The second week of Champions League last-16 action kicks off tonight, with a pair of very juicy matches indeed: Bayern Munich at Juventus and Barcelona at Arsenal. So maybe it’s the appropriate time for a little reminder about one of that competition’s chief sponsors.

Gazprom has paid big to associate its name with Europe’s leading international football club competition for a number of years now, and at every commercial break you’ll see an elaborate paean to it on your TV screen, generally in cartoon form and accompanied by a medley of leading tunes from Tchaikovsky. The thing everyone must remember is that Gazprom is not really a company in the conventional sense of that term. Rather, it is a component of the Russian state, tasked with making money, for sure, but also with carrying out Putin’s strategic objectives. Those have included, multiple times, forgetting about money entirely and cutting off gas supplies to entire countries – generally in mid-winter, of course – to make them knuckle under. Among these victims have been the Ukraine, of course, but also those EU countries, generally to the East (e.g. Bulgaria, Slovakia, Estonia, Finland), which have not had the resources or time to make the considerable infrastructure switch from the heavy dependence on that gas that they had during Soviet times.

So you can watch those playful cartoons of serious-looking employees manning gas pipeline control rooms, etc., flick by on your screen, but you need to remember: this is a “company” that would be glad to simply let you and your family freeze; all that it takes is for Putin to give the word. The sad fact that it has been able to do that reflects the absence of any common EU energy policy. Yes, the Commission has certainly been aware of the problem, and of course there exists a Directorate-General for Energy within the Commission, now headed by the Slovak Maroš Šefčovič. And in one sense it’s reassuring to read (in Dutch, from Het Financiële Dagblad; behind paywall) that the Commission recently concluded from a study that “well coordinated actions by member-states, above all in case of emergency, can considerably increase the security of [natural gas] delivery.” (On the other hand: Why did they find this out only recently? And what are they going to do to make that conclusion a reality?)

Fortunately, other developments have occurred which – often independently from anything the Commission might have done – serve to lessen this dependency on Gazprom and Russia. For one thing, demand for natural gas is declining simply due to increased energy-efficiency and alternate renewable sources of energy that are coming on-line. And there are other developments, too, discussed in a separate article not stuck behind a paywall (although it is in Polish):

“American natural gas arriving on European shores forces Gazprom into a battle for the market and for investors.” Yes, the Americans are coming to the rescue again, specifically the shale-oil companies which, via fracking, have unlocked considerable new supplies of both petroleum and gas there on the North American continent. Mighty kind of them, you have to admit, namely to pollute their own ground-water and a as result have so much gas coming out of local household water-taps that you can light a match and explode it, all just to produce some more fossil fuels to sell. But the business of America is business. (more…)

New bad news for the Ukraine:

“Hungary stops gas deliveries to Ukraine.” Would that have something to do with the visit by Gazprom chief Alexei Miller to Budapest on Monday of this week to speak with Hungarian PM Viktor Orbán?

Not if you ask the Hungarians. From the lede:

According to the government in Budapest and the State company responsible for the pipelines, FGSZ, the step was taken due to the rise in domestic demand for gas. Satisfying Hungarian demand has priority.

Yeah, right. Like the rest of us Europeans, Hungary has been enjoying the usual global warming-induced prolonged summer September weather, with temperatures dipping below 15ºC (59ºF) only at night. Demand for gas there – for heating – is due to rise maybe end November, beginning December, and not particularly now.

The real story here can be clearly seen from a couple weeks ago, when Gazprom similarly forced Poland to stop the “reverse supplies” of natural gas it was providing to the Ukraine by threatening to cut off the Poles’ supply they were diverting from. It’s just that the latter were willing to be rather more straightforward about what was happening than the Hungarians. Indeed, this Telegraaf piece speaks of a €10 billion Russian loan Orbán’s government is hoping to gain. How is such a thing even possible after the EU has collectively imposed repeated waves of sanctions – including of the financial kind – on Russia?

I’d like to derive two remarks from this data-point, which we can call “Major” and “Minor”:

• Major: Putin really likes throwing Russia’s geopolitical weight around using the threat of energy cut-offs. I believe I read somewhere that the dissertation he wrote for whatever higher academic degree it was that he earned back in his KGB schooldays had precisely to do with that subject.The prevailing wisdom seems to be that, while the Ukraine has of course already been shoved out into the cold (literally) for the coming winter when it comes to Russian natural gas, Putin would not dare to do that to the rest of the EU because of the revenue loss that would entail. Then again, he seemed indifferent enough to the food-price inflation the Russian people have had to suffer resulting from his embargo on EU agricultural imports. Make no mistake: this coming winter is when the EU will be confronted in the bleakest and most direct way possible with the problem of how to do without Russian energy supplies.
• Minor: Notice here as well the common thread of the involvement of Gazprom, which is supposed to be a private company. Well, at least it is a private company to the likes of FIFA, which allows it to pay the mega-price to be one of the commercial sponsors of the Champions League. (It is also the shirt-sponsor of the famous German football club Schalke 04.) Inevitably, those watching Champions League games at home have to put up with repeated commercials extolling Gazprom as a reliable energy-provider; if you watch closely, you’ll even notice how the characteristic Champions League graphic used when heading into and out of commercial breaks, in which spotlights come on in turn around a circular stadium, precisely recalls the pattern of gas-jets lighting up on a stove! How many of those looking on for the football actually realize that Gazprom will be glad to let them freeze next winter, if only Putin gives the order?

There are some people – or institutions – that can’t help but look at the bright side of things. Over in Eastern Ukraine, seven European military officers working for the OSCE have just been put out for display at a press conference, unconvincingly insisting “We are not prisoners of war, we are guests of [Sloviansk] Mayor Ponomarev”; the Economist writes [subscription required] “Every day, incident by incident, the situation is deteriorating and moving towards major armed conflict of one form or another.”

Not to worry, though, at least if you read the Netherlands’ leading business newspaper Het Financiele Dagblad: The Ukraine crisis also has its winners. The lede:

The drift since the crisis in the Ukraine has been: Europe has to become less dependent on Russian gas. Who can profit from that?

Oh, a number of organizations can profit, and journalists Gijs den Brinker and Mathijs Schiffers have the run-down. (more…)

It seems Russian troops – even though they (mostly) are not yet labeled as such – are in the Crimea to stay. Reclaiming that strategic peninsula for Ukraine would require the use of force, something no state outside of the Ukraine is willing to contemplate, and before which even Ukraine authorities themselves should hesitate due to the risk of thereby only losing more of their territory.

What the West is left with is proceeding with a deliberate worsening of relations with Vladimir Putin’s regime as punishment: denying him the chance to get yet more mileage out of his $51 billion Sochi reconstruction by staging a G8 summit there, for instance. But the unfortunate problem is that, to a great extent, this can turn out to be self-defeating as the West needs Russia just as Russia needs the West.

Anyone who follows international affairs regularly can name two vital areas right off the bat for which that is true: Iran and Syria. For the former, the West seems very close to achieving a remarkable deal that will safeguard against any nuclear weapons ambitions Iran might have – but one for which Iran’s willingness has been predicated upon united political and economic pressure from the West and from Russia. As for Syria, the regime there is already behind on the schedule for the elimination of its chemical weapons that Russia did quite a lot to help draw up.

(Now, this NYT piece claims that Syria is ready to try to speed things up to try to make up lost ground – but the article is dated March 4. Returning to Russia’s potential reluctance for any more international cooperation, there are always those inspections that Putin, in good times, ordinarily consents to undergo in relation to various arms-control treaties.)

Then there are the more tangible things – like natural gas. (OK, it’s a gas, but still slightly more tangible than a pure concept such as “arms control.”) Plenty of European countries are still dependent on gas supplies from Russia, piped through the Ukraine. And so we get this:

I know, that must seem at first sight like some confused jumble. “V4,” for example: what’s “V4”?* That is shorthand for the “Visegrad 4,” itself a shorthand for the Central European countries Poland, Czech Republic, Slovakia, and Hungary. And what the governments of those countries have done is think ahead a bit in light of this new geopolitical confrontation with Putin. (more…)

You’ve heard about the latest EU member-state to get in line for bailout assistance, right? It’s small, but it’s financial needs are anything but. It’s Cyprus. But it’s also a beggar with a difference, namely a rather too-close relationship to Russia.

Schuldenland: Zyperns Trickserei mit Russen bringt EU in Rage http://t.co/xZO5vzNJ

July 9, 2012 3:31 am via SocialFlowReplyRetweetFavorite

@weltonline

Welt Online

Germany’s Die Welt has a great run-down of the situation on that Mediterranean isle, so far-flung that it might as well be considered Middle Eastern. But no, as of 1 May 2004 Cyprus has been an EU member-state, as of 1 January 2008 in the Eurozone. And as of a week ago last Sunday it is EU Council president! This despite all the international intrigue swirling around it, as sketched in this Die Welt piece, which reads like something out of a spy novel. (more…)

A brief review here of an important European energy project: Nord Stream. That’s the natural gas pipeline currently being built under the Baltic Sea, connecting the Russian coastal town of Vyborg (Выборг, north of St. Petersburg, on the Finnish border) with a western terminal near the East German coastal town of Greifswald. But as the Nord Stream homepage explains, “[This] is more than just a pipeline. It is a new channel for Russian natural gas exports, and a major infrastructure project which sets a new benchmark in EU-Russia cooperation.”

All true, in a way. But the crucial fact that the website is in no hurry to mention is that this pipeline will deliver Russian natural gas to Germany while by-passing the countries through which a cheaper, overland pipeline would normally go, in particular Poland. To be sure, pipelines to Europe through Poland (and the Ukraine) already exist. But Russian relations with those countries are usually rather prickly; with the completion of Nord Stream, the Russian authorities will have the option within a few years to cut them out of natural gas transmission completely – literally to leave them out in the cold, with no gas, as has already happened this past decade during a number of winter-time confrontations with Ukraine. (more…)

It now looks like an agreement is in place to let Russian natural gas shipments to the West resume with independent monitors from the European Union in place, but those have been blocked completely since Thursday (8 January) and it will take about a further three days to resume full service. In the meantime, unfortunately, the continent has suffered under a bitter cold spell, so that the political pressure from freezing constituents has already reached the breaking-point – I wouldn’t really call it the “boiling-point” – in Slovakia. As a number of press outlets report, among which Berlin’s Der Tagesspiegel, Slovak premier Robert Fico announced at a Saturday evening televised press conference that his country would bring back on-line the atomic reactor at Jaslovské Bohunice that it had just shut down before the end of 2008.

Gee, why did the Slovaks go and close that reactor in the first place a few weeks ago? Namely because doing so, and doing so permanently by the end of 2008, was a provision in the accession agreement by which the country became a EU member-state back in 2004 in the first place. With the Jaslovské Bohunice reactor we’re talking in fact about the very first nuclear reactor in the former Czechoslovakia, whose construction began back in 1958 although it first went into operation only in 1972. Naturally, then, it’s a reactor built in the Soviet style, which in the light of such incidents as Chernobyl raised safety concerns to such a degree that the EU insisted that Slovakia eventually shut it down. (more…)

The Reuters/Jefferies CRB Index is “the most widely recognized measure of global commodities markets” (if they do say so themselves on their Jefferies website) and last 2 July its measurement of the price of a bundle of 19 different raw-material commodities reached its all-time high. Since then, though, it has fallen by 10%, reports Christian Losson writing for the French newspaper Libération. (Raw Materials Deflate… A Little. Losson calls it the “Jefferie Reuters CRB,” FWIW.) Specifically: natural gas down 31%, corn down 19%, nickel down 18%, soya down 13%, gasoline down 11%. Even palm oil is affected (don’t laugh, it’s apparently important in the production of bio-lubricants), Malaysia is now finding it hard even to give the stuff away.

What’s happening here? Is it an up-and-down see-saw? The working-out of some cycle? A commodities crash? That CRB index hasn’t lost this much ground since 1980, when super-high interest rates drove America and then much of the rest of the world into recession. Losson tries his best to get some expert guidance, but the experts aren’t saying much. Maybe you can turn the causality around: if commodity prices are acting this way, that must mean that in effect America (and maybe much of the rest of the world) is in a recession now.

Then again, maybe not, because even more striking is the sheer volatility of commodities prices. The last week, he reports, both mineral and agricultural products (but he does not include oil/gasoline) have headed back up again in price. Beyond that, as one French professor he quotes reminds us, the potential for these prices to go higher – all it takes is some geopolitical or climate shock somewhere – is much larger than it is for them to continue to sink.