Scholz Pushes New Pipeline Initiative

With Germany in the midst of a deepening energy crisis German Chancellor Olaf Scholz is now calling for the construction of a pipeline which would reach from Portugal to Central Europe. Naturally, the goal of such a pipeline would be to reduce Germany’s dependence on Russian gas. Even though Germany and other European nations have made strides to shrink their dependence on gas shipments from Russia, it has become clear that reliance will not diminish before the winter season arrives. Scholz has broached the topic of a pipeline with the officials from Portugal, Spain, France and the European Union. Portuguese Prime Minister António Costa has been pushing for the pipeline proposal to be examined by the EU since the early days of Russia’ invasion of Ukraine. Germany and other nations with a heavy reliance on Russian gas paid the issue little mind.

Now Germany appears intent to push the matter, even publicly admitting regret that a sincere effort was not made earlier. Of course, the geopolitical situation has changed. Now that Germany is anxiously seeking other sources for natural gas supplies, a pipeline from Portugal to Central Europe suddenly seems to be an ideal solution.

Unfortunately for Berlin, the energy troubles confronting Germany are not strictly limited natural gas. Water levels on the Rhine River dropped to a critical low on Friday. This will affect barge traffic on the river and subsequently restrict the flow of essential commodities to inland Europe even more. Not exactly welcome news and a firm indication that the energy crisis facing Europe is a long way from being brought under control.

Russia Reduces German Gas Supply Further

With Gazprom 1 having announced another reduction in the Nord Stream 1 pipeline’s output to around twenty percent of its capacity, Germany and other Central European nations could be faced with having to make some unpalatable choices in the weeks to come. Service resumed on the pipeline last week following a ten-day maintenance period at roughly 40 percent capacity. Now that has been halved and the prospect of even deeper reductions is looming. Other nations in Central Europe are contending with reductions as well. Italy has been informed by Gazprom that the amount of gas it normally receives is being reduced as well. The Russian energy giant claims overall gas flow in the pipeline is lower because of technical concerns with one of the turbine engines. Germany claims this reason is a ‘made up pretext’ and the move is nothing less than a Russian powerplay.

Earlier in the week EU energy ministers announced support for a voluntary 15% reduction in natural gas usage. The plan has been somewhat watered-down following resistance from Southern European nations, but the 27 member-states have agreed to cut back on usage by the winter. The plan is an effort to make certain fuel supplies are adequate for the coming winter. Despite the claim by Brussels that the bloc is united in standing up to Russian energy strongarm tactics, objections by nations not reliant on Russian gas raise the prospect of a disunited front in the future.

In a somewhat ironic reversal of fortunes from ten years ago, now it is Southern European nations like Spain and Portugal chiding Germany for its failure to prepare and short-sighted thinking. They’re not wrong. Berlin ignored the warnings for quite some time as it became dependent on Russian gas. Therefore, the argument put forward by Madrid and Lisbon is that the Germans should carry the largest burden instead of nations whose economies are not reliant on Russian gas.

Gazprom’s Force Majeure Claim Rattles Nerves in Germany

Yesterday’s declaration by state-owned Russian energy giant Gazprom that ‘unforeseeable circumstances’ could make it unable comply with European gas contracts is placing Germany in an even more precarious position. The prospect of Russia shutting down the flow of natural gas to Germany seems more probable. With Gazprom threatening to send less gas to Germany and other European nations, German firm Uniper, a major energy importer, has rejected the claim. According to a company spokesperson, Uniper rejects the force majeure claim put forward by Gazprom. Realistically, Uniper’s rejection does not change matters one way or another.

The Nord Stream 1 pipeline is scheduled to come off its 10-day maintenance period and resume operations on Thursday. It’s unclear if the pipeline will start operating at a reduced capacity, or at all. Despite Berlin claiming to have reduced its overall dependence on Russian gas from 55% to 35% it is still highly dependent on Nord Stream 1. The two other pipelines providing natural gas to Germany from Russia were closed off.

Many analysts still seem to agree that Nord Stream 1 will resume operations, albeit in a limited capacity, perhaps. However, Germany’s nightmare scenario of Putin halting gas deliveries entirely is haunting Berlin and Brussels. The nation is already falling behind efforts to top off its natural gas storage supplies before winter sets in. We discussed this in an earlier entry last week. Gas rationing and other conservation steps will have a detrimental effect on the German economy.  A number of companies are concerned such measures will force them to close permanently.

Germany is not the only target either. A dozen EU nations have seen their gas supplies from Russia either severely reduced or cut off entirely. The lack of a European-based energy sharing plan and the shortsighted thinking of EU leaders on the energy-security front are now coming home to roost.

Growing Food Concerns Worldwide

It was only a matter of time before growing anxiety over food supplies and prices across the globe induced action by nation-states and citizens alike. As 2022 motors along, concerns about the health of the global economy, the lingering hangover of the COVID-19 pandemic, as well as its recent return to China, and the economic consequences of the war in Ukraine have come together to create a perfect storm. Food prices are going through the roof in a number of nations, and it was only a matter of time before citizens took to the streets and protested.

Over the weekend Iran saw a wave of protests break out across the country over cuts in state subsidies on food. To be fair, Iranians already have a laundry list of grievances with their government and economic conditions always serve as a barometer of the population’s feelings. It comes as no surprise to see Iranian citizens come out in large numbers to protest the subsidy cuts, as well as other issues. The swift and brutal response by the Iranian government, however, has raised some eyebrows around the world. Tehran’s readiness to clampdown on and make an example of anti-government protesters is an indication the government expects prices to rise even more in the coming weeks. With the cut of subsidies last week, prices on a number of flour-based food staples rose in excess of 300%

There are also protests and street violence over rising food prices and inflation going on in Sri Lanka and Tajikistan. Those situations will be discussed in more detail later in the week.

Then there is the increasing worry over food supplies. India is moving to take pre-emptive action by restricting exports of wheat to create a safety cushion of sorts for its own population. The Indian government seeks to control rising prices and diminishing output due to global economic conditions and the extreme heat wave that has affected Indian wheat production. Predictably, India’s move has sent global prices skyrocketing and prompted the US and European Union to begin searching for solutions to improve food supply chains. Given the current conditions, Washington and Brussels need to hurry. At the present time, the situation worldwide appears fated to become significantly worse unless measures are taken within weeks.

Transnistria Simmers

Over the past week, the Moldovan region of Transnistria has become a focal point of attention. As the war in eastern Ukraine continues on, concern is growing that the breakaway Russian-backed region of Moldova could be the next flashpoint. Transnistria is a prototypical “oppressed Russian-speaking populations” region. A de-facto independent, but unrecognized breakaway state on Moldova’s eastern border, it has co-existed with the remainder of Moldova since the end of the Cold War. Russia has over 1,000 troops stationed there ostensibly as peacekeepers.

A number of attacks in Transnistria over the past week has put the region on edge. On Monday, it was the state’s security headquarters in Tiraspol, the region’s main city. The next day, a military barracks in Parcani and a radio transmitter in Maiac were hit. On Wednesday, the interior ministry reported that a number of drones were launched from Ukrainian territory and flew over the town of Cobasna, home to a large ammunition depot. Also, according to the ministry, ‘shots were fired’ from the Ukrainian side of the border in the direction of Cobasna. Following the attacks, Transnistria’s government announced a number of new measures intended to raise security across the region. New checkpoints at strategic points on roadways and in towns, increased power for militia and security forces, and Transnistria’s Defense Ministry has ordered the mobilization of all men between the ages of 18 to 55 to “replenish the peacekeeping contingent.”

The attacks have sparked concern in Moldova and around Europe that Russia is setting the stage for military action there, based on the pretense of defending the Moscow-backed breakaway republic of Transnistria. Moldovan citizens and politicians alike are increasingly worried about the direction events might take their small, pro-western nation in. Many people there are also quite aware that the future of Moldova is inextricably tied to the war in Ukraine. Right now, the war there appears to be perilously close to spilling over into Moldova. After two months of heavy fighting, and high casualties, Russia has little to show for its Ukrainian adventure. Unrest in, or a foreign attempt to destabilize Transnistria offers a variety of enticing opportunities for Russia. The Moldovan government and its citizens understand this as well, and are quite worried. Russia is clearly prepared to use the Transnistria for more attacks into Ukraine, or possibly for aggression against Moldova.