Russia sanctions could hammer German growth
Update: Bloomberg notes that Russian gas deliveries to Europe are suddenly in accelerating flux.
- Ukraine today received request from Poland to ship 11mcm/d of Russian gas, Ihor Prokopiv, CEO of Ukraine’s pipeline operator Uktransgaz, says in Kiev. Gazprom sent note it’s ready to supply just 7mcm, Prokopiv says
- Poland halted reverse gas flow to Ukraine of 4mcm/d by 3pm Warsaw, later than initially planned, Prokopiv
- GAZPROM SAYS GAS FLOWS TO POLAND REMAINING AT 23MCM/D
- RUSSIA LIMITING EU GAS TO RESTRICT REVERSE SUPPLY TO UKRAINE
And yet:
So all is well on the surface. Just don't look underneath.
Over the weekend, we commentedthat in response to Europe's latest, and most serious, sanction round which would finally impact Russian energy giants Rosenft, Gazprom Neft (but not Gazprom) and Transneft, "suddenly the stakes for Russia, and thus Europe, just got all too real, as Putin will now have no choice but to really ramp up the retaliatory escalation, which following the food ban can only mean one thing: a staggered reduction in gas flow to Europe."
And while Europe appears to have blown its load prematurely, with the sanctions leaked before Europe actually has the consensus to implement them(it is now a daily threat by Europe which is screaming that it will impose the sanctions any minute yet not actually doing so), Russia has no such moral quandaries and three days following our forecast, here comes Gazprom confirming once again that it is perfectly happy to play the "mutual defection"strategy in the ongoing and ever escalating game theory between Europe and Russia for one simple reason: it has all the leverage.
From Bloomberg:
In other words, this is only the beginning as Ukraine has clearly made the case that it will plug its gas reserve gap using "reverese flow" of Russian gas in transit to Europe. More importantly, this follows news earlier today from Poland’s PGNiG which said Gazprom lowered supply by 20%-24% in past 2 days.
So is this the beginning of the quite literal, ahead of the winter, European coldwar? It looks like it, although for now it is all covered up in diplomacy with Bloomberg reporting that the Russian exporter "set volumes of daily natgas deliveries to Poland at level of end of last week due to preparations for heating season in Russia, Gazprom official says by phone, asking not to be identified in line with corporate policy." That, and conveniently Gazprom decided to "carry out some maintenance work at its pipeline system in Russia." Some maintenance work which suddenly saw Poland, which is 80% reliant on Russian gas, receive up to a quarter less Russian gas...
Finally, Gazprom noted that it also has to pump additional 7.3bcm of fuel to local underground inventories for winter in next month.
To be sure, Poland refused to tip its cards, and quickly commented that it won’t be hurt "as its underground storage is full",as was to be expected simply to avoid giving Russia all the leverage, something we also explained previously, when we observed in "Here Is Why Europe Just Launched The "Nuclear Option" Against Russia" that the Europe's 2014 winter war will be between the amount of gas held in European reserves, and how long Russian companies can go without obtaining European funding.
Then again, and once again confirming it is all about leverage, and who has it, Gazeta.ru reports that it took Poland just hours to halt its reverse flowto Ukraine:
Poland has suspended gas supplies to Ukraine in reverse flow.This was stated by the head of the company "Ukrtransgaz" Igor Prokop'ev, reports RIA "Novosti."
"Not everything is so simple. Today, Russia has begun to limit the supply of gas to the Republic of Poland to thwart reverse with Poland, we learn. At two o'clock in Poland ceased to reverse the Ukraine within the 4 million cubic meters ", - he explained the situation.
Earlier Polish PGNiG reported about the reduction of Russian gas supplies by 24%.
Gazprom’s press service declines to provide immediate comments, although none is needed after taking a quick look at the European dependence on Russia gas map conveniently placed below.
You are totally right sir, Right now RUSSIA never using dollar in any trasaction with big countries such as china,iran, and other big nation.
Dollar really collapse..
EU Parliament wants Russia excluded from financial transfers system
The European Parliament on Thursday urged the EU to consider excluding Russia from the SWIFT system for global financial transactions as an additional punishment for its role in the Ukraine conflict.
SWIFT immediately denounced the proposal as discriminating against the firm, damaging its reputation and infringing on its EU-enshrined right to do business.
In a non-binding resolution, the European Parliament among other things called on the "EU to consider excluding Russia from... the Swift system."
Such a measure would complement tough economic sanctions targeting major Russian banks, energy and defence companies adopted earlier this month by the European Union.
These sanctions followed Russia's "violation of international law with the illegal annexation of Crimea and the destabilisation of Ukraine," the resolution said.
It also condemned Russia "for waging an undeclared 'hybrid war' against Ukraine with the use of regular Russian forces and by supporting illegally armed groups."
The parliament said it supported the latest EU economic sanctions against Russia and deplored the tit-for-tat measures taken by Moscow, adding they were not justified.
It stressed that a landmark association agreement between the EU and Ukraine and which both parliaments ratified Tuesday, "cannot and will not be changed," despite pressure from Moscow.
In a statement, SWIFT (Society for Worldwide Interbank Financial Telecommunication) denounced the proposal.
"The singling out of SWIFT in this manner interferes disproportionately with SWIFT's fundamental right to conduct business and its right to property," it said.
"It also constitutes discriminatory and unequal treatment," it added.
Condemning the "immense damage to our company's reputation," it said its mission is to remain "a global and neutral service provider" to the financial services industry.
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German growth could be reduced by up to 0.9 percentage points this year and 0.3 points in 2015 if the EU imposes tougher economic sanctions on Russia for its actions in Ukraine, a German magazine reported
It cited the German section of a European Commission study in which confidential scenarios for all 28 European Union member states were prepared as the bloc debates how to retaliate if pro-Russian separatists prevent Ukraine from holding free presidential elections as scheduled on May 25.
The Commission's current forecast is for German gross domestic product (GDP) to expand by 1.6 percent in 2014 and 2.0 percent in 2015. The report cited by Stern magazine said sanctions would drag these rates lower mainly by pushing up energy prices.
Europe's reliance on Russian natural gas supplies has forced leaders like Chancellor Angela Merkel to temper their threats of tough action against Russia with cautious talk of the need to engage President Vladimir Putin in dialogue about Ukraine.
Light sanctions, such as blocking imports of Russian luxury goods like furs or expanding the list of political and business figures subject to travel bans, would slow German growth by 0.1 percentage points this year and next year, the Stern report said.
But the worst-case scenario for the German economy would be prompted by a ban on imports of Russian oil and gas and Russian intermediate goods and a freeze on Russian financial assets and capital movements, according to the report.
This would have a big impact on Germany's energy supplies, it said, estimating that Germany gets 46 percent of its gas and 37 percent of its oil from Russia and is even more dependent on it for supplies of certain raw materials like copper.
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