukraine: Day 82
By Rishma Banerjee
War on the Ground
On 18 April, the first war crime trial was held.. Vadim Shishimarin, a 21-year-old tank commander from Russia has been accused of killing an unarmed 62-year-old Ukrainian. Shishimarin pleaded guilty on Wednesday and even apologised to the widow of his victim.
On 19 April, Ukraine’s minister of environmental protection and natural resources, Ruslan Strilets said that they will ask for reparations from Russia for the huge environmental damage that their invasion has caused in the country. He spoke about how entire ecosystems have been destroyed and natural habitats of the wildlife have been contaminated due to the Russian advances.
The Moscow View:
Claims by Russia
On 19 May, Russia’s foreign ministry reported that they will expel five Portuguese diplomats from Russia. This is in response to Lisbon ordering the eviction of 10 Russians from their country. The foreign ministry said that the diplomats will have to leave within 14 days of them receiving the corresponding note.
Russia’s deputy foreign minister also spoke about the food crisis and said that the sanctions against Russia were one of the primary reasons for the intensifying food crisis. Moscow has said that they will consider lifting the blockades from the occupied ports in Ukraine if the sanctions against their country are removed.
The West View:
Responses from the US and Europe
On 19 May, the US Senate passed the bill which will provide USD 40 billion for additional aid to Ukraine. So far, they had given Ukraine USD 3.9 billion worth of military assistance, as weapons. The previous instalment included howitzers, anti-aircraft Stinger systems, anti-tank Javelin missiles, ammunition, and armed drones. USD four billion will be for international disaster assistance needed for the humanitarian crisis. The package also has USD nine billion for economic support; this is the money that can be used to combat the rising food security crisis. USD 200 million of this package is for the US state department’s diplomatic programs that are to respond to the crisis in Ukraine. While a significant amount of money is also kept for security assistance, the package includes USD 8.7 billion for the US to replenish the equipment stocks sent to Ukraine. An additional USD 11 billion has been allotted in the Presidential Drawdown Authority, with which the president can authorize the transfer of articles and services without congressional approval, in case of an emergency.
The chairman of the US joint chiefs of staff, general Mark Milley had a phone call with Russia's chief of general staff Valery Gerasimov. While the specific details of their correspondence has been kept confidential, General Milley’s spokesperson said that they talked about ‘several security-related issues of concern’. They have also agreed to keep the communication lines open.
On 19 May, Switzerland’s department of foreign affairs said that they will be reopening their embassy in Kyiv. Five staff members, including the ambassador, are set to return to the office.
Italy’s prime minister, Mario Draghi, in an address to the Senate said that achieving a ceasefire in Ukraine was of utmost importance. He mentioned that Moscow must be brought to the negotiating table, but did not speak about whether Italy will continue to supply weapons to Ukraine.
On 19 May, the European Parliament suggested that the former German chancellor Gerhard Schroeder be blacklisted. Schroeder is on the board of Russian state-owned oil company Rosneft. This suggestion is also a way to make him not take up a position with Gazprom. He is allegedly the one that sponsored the building of gas lines between Germany and Russia, thus increasing their dependence on Moscow. In a meeting with EU leaders, the current chancellor Olaf Scholz said that the EU must prepare to assist Ukraine in rebuilding their country after the war is over. He also pointed out that the reconstruction of Ukraine will be an extremely expensive process. He suggested collective action on the EU’s part and said: “We as the EU must start laying the ground for a solidarity fund financed by contributions from the EU and its partners.”
The Global Fallouts:
Implications of the Ukraine war
Japan’s prime minister Fumio Kishida said that they will double the financial aid to Ukraine. The revised amount will come to USD 600 million, and will be sent in a coordinated move with the World Bank.
On 19 May, the G7 member countries came to an agreement about sanctioning USD 18.4 billion to Ukraine. At the meeting in Germany, it was reiterated that the G7 member states are standing behind Ukraine and are ready to provide any form of assistance that they need to "get through this.” At the meeting, the German finance minister said that their country will pledge EUR 1 billion to help Ukraine with its short-term liquidity needs.
The International Committee of the Red Cross (ICRC) said that they have begun registering the hundreds of Ukrainians who have surrendered at the Azovstal Steel Plant, in Mariupol. These people have been taken in by Russia as prisoners of war, and are being taken to Russia-backed territories in the country. The ICRC clarified that they are just tracking the fighters leaving the plant, including the wounded ones, but are not responsible for transporting them to where they are being held.
References
Pavel Polityuk, “Russian soldier pleads guilty in war crimes trial in Ukraine,” Reuters, 19 May 2022
Natalia Zinets, “Ukraine to seek damages from Russia over huge environmental damage,” Reuters, 19 May 2022
“Russia expels five Portuguese diplomats in retaliatory move,” Reuters, 19 May 2022
“Moscow says opening Ukraine ports would need review of sanctions on Russia - Interfax,” Reuters, 19 May 2022
Daphne Psaledakis, “Factbox: The big items in Washington's $40 billion Ukraine aid package,” Reuters, 20 May 2022
“Top U.S., Russian generals speak for first time since Ukraine invasion,” Reuters, 19 May 2022
“Switzerland to reopen Kyiv embassy after two and a half months,” Reuters, 19 May 2022
“Italy's Draghi urges Ukraine ceasefire, skirts issue of arms shipments,” Reuters, 19 May 2022
“German ex-Chancellor Schroeder under EU pressure over Rosneft, Gazprom,” Reuters, 20 May 2022
“Germany's Scholz proposes EU solidarity fund to rebuild Ukraine,” Reuters, 19 May 2022
“Germany pledges 1 bln euros in grants to help Ukraine - finmin,” Reuters, 19 May 2022
“Japan says to double fiscal support for Ukraine to $600 mln,” Reuters, 19 May 2022
“Russia-Ukraine war: what we know on day 86 of the invasion,” The Guardian, 19 May 2022
Natalia Zinets and Jonathan Landay, “G7 pledges billions for Ukraine 'to get through this',” Reuters, 19 May 2022
“ICRC begins registering hundreds of prisoners of war from Azovstal,” Reuters, 19 May 2022
IN BRIEF
By Emmanuel Royan and Padmashree
THE UK
Energy firms refuse the government's plans to levy a windfall tax
On 19 May, oil and gas producers rejected proposals to levy a windfall tax on exceptional profits for the year 2022. The sector's representative, Offshore Energies UK (OEUK), estimates that producers are paying EUR 7.8 billion in taxes this year, which is up from EUR 3.1 billion in 2021. According to the independent Office for Budget Responsibility, the levy on UK fossil fuel energy producers is likely to be about twenty times higher this year than it was in 2020. Prices plunged in 2020, at the outset of the epidemic, and manufacturers suffered losses. However, profits have surged now due to steep rises in energy prices, prompting proposals for a windfall tax on such "exceptional" gains. (Douglas Fraser, “Oil and gas industry pushes backover windfall tax,” BBC, 19 May 2022)
Police conclude inquiries into the Downing parties scandal
On 19 May, the UK’s Metropolitan police said they had ended the investigations into violations of the lockdown rules at parties attended by prime minister Boris Johnson. The inquiry resulted in 126 penalties, but the identities of individuals who got them were not revealed. Between 20 May 2020, and 16 April 2021, eight events were found to have broken the lockdown restrictions, according to the police statement. 53 men and 73 women were penalized, with some receiving multiple fines. After being penalized for violating lockdown regulations, Johnson and Treasury head Rishi Sunak drew widespread criticism, even from his own Conservative Party. The Metropolitan Police’s acting deputy commissioner Helen Ball said: “Our inquiry was comprehensive and impartial, and we conducted it as swiftly as we could.” (“UK: Police end inquiry into 'Partygate' scandal at Downing Street,” BBC, 19 May 2022)
GERMANY
Former chancellor Gerhard Schroder striped off state privileges
On 19 May, the Bundestag’s budgetary committee decided to strip the former chancellor Gerhard Schroder of post-office privileges for not terminating his ties with energy firms in Russia. Schroder was the head of government between the years 1998 and 2005; he was stripped of his office and staff as well. The vote by the Bundestag’s budgetary committee came following the European parliament’s call to the European Commission president Ursula von der Leyen to sanction Schröder for his links to the Kremlin. On the same day, the European Parliament approved a resolution calling for sanctions against European members of the boards of significant Russian firms and politicians who continue to receive money from Russia. (Philip Oltermann, “Gerhard Schröder to be stripped of privileges for not cutting ties with Russia,” The Guardian, 19 May 2022)
NETHERLANDS
Cabinet plans to collaborate to construct windmills
On 19 May, the ministry of economic affairs and climate announced the collaboration plan of the Netherlands with Germany, Denmark, and Belgium to build wind farms. According to the ministry, the target will generate 150 gigawatts by 2050. The given target is expected to increase production by ten times. Although the contribution rate of the Netherlands in the 150 gigawatts remains unclear, four states assure to work together to standardize the regulations. As per the EU is concerned, it aims to achieve 300 gigawatts of electricity through hydro by 2050, but the current capacity stands at 16 gigawatts. (“Netherlands teaming up with Germany, Denmark for more offshore wind farms,” NL Times, 19 May 2022)