Russia’s threat to cut off energy supplies to Europe: Three implications
By Sai Pranav

On 20 July, the European Commission called for mandatory gas demand reduction from 01 August 2022 to 31 March 2023 up to 15 per cent for all the member nations to save energy for the upcoming winter. The EU fears the permanent disruption of the Nord Stream 1 pipeline after its 10-day annual maintenance by Russia. Since the winter would pose difficulty in living, increasing the demand for more energy causing energy shortage and price rise. Therefore, the EU aims to have an 80 per cent capacity of energy in underground gas storage by 01 November 2022 to battle through the winter without impacting the price levels. 
 
Supply disruption by Russia
The EU accused Russia's president Vladimir Putin for weaponizing gas in response to the sanctions. Although Putin denied the claims stating Russia will deliver gas as promised, Gazprom reduced the supply to 40 per cent capacity of the Nord Stream 1 pipeline. According to Putin, there might be a possible reduction in supply via Nord Stream 1 pipeline due to the maintenance of other equipment. Russia has blamed Canada for not returning the turbine that was sent by the German company, Siemens Energy for repairs. Canada refused to return the turbine as it saw as a violation of its sanctions on Russia. But due to persuasion from Germany, they returned the turbine to Siemens Energy which in turn gave it to Gazprom, a Russian gas company. Followed by the row of European countries not paying in Russian roubles for gas and as a counter measure to the sanctions, Poland, Bulgaria, Finland, the Netherlands, Denmark, Norway, and Lithuania have been cut off from energy supplies by Russia.
 
Three Implications
First, Europe’s energy problem. From the start of Ukraine war on 24 February 2022, the energy prices have on the rise. Europe’s existing energy crisis has furthered due to the war and from the dual effect of the sanctions put on Russia. It has resulted in increased demand for more energies from the industries and household and this will aggravate with climate conditions leading to price hike. The EU has taken measure such as incentivizing for less energy consumption and switching for other forms of energy. But the taken steps have low outcomes resulting in supply shortage. Poor condition of the existing pipelines and limited supplies to Austria and southeastern Europe from Ukraine’s pipeline are also other reasons for the dualling energy crisis. Apart from this, EU member states such as Germany, Poland and Austria shifting towards their coal mines as a short-term solution to the energy crisis can be a short-term solution but lead to environmental risk.
 
Second, energy combined economic problem. The surging energy prices are predicted to impact EU's industrial sectors and have a longer effect on its economic growth. Inflation and the cost-of-living crisis have decreased consumer growth and purchasing power. Industries such as chemicals, fertilizers and steel have been negatively impacted due to supply disruption in gas. Such industries use gas as an energy source and a raw material as well. With investments into renewable energies falling short to meet the energy demands and increased energy imports from Middle-East, the stress on economy is set to build more along with the energy crisis.
 
Third, search for alternatives. The EU is looking for other ways to replace Russian gas imports to fulfil its energy needs. The bloc is eyeing the middle east for an alternative. Germany had already signed a deal with Qatar to import LNG and hydrogen fuel from Doha, which is the largest LNG exporter. Construction of LNG floating terminals to store the energy from places like the US or Qatar and transiting it towards Norway, Algeria and North African countries are also other methods by the EU to alternate the oil shortage.
 
References
Philip Oltermann, "Germany worries about gas rationing as supply from Russia halted," The Guardian, 19 July 2022
America Hernandez, "Emergency gas rationing for EU countries, under crisis plan," POLITICO, 18 July 2022
"Exclusive: Russia likely to restart gas exports from Nord Stream 1 on schedule - Russian sources," Reuters, 20 July 2022
Kate Abnett and Nina Chestney, "Europe races to cut Russian gas usage amid new Putin warning," Reuters, 20 July 2022
"EU urges countries to reduce gas demand by 15% amid threat of Russian cuts," Deutsche Welle, 20 July 2022
"Save Gas for a Safe Winter: Commission proposes gas demand reduction plan to prepare EU for supply cuts," ec.europa.eu," 20 July 2022
Jake Horton and Daniele Palumbo, "Russia sanctions: Can the world cope without its oil and gas?," BBC, 11 July 2022
"Germany, Qatar sign energy partnership agreement," Al Jazeera, 20 May 2022
Mathew Dalton, "Some European Factories, Long Dependent on Cheap Russian Energy, Are Shutting Down," Wall Street Journal, 13 June 2022

War in Ukraine: Day 148
By Emmanuel Royan
 
War on the Ground
On 21 July, the National Bank of Ukraine (NBU) devalued the Ukrainian hryvnia currency by 25 per cent against the US dollar to assist the country from the economic impact of the war. The bank reduced the new hryvnia rate at 36.5686 to the dollar compared with the previous rate of 29.25. The governor of NBU Kyrylo Shevchenko mentioned that the new exchange rate "will become the anchor for the economy and make it more resilient at times of uncertainty." Changing the exchange rate would result in the increased inflows of foreign currency by exporters and minimize the "speculative behavior of market participants." The NBU has also forecasted the country’s inflation rate for 2022 to be more than 30 per cent from its previous forecast of 20 per cent. 
 
On the same day, the Ukrainian Stock exchange reported that the permission for holders of its Eurobonds to defer payments for two years and holders of its Value Recovery Instruments (VRIs) to change their terms is scheduled for tenth August. The Ministry of Finance stated that this measure will preserve foreign exchange liquidity within the country and reduce the existing USD five billion monthly budget deficit. 
 
Also on 21 July, the Secret Service of Ukraine detained a Russian spy suspected of sharing on the ground intelligence in Ukraine to assist the invasion. The agent was claimed to be a major business owner. The individual has been collecting information on deployment and movement of forces in the South and transmitted collected intelligence to the Russians by secure communication channels. His messages included map coordinates, detailed descriptions and pictures of buildings.
 
On 21 July, Ukraine’s Ministry of Digital Transformation reported that the joint agreement of the mobile operators of Ukraine and the EU will be extended for ease of communication. The refugees taking shelter in other countries will be able to continue calling their relatives in Ukraine without extra charges
 
On 21 July, the spokesperson for the Ministry of Foreign Affairs of Ukraine Oleh Nikolenk urged China to not politicize the war in Ukraine and to use its powers on Moscow to condemn the war. 

The Moscow View
Claims by Russia 
On 21 July, Russia’s president Vladimir Putin signed a decree to grant citizenship status to an individual from France. The head of the Foundation for the Development of Russian-French Strategic Initiatives, Pierre Malinowski served eight years in the French army. Then he was a member of the European Parliament, where he dealt with issues of relations with Russia. For the past six years he has been residing in Moscow and organizing historical projects based on the common history of Russia and France.

On 21 July, Hungary’s foreign minister Peter Szijjarto visited Moscow to purchase gas for his country. His party office stated: “In order to ensure the security of Hungary’s energy supply, the government has decided to purchase an additional 700 million cubic meters of natural gas in addition to the quantities stipulated in the long-term contracts.” 
 
On 21 July, the operator of the Nord Stream gas pipeline, Nord Stream AG has completed the maintenance of the pipeline and the twin turbines within the scheduled time. The operator mentioned that gas flow has achieved 40 per cent of the maximum capacity. Kremlin spokesman Dmitry Peskov stated that Western sanctions obstruct the maintenance of equipment and turbines critical for Nord Stream one  to work at full capacity. He said: "Any technical difficulties linked to this are caused by those restrictions that European countries introduced themselves."
 
Also on 21 July, the director of the Russian Foreign Ministry's second Commonwealth of Independent States, Alexey Polishchuk department stated that the 5+2 format on the Transnistrian settlement de facto was not progressive and gave no alternate solutions. The peace talks in the 5+2 format which includes Moldova and Transnistria as parties to the conflict, Russia, Ukraine and the Organization for Security and Cooperation in Europe acting as mediators and the EU and US with the observer status has began to lose momentum amid the political instability in Moldova.
 
On 21 July, the chief of Russia’s National Defense Management Center, Mikhail Mizintsev reported that more than 2.7 million people have been evacuated from Ukraine and from the Lugansk and Donetsk People’s Republics to Russia since 24 February. He stated: "Despite the difficulties and obstacles created by the Kiev regime, during the day, as many as 26,764 people, including 4,624 children, were evacuated from dangerous zones in various Ukrainian regions, and from the republics of Donbass to Russia without participation of the Ukrainian side."

The West View
Responses from the US and Europe  
On 21 July, the first lady of Ukraine, Olena Zelenska visited Washington to address the US Congress and called for additional defensive weapons. She expressed gratitude to the US for its assistance in providing aid to Ukraine. She stated:“We are grateful, really grateful that the United States stands with us in this fight for our shared values for human life and freedom.” Speaker of the House Nancy Pelosi said Olena’s address has made the legislators “...learn more about the terrible toll of the Russian invasion and to express our gratitude to the people of Ukraine for their fight for democracy.” Senator Roger Wicker said that supplying Ukraine with defense systems was a “necessary part of our efforts” to help Ukraine, and Senator Bill Cassidy said that the Biden administration had congressionally approved the funds for Ukraine.
 
On 21 July, the US Central Intelligence Agency director William Burns reported that an estimated 15,000 Russians were killed in the war in Ukraine during his address to the Aspen Security Forum in Colorado. Also during the conference, the chief of MI6 Richard Moore mentioned that Russian spies working as diplomats in Europe have been expelled. Moore stated that the expulsions of about 400 Russian diplomats from countries in continental Europe, including France and Germany, had reduced the Kremlin’s espionage capabilities.
 
On the same day, the UK foreign secretary and prime ministership candidate Liz Truss in an interview with BBC Radio mentioned that she did not support the direct involvement of British troops in Ukraine. Truss said: "We are doing all we can to support Ukraine. We've led the international coalition on sending weapons, we're putting the sanctions in place, but I do not support the direct involvement of UK troops."
 
The UK’s National Crime Agency called for more funding to address Russian kleptocracy. NCA claimed that it receives only a third of the budget per officer given to the FBI, making it difficult for it to combat Russian kleptocracy and sanctions evasion. The UK had lagged behind the US in seizing the assets of Russian oligarchs who had been sanctioned, because London was unable to commit the same "substantial level of investment" that Washington had made in fighting global corruption and evading sanctions. 
 
The UK’s defense secretary Ben Wallace has revealed a further military support package for Ukraine, The UK will supply scores of artillery guns, drones and more anti-tank weapons to Ukraine in the coming weeks. He also mentioned Counter-battery radar systems and more than 50,000 rounds of ammunition for Ukraine’s existing Soviet era artillery will be provided.
 
On 21 July, Bloomberg claimed that the Kremlin may hold referendum elections in the occupied territories for Putin to include them into Russia within September. According to sources on the ground authorities are preparing to set up elections in regions the Russian military is able to take control of in the upcoming weeks.
 
On 21 July, the foreign banks operating in Russia, which include Citi and Raiffeisen Bank International, began to recruit staff for operations amid sanctions. The Central bank of Russia has refused to take over the operation of foreign banks amidst domestic calls to do so. The foreign banks are unable to move out of Russia because of sanctions, therefore the banks have begun to start its operations and service nevertheless. 
 
On 21 July, the EU froze assets and banned visas of ten Syrians for recruiting mercenaries to fight for Russia. The names of the Syrians and two private security firms were added to the EU sanctions list. Those on the blacklist include the owner of the Cham Wings airline Issam Shammout, who is a close ally of Syria’s President Bashar al-Assad. An army colonel, Saleh al-Abdullah is accused of involving forces from his 16th Brigade, who worked with Russian forces in Syria, to fight against Ukraine. 

The Global Fallouts
Implications of the Ukraine war

On 21 July, South Korea’s Ministry of Oceans and Fisheries reported that the cargo processed at seaports fell 5.1 per cent in the second quarter of this year amid global supply disruptions due to the prolonged conflict in Ukraine. Cargo operated at the ports came to 373.98 million tons in the April-June period, compared with 394.17 million tons a year earlier.

References
“Ukraine devalues hryvnia currency by 25% against U.S. dollar,” Reuters, 21 July 2022
Ukraine's SSU Successfully Arrest Suspected Russian Agent,” KyivPost, 21 July 2022
“Ukrainian First Lady Olena Zelenska Seeks More U.S. Support in Address to Congress ,” Wall Street Journal, 21 July 2022
“Ministry of Digital Transformation Expands Services for Ukrainian Refugees,” KyivPost, 21 July 2022
NBU predicts inflation growth in 2022 to over 30%, its decline to 20.7% in 2023,” Interfax, 21 July 2022
“Ukraine receives clear signs of support for proposal to defer payments on eurobonds from key owners group,” KyivPost, 21 July 2022
“Ukraine calls on China to not politicize Russia's aggression against Ukraine, use its influence on Interfax-Ukraine,” KyivPost, 21 July 2022
“Hungary FM in Russia to Discuss Buying More Gas,” KyivPost, 21 July 2022
“Nord Stream operator completes planned maintenance works on gas pipeline on time - Business & Economy,” TASS, 21 July 2022
Mellisa Eddy, “Russia-Ukraine War: Russia Restarts Gas Flow,” The New York Times, 21 July 2022
“Transnistrian 5+2 format de facto suspended,” TASS, 21 July 2022
“Almost 3 mln people evacuated from Ukraine, DPR, LPR to Russia since operation began ,” TASS, 21 July 2022
“Putin grants citizenship to Frenchman Pierre Malinowski,” lenta.ru, 21 July 2022
“Kremlin Blames Russia-Europe Gas Supply Problems on Western Sanctions,” The Moscow Times, 21 July 2022
Phill Stewart, “CIA director estimates 15,000 Russians killed in Ukraine war,” Reuters, 21 July 2022
National Crime Agency calls for more funding to tackle Russian kleptocracy,” The Guardian, 21 July 2022
“Half of Russian spies in Europe expelled since Ukraine invasion, says MI6 chief,” The Guardian, 21 July 2022
“UK to send scores of artillery guns and hundreds of drones to Ukraine,” UK government, 21 July 2022
“UK's Truss: I do not support direct involvement of our troops in Ukraine,” Reuters, 21 July 2022
“EU slaps sanctions on Syrians accused of recruiting mercenaries for Russia,” KyivPost, 21 July 2022
“Russia Moves to Annex Occupied Ukrainian Land by September,” Bloomberg, 21 July 2022
“S. Korea's seaport cargo down 5.1% in Q2 amid Ukraine crisis By Yonhap,” The Korea Herald, 21 July 2022
“Exclusive: Citi, Raiffeisen, other foreign banks seek staff in Russia as they struggle to exit,” Reuters, 21 July 2022

IN BRIEF
By Rishma Banerjee

ITALY
Prime minister Draghi resigns signalling impending snap elections
On 21 July, the Italy’s prime minister, Mario Draghi handed in his resignation, after the coalition of his national unity government collapsed. However, he has been asked by president Sergio Mattarella to stay on in a caretaker capacity, till snap elections are on 25 September. Leader of the Brothers of Italy party, Giorgia Meloni welcomed the news, as the bloc of conservative parties led by the Brothers of Italy seem to be in line to win a clear majority at the ballot. (Crispian Balmer, Giuseppe Fonte and Angelo Amante, “Mario Draghi resigns, plunging Italy into political turmoil,” Reuters, 22 July, 2022)

REGIONAL
European Central Bank hikes interest rates for first time in 11 years
On 21 July, the European Central Bank (ECB) declared that they will be raising the interest rates for the first time in 11 years. The interest has been raised by 0.5 per cent points to 0.0 per cent, while it had been negative since 2014. ECB president Christine Lagarde clarified that the inflation rate in the country is expected to remain high, due to the energy and food crisis, and that further rate hikes "will be appropriate." This step comes after the Bank of England and the US Federal Reserve also increased their rates to try and deal with rising prices. (“Eurozone raises interest rates for first time in 11 years,” BBC, 21 July 2022)

Belgium and Iran sign controversial prisoner exchange treaty
On 20 July, Belgian parliament approved a controversial prisoner exchange treaty with Iran. 79 MPs votes in favour of the treaty, while 41 rejected it and 11 abstained. Justice minister, Vincent Van Quickenborne defended the treaty saying that it was important to free innocent people from the authoritarian regime in Iran. However, local NGOs and human rights groups criticised the deal and said that it will allow Iran to engage in “hostage diplomacy.” They fear that this could lead to convicted terrorists like Assadollah Assadi to be pardoned in exchange of Olivier Vandecasteele, a Belgian humanitarian worker who has been illegally held in Iran. The treaty could also help Swedish-Iranian academic Ahmadreza Djalali, sentenced to death in Iran be released. (“Belgian MPs approve controversial prisoner exchange treaty with Iran,” Euronews, 21 July 2022)

Sweden and Finland’s NATO protocol ratified by Finland and Sweden
On 21 July, Lithuania and Romania’s parliaments voted to ratify the protocol on Sweden and Finland’s accession. In Lithuania, the parliament ratified Finland’s accession protocol with 111 votes and Sweden’s with 112 votes, and the president Gitanas Nausėda signed the laws, thus completing the ratification procedure. In Romania, the members of parliament convened an extraordinary session to vote on the ratification process. The Chamber of Deputies and the Senate approved the law and no votes were registered against it. (Bogdan Neagu and Giedre Peseckyte, “Lithuania, Romania ratify Finland, Sweden’s NATO accession,” Euractiv, 21 July 2022)

Turkish foreign minister denies attack in Iraq
On 21 July, Iraq protested against Turkey for their alleged strikes on an Iraqi tourist resort, where eight people were killed and 20 were wounded. Turkey’s foreign minister, Mevlut Cavusoglu has rejected the claims and said that they are willing to cooperate with Iraq’s authorities to investigate the “treacherous attacks.” He mentioned that the attack was being used as a “smokescreen” to prevent Turkish military operations in the region. Casavoglu further clarified that Turkey’s fight in Iraq has always been against the PKK, and that they would not attack any civilians. (Ali Abd Al-Hasan and Samya Kullab, “Turkey denies carrying out deadly strikes in northern Iraq,” AP News, 21 July 2022)
 
CLIMATE
Intense heatwave in Europe moves east and southwards
On 21 July, Reuters reported that the heatwave across Europe was moving towards the east and south. As a result countries like Italy, Poland and Slovenia have issues their highest heatwave alerts. In the ongoing European heatwave has led to hundreds of deaths in the continent. The high heat has also exacerbated the wildfires across Europe. A gas tank exploded in a forest in Italy leading to a forest first forcing hundreds to flee in central Italy. Similar numbers had to flee in Greece as winds spread wildfires in Greece too. Reportedly, wildfires are also ranging in Spain, Portugal, France and Poland too. (Renee Maltezou and Federico Maccioni, Europe's heatwave reaches Poland, Greece as it moves eastwards, brings wildfires, Reuters, 22 July, 2022)