News round-up, March 27, 2023
Reflections by the editor…
"We are our memory, we are that chimerical museum of inconstant forms, that heap of broken mirrors".
Jorge Luis Borges, (born August 24, 1899, Buenos Aires, Argentina—died June 14, 1986, Geneva, Switzerland), Argentine poet, essayist, and short-story writer whose works became classics of 20th-century world literature.By way of the XXVIII Ibero-American Summit, held in Santo Domingo, Dominican Republic, this Saturday, March 25. On March 17, 2022, ECLAC’s executive secretary, Ms. Alicia Bárcena, delivered a keynote speech at FAO's regional headquarters. She warns us that inequality generates in Latin America, the product of a culture of privilege that restricts access and opportunities and distorts public policy.
...Latin America and the Caribbean are not the poorest regions in the world, but they remain the most unequal. She said.
The UN official also warned that:
"We are no longer in an era of change, but in a real change of era. This requires rethinking development and putting equality at the centre. This requires social pacts," she said.
Alicia Bárcena also discussed the profound asymmetries between developed and developing countries, exacerbated by the COVID-19 pandemic. For example, she pointed out that Latin America and the Caribbean emit only 8.3% of global greenhouse gases but are highly vulnerable to climate change.
"There is a tremendous asymmetry, and we have forgotten the principle of common but differentiated responsibilities. We must take positions because the evidence shows us that these asymmetries are unacceptable and that developed countries have a historical debt with developing countries,".
In the same vein, in the document published by the Inter-American Development Bank (IDB), entitled: “The trade fallout of the war in Ukraine on Latin America and the Caribbean, subscribed by Paolo Giordano and Kathia Michalczewsky, in June of last year (2022), indicates the following:
“The Russian invasion of Ukraine is a significant shock to the global economy, unfolding as Latin America and the Caribbean (LAC) are still recovering from the pandemic. For some countries, it may slow growth and result in a sizeable food security shock like that experienced in 2008 and 2011. Although the impact on direct trade is expected to be limited, the indirect consequences are poised to be very relevant, if heterogeneous, across countries. In the short term, the main channels of transmission of the disruption are the surge in the prices of food and energy, the reduction in global growth, the rise in inflation, and possible contagion in financial markets.
As if this were not enough:
Over the last week, there has been turmoil in the international financial markets due to the repercussions on the global banking system from the failure of Silicon Valley Bank. This financial crisis has generated significant concerns in the banking sector worldwide and has been reflected in Latin American stock market indices.
The crisis of confidence in banks is also affecting traders in emerging countries. In this context, the leading indices of the Latin American Integrated Market (MILA) stock exchanges have declined this week. Colombia is the most affected, with a fall of -6.08%, followed by Chile and Mexico with -3.56% and -1.23%, respectively.
Conversely, this event could negatively impact foreign investment in the region's countries. Investors may feel less confident about investing in these countries due to uncertainty in the banking sector.
In addition, the banking crisis may also affect lending and the financing of investment projects. Banks may be forced to reduce lending and be more cautious in granting financing, thus harming the economy of and growth in Latin American countries. The national banking crisis and its effects on Latin America
In conclusion, all indications are that Latin America has a good chance of continuing in its complex history of broken mirrors.
Most read…
Morning Bid: Banks are leaking money
There is some relief that negotiations to acquire Silicon Valley Bank by First Citizens BancShares Inc. (FCNCA.O) are advanced (SIVB.O). As a further measure to reassure depositors, there was also some discussion about the Federal Reserve expanding its new lending program for banks.
REUTERSFirst Citizens Bank to buy Silicon Valley Bank after collapse, FDIC says
The announcement that First Citizens, based in Raleigh, N.C., would buy the Northern California bank is a significant step in the efforts to quell the chaos that unfolded after Silicon Valley Bank collapsed this month, setting off wider unease across the global financial sector.
TWP, by Bryan Pietsch, March 27, 2023 ANZ CEO: Banking turmoil has potential to trigger financial crisis
"It's a crisis for some obviously, but is it a financial crisis, who knows? Does it have the potential to be one? Yes, it does have the potential to be one," CEO Shayne Elliott said in an interview on the bank's website.
REUTERS by Renju JoseIn inflation-hit Germany, massive strike over pay to cripple transport
"It is a matter of survival for many thousands of employees to get a considerable pay rise," Frank Werneke, head of the Verdi labour union, told Bild am Sonntag.
REUTERS by Klaus Lauer and Tom SimsBig Oil is selling off its polluting assets — with unintended consequences
Shell’s divestments in Nigeria help the company meet its green goals. But villagers and watchdogs say conditions have worsened after the sales.
TWP by Rachel Chason, March 27, 2023
Brazil's Lula cancels trip to China because of pneumonia
Brazil's leftist leader Luiz Inacio Lula da Silva, who was due to head to China for key talks with President Xi Jinping, has indefinitely postponed his trip to recover from pneumonia, the government said Saturday.
Le Monde with AP and AFP on March 25, 2023
Ibero-American Summit strengthens integration between the two sides of the Atlantic
The 22 countries of the Ibero-American community close the meeting in Santo Domingo with consensus on climate change, food security, and digitalization.
El País by Francesco Manetto, Santo Domingo - 26 MAR 2023 Russia may demand compensation over Nord Stream pipeline explosions - diplomat
In an interview with the news agency, Dmitry Birichevsky, the director of the department for economic cooperation in the Russian Foreign Ministry, stated, "We do not rule out the subsequent raising of the question of compensation for damage as a result of the explosion of the Nord Stream gas pipes."
Reuters
“We’re living in a volatile world…
it’s easy to get distracted by things like changeable commodity prices or a shortage of solar panels. But this wouldn’t be true to our purpose – we can’t allow ourselves to lose sight of our end goal; said Andres Gluski, CEO of energy and utility AES Corp
Image: A trader works at Frankfurt's stock exchange in Frankfurt, Germany, March 12, 2020. REUTERS/Ralph OrlowskiMorning Bid: Banks are leaking money
There is some relief that negotiations to acquire Silicon Valley Bank by First Citizens BancShares Inc. (FCNCA.O) are advanced (SIVB.O). As a further measure to reassure depositors, there was also some discussion about the Federal Reserve expanding its new lending program for banks.
ReutersA look at the day ahead in European and global markets from Wayne Cole
It's been a quiet Monday so far with Asian share markets mixed but U.S. and European stock futures higher, perhaps because they got through a weekend without another bank collapsing.
There is some relief that First Citizens BancShares Inc (FCNCA.O) is in advanced talks to acquire Silicon Valley Bank (SIVB.O). There was also some talk the Federal Reserve could expand its new lending programme for banks as another step to reassuring depositors.
Money is clearly flowing out of smaller banks toward their bigger siblings and to money market funds, which have seen an inflow of more than $300 billion in the past month to a record $5.1 trillion. BofA notes the prior two events like this in 2008 and 2020 were followed by Fed rate cuts.
Fund futures now show an 88% chance the Fed stands pat in May, while a July cut is priced at better than 90%.
Deposits at small banks fell by $120 billion in the week to March 15, while borrowing jumped $253 billion and presumably much of that was from the Fed.
Capital Economics points out that deposits across all the banks have fallen by $663 billion in the past year as customers search for higher yield.
"Unless banks are willing to jack up their deposit rates to prevent that flight, they will eventually have to rein in the size of their loan portfolios, with the resulting squeeze on economic activity another reason to expect a recession is coming soon," they warn.
European banks face similar strains, with the added speculative stress on Deutsche Bank (DBKGn.DE) and a general jump in the cost of credit default swaps. Deutsche Bank's five-year CDS hit 222 bps on Friday, the highest since late 2018, while UBS CDS shot up to 139 bps.
Credit Suisse had to tap the Swiss National Bank for "a large multi-billion amount" to secure its liquidity. Not only were customers withdrawing money but counterparties were demanding guarantees to keep doing business, hardly an encouraging sign when interbank lending relies so much on trust.
Key developments that could influence markets on Monday:
- German IFO survey for March is seen around 91.0
- Bank of Spain´s Governor Pablo Hernandez de Cos delivers speech on economy. ECB Board members Frank Elderson and Isabel Schnabel speak, as does Andrew Bailey Governor of the Bank of England
- Federal Reserve Board Governor Philip Jefferson speaks on "Implementation and Transmission of Monetary Policy"
Image: MediaFirst Citizens Bank to buy Silicon Valley Bank after collapse, FDIC says
The announcement that First Citizens, based in Raleigh, N.C., would buy the Northern California bank is a significant step in the efforts to quell the chaos that unfolded after Silicon Valley Bank collapsed this month, setting off wider unease across the global financial sector.
TWP, by Bryan Pietsch, March 27, 2023 First Citizens Bank has agreed to purchase Silicon Valley Bank, which collapsed after a bank run, the Federal Deposit Insurance Corp. said Sunday.
All of Silicon Valley Bank’s 17 branches will open as First Citizens branches on Monday, the FDIC said in a release.
News in progress…
Image: The logo of the ANZ Banking Group is displayed in the window of a branch in central Sydney, Australia, Aprl 30, 2016. REUTERS/David Gray/File PhotoANZ CEO: Banking turmoil has potential to trigger financial crisis
"It's a crisis for some obviously, but is it a financial crisis, who knows? Does it have the potential to be one? Yes, it does have the potential to be one," CEO Shayne Elliott said in an interview on the bank's website.
REUTERS by Renju JoseSYDNEY, March 27 (Reuters) - Australia and New Zealand Banking Group's (ANZ.AX) CEO said on Monday the latest turmoil in the global banking system had the potential to trigger a financial crisis though it was early to predict it could bring one similar to that in 2008.
Authorities around the world are on high alert for the fallout from the recent turmoil at banks following the collapse of Silicon Valley Bank (SVB) and Signature Bank (SBNY.O) in the U.S. and the emergency takeover of Credit Suisse.
"It's a crisis for some obviously, but is it a financial crisis, who knows? Does it have the potential to be one? Yes, it does have the potential to be one," CEO Shayne Elliott said in an interview on the bank's website.
But he said it was premature to assume the current condition could result in "another GFC", referring to the global financial crisis around 15 years ago that plunged the world's major advanced economies into their worst recession since the Great Depression in the 1930s.
Australian banks did not suffer as much as those in the U.S. and Britain during the 2008 crisis, thanks in part to tighter lending standards and a more resilient home economy.
"This is a different issue. This is really to do with the global war on inflation and how central banks are raising rates very quickly in order to combat that, and that has casualties," Elliott, the top executive at the country's no.4 lender, said.
Australia's banking regulator, soon after the collapse of startup-focused lender SVB, flagged it had intensified supervision of local banks.
Global regulators have acted much quicker to support banks this time, having learned lessons from the prior crises, Elliott said.
"Having said all that, it's clearly not over. I don't think you can sit here and say, 'Well, that's all done, Silicon Valley Bank and Credit Suisse and, you know, life will go back to normal'. These things tend to roll through over a long period of time."
Rachel Slade, personal banking group executive at the country's second-largest lender, National Australia Bank Ltd (NAB.AX), told the Australian Financial Review on Monday that mortgage customers had started showing first signs of strain after 10 straight rate rises, but there were no spikes yet on defaults.
Treasurer Jim Chalmers has said Australia was in a good position to hold out against some of the volatility because its banks were well capitalised, while the Reserve Bank of Australia last week flagged the banks were "unquestionably strong".
Image: Workers protest at Munich's main train station during a nationwide strike called by the German trade union Verdi over a wage dispute in Munich, Germany, March 27, 2023. REUTERS/Lukas BarthIn inflation-hit Germany, massive strike over pay to cripple transport
"It is a matter of survival for many thousands of employees to get a considerable pay rise," Frank Werneke, head of the Verdi labour union, told Bild am Sonntag.
REUTERS by Klaus Lauer and Tom SimsBERLIN/FRANKFURT, March 27 (Reuters) - A massive strike in Germany was set to begin early Monday, crippling mass transport and airports in one of the biggest walkouts in decades as Europe's largest economy reels from soaring inflation.
In the hours running up to the strike, both sides dug in their heels, with union bosses warning that considerable pay hikes were a "matter of survival" for thousands of workers and management calling demands and the resulting action "completely excessive".
The strikes, which were scheduled to mainly start just after midnight and affect services throughout Monday, are the latest in months of industrial action that has hit major European economies as higher food and energy prices dent living standards.
Germany, which was heavily dependent on Russia for gas before the war in Ukraine, has been particularly hard hit by higher inflation as it scrambled for new energy sources, with inflation rates exceeding the euro-area average in recent months.
German consumer prices rose more than anticipated in February - up 9.3% from a year earlier - pointing to no let-up in stubborn cost pressures that the European Central Bank has been trying to tame with a series of interest-rate increases.
It has been a painful adjustment for millions of workers throughout the country as costs of everything from butter to rents rise after years of fairly stable prices.
"It is a matter of survival for many thousands of employees to get a considerable pay rise," Frank Werneke, head of the Verdi labour union, told Bild am Sonntag.
France has also faced a series of strikes and protests since January as anger mounts over the government's attempt to raise the state pension age by two years to 64.
But officials in Germany have made clear that their fight is only about pay.
The Verdi union is negotiating on behalf of around 2.5 million employees in the public sector, including in public transport and at airports. Railway and transport union EVG negotiates for around 230,000 employees at railway operator Deutsche Bahn (DBN.UL) and bus companies.
Verdi is demanding a 10.5% wage increase, which would see pay rising by at least 500 euros ($538) per month, while EVG is asking for a 12% raise or at least 650 euros per month.
Deutsche Bahn on Sunday said the strike was "completely excessive, groundless and unnecessary".
Employers are also warning that higher wages for transport workers would result in higher fares and taxes to make up the difference.
Image: Oil from illegal extraction in Bodo, Nigeria, shines on water after a spill. (Andrew Esiebo for The Washington Post)Big Oil is selling off its polluting assets — with unintended consequences
Shell’s divestments in Nigeria help the company meet its green goals. But villagers and watchdogs say conditions have worsened after the sales.
TWP by Rachel Chason, March 27, 2023
NEMBE, Nigeria — When Lambert Ogbari learned that the oil giant Shell was selling its local operations to a Nigerian firm, he said he felt hopeful his living conditions would finally improve. But he quickly noticed that maintenance on the oil wells surrounding his village had declined.
Then, one night, Ogbari woke up to a loud bang, followed by the smell of gas. Crude oil was shooting out of a well near his home with such force that people hundreds of yards away could hear the roar.
As the world wrestles with climate change, major oil companies are selling off polluting assets around the globe. Shell, which announced in 2021 that it is looking to exit Nigeria’s onshore market completely, has repeatedly said in annual reports over the past eight years that divestments in Nigeria and elsewhere have played an important role in decreasing the company’s own greenhouse gas emissions. Shell’s withdrawal is part of an exodus by some of the world’s top energy companies from the Niger Delta, which had long made Nigeria the largest oil producer in Africa.
But interviews with residents, local officials and environmental groups show the divestments made in Nigeria over the past decade have had negative consequences for communities that Shell and other international companies leave behind — and for the environment they say they are aiming to protect.
Local companies that have acquired the Niger Delta assets from international firms have failed to respond quickly to oil spills such as the one in Nembe, environmental activists say. Greenhouse gas emissions from gas flaring — the burning off of natural gas, a byproduct of oil extraction — have increased dramatically in multiple cases after Nigerian companies took over, according to data from flare tracker Capterio and reports by the Environmental Defense Fund and Stakeholder Democracy Network. At the same time, according to several analyses by these two groups and others, information about those effects has become scarce, because the local companies tend to make fewer environmental commitments and set fewer reporting standards.
In the Nembe area, where villages emerge from the thick mangrove swamps, oil sprayed for more than a month before the local company stopped the leak, villagers recalled. On a recent afternoon, 15 months after the spill was cleaned up, nearby water was still covered with an oil sheen, and mangrove roots were cloaked in black. Fishermen are still catching just a tiny fraction of what they once were, Ogbari said, his voice raised in anger, and locals say they have seen their already poor health deteriorate.
“We were excited to see our brothers in control,” Ogbari said, referring to the purchase in 2015 of Shell’s local oil license by the Aiteo Group, a Nigerian company. “We thought they would understand our needs. … But it has gone from bad to worse.”
Rethinking Nigeria’s oil
The Niger Delta’s history with oil began in the 1930s, when Shell started exploration here. Shell exported its first barrel of oil in 1958, when Nigeria was still a British colony. Oil giants including ExxonMobil, Chevron, Eni and Total Energies arrived in Nigeria over the years that followed, entering into arrangements with the government that proved extremely lucrative for the state and oil companies but did little for average Nigerians. The Niger Delta, according to the United Nations, became one of the most polluted places on Earth.
The international companies began a first wave of divestments around 2010, according to Etienne Kolly, associate director at S&P Global Commodity Insights. Oil theft by gangs and militants was proving a massive headache, and Nigeria’s government was pushing for more local ownership in the industry.
Image: São PauloSão Paulo, Brazil - 10, 16, 2022: Former President Luís Inácio Lula da Silva and President Bolsonaro participate in presidential debate on Brazil. Germán & Co by Shutterstock. Brazil's Lula cancels trip to China because of pneumonia
Brazil's leftist leader Luiz Inacio Lula da Silva, who was due to head to China for key talks with President Xi Jinping, has indefinitely postponed his trip to recover from pneumonia, the government said Saturday.
Le Monde with AP and AFP on March 25, 2023
Brazil’s President Luiz Inácio Lula da Silva has canceled his trip to China after contracting pneumonia, the presidential palace said on Saturday, March 25.
Lula, 77, was admitted to a hospital in the capital of Brasilia with flu-like symptoms and was diagnosed with “bacterial and viral bronchopneumonia due to influenza A,” the palace said in a statement, quoting a medical note signed by Dr. Ana Helena Germoglio. The leftist leader’s health was reassessed on Saturday and, despite improvement, he was advised to “postpone the trip to China until the cycle of viral transmission ends,” the medical note said. His press office later confirmed that the trip had been canceled.
Chinese authorities have been informed, “with the reiteration of the desire to schedule the visit on a new date,” the palace said.
Lula had been expected to leave for China on a multi-day visit on Friday or Saturday, but the trip was pushed back on Friday.
China is Brazil’s biggest trade partner
A delegation composed of ministers, senators, lawmakers and hundreds of businessmen had been set to accompany Lula during his first state visit to Brazil’s biggest trade partner since taking office in January. The Brazilian president and his Chinese counterpart Xi Jinping were scheduled to meet next Tuesday.
Trade, investment and climate change were on the agenda and 20 bilateral agreements had been expected to be signed, according to a statement Thursday from the presidential palace.
Lula, who rarely postpones or cancels trips due to health reasons, traveled to Argentina in January and the US in February, marking a departure from Brazil’s foreign policy under former far-right President Jair Bolsonaro, who showed little interest in international affairs or travel abroad.
Seaboard: pioneers in power generation in the country
…Armando Rodríguez, vice-president and executive director of the company, talks to us about their projects in the DR, where they have been operating for 32 years.
More than 32 years ago, back in January 1990, Seaboard began operations as the first independent power producer (IPP) in the Dominican Republic. They became pioneers in the electricity market by way of the commercial operations of Estrella del Norte, a 40MW floating power generation plant and the first of three built for Seaboard by Wärtsilä.
Image: Luis Abinader, President of the Dominican Republic and the King of Spain Felipe VI. El País by Mónica González Islas.Ibero-American Summit strengthens integration between the two sides of the Atlantic
The 22 countries of the Ibero-American community close the meeting in Santo Domingo with consensus on climate change, food security, and digitalization.
El País by Francesco Manetto, Santo Domingo - 26 MAR 2023 The Ibero-American Summit in Santo Domingo (Dominican Republic) concluded on Saturday night with a central message of cohesion that strengthens the path towards regional integration and a rapprochement between the two sides of the Atlantic. The 28th meeting of the 22 countries of the community showed the vocation of this forum as opposed to other international conferences that are more conditioned by the corset of diplomacy. The debate revealed ideological severe clashes, and there were even clashes of accusations between Latin American countries. But the essential thing was the consensus of all members on a series of instruments that consolidated the alliance. The Santo Domingo Declaration adopts three planned documents: climate change, food security, and digitalization. Peace, even without directly mentioning the Russian invasion of Ukraine, the severe crisis in Haiti, and migration were other key challenges.
The Ibero-American Secretary General, the Chilean diplomat Andrés Allamand, called for "maintaining Ibero-America as a privileged space for dialogue, political articulation, consensus, and cooperation." Under this umbrella, the discussion of presidents, heads of state, vice presidents, and foreign ministers highlighted that dialogue could prosper and unity can be tested despite differences.
At the summit, for example, an essential agreement on reforming an international financial architecture and access to credit fell through, frustrated by the opposition of Cuba, whose president, Miguel Díaz-Canel, charged against the "bubbles of financial capitalism." However, the community of Ibero-American countries has pledged to continue trying, with a view to the next summit to be held on 29 November 2024 in Quito, and issued a brief communiqué that stresses "the need for a structural reform of the international financial architecture, which allows a greater flow of resources destined for sustainable development and expands the limits of access that Ibero-American countries have in terms of financing." The text questions the "loan overcharges" and calls for the adoption of "innovative financial instruments, with conditions that facilitate sustainable borrowing."
Russia's invasion of Ukraine was another of the discussions that indirectly hovered over the summit. Chile's president, Gabriel Boric, openly condemned it in his speech, calling it "unacceptable." However, achieving a unanimous and explicit position in a forum that, in addition to Cuba, includes countries such as Nicaragua, Venezuela, Bolivia, and El Salvador, which did not condemn Russian President Vladimir Putin's offensive at the UN, was an arduous task. Everything was thus left in a pact of minimums through references to peace on the international chessboard. In it, everyone pledges to work for "comprehensive, just and lasting peace throughout the world," respecting "the principles of the Charter of the United Nations, including the principles of sovereign equality and territorial integrity of states, which will also contribute to ending the adverse effects of war, including loss of life, food, financial, energy and environmental security crises."
How to help Haiti
The humanitarian crisis in Haiti, a country bordering the Dominican Republic, cornered by criminal gangs and sinking into a whirlwind of corruption, misery, and the absence of the state, was an unavoidable urgency at the Santo Domingo meeting. The situation, aggravated by the assassination of President Jovenel Moïse in July 2021, prompted the local government, headed by Luis Abinader, to ask for support. "There is no other way to help Haiti than to go and pacify Haiti," he said. The Costa Rican leader threw a wrench in the debate with a call for international responsibility. The paragraph included in the final declaration recognizes the need for multilateral mobilization, although it does not mention a peacekeeping force. "We call on the international community and international organizations to join efforts to find a way out of this complex crisis, based on the principles of solidarity and international cooperation, with the consent and participation of Haiti," the text states.
The Summit was attended by 13 delegations headed by their heads of state or government - in the case of Spain and Portugal, they were represented twice by the King, the president, and the prime minister, respectively - three vice-presidents, five foreign ministers, and only Mexico delegated the defence of its positions to a director general of the Ministry of Foreign Affairs. The most significant absence was that of Andrés Manuel López Obrador, whose government also failed to send a foreign minister to other international meetings. Luiz Inácio Lula da Silva excused himself because he had scheduled a trip to China, which was finally postponed due to pneumonia. And Nicolás Maduro, as usual, kept his attendance unknown until the end, which was finally cancelled due to suspicion of Covid-19 infection.
Migration, the challenge that affects us all
All the leaders, present and absent, must face a daily challenge that affects the entire region: migration. Most of the more than seven million Venezuelans who left searching for opportunities have settled in Latin American countries, mainly Colombia, Peru, Chile, and Ecuador. Between Colombia and Panama, hundreds of people risk their lives every day crossing the Darién jungle, one of the planet's most inhospitable and dangerous territories. Thousands of migrants pile up on Mexico's southern and northern borders while the US Supreme Court is pending a decision on Title 42, a measure allowing hot returns to Mexico. The Santo Domingo Declaration advocates "safe, orderly and regular migration" but at the same time calls for "mechanisms that guarantee adequate management of migratory flows, agile and accessible migration regularisation processes, the socio-economic integration of migrants, support for host communities and the coordinated fight against transnational organised crime." With these premises, a forum on migration will be held in Ecuador in the second half of this year.
Borrell: a "key" year for relations between Europe and Latin America
The European Union's High Representative for Foreign Policy, Josep Borrell, took part in the 28th Ibero-American Summit as a special guest. In his speech, Borrell pointed out that 2023, which will coincide with the Spanish Presidency of the Council of the EU in the second half of the year, will be a "key" year for relations between Brussels and Latin America. He said that both the Santo Domingo meeting and the Summit of the Community of Latin American and Caribbean States (CELAC) scheduled for next July send "a powerful message and show our desire for greater collaboration." "It will be the first EU-CELAC summit since 2015. We have done something wrong for so much time to have passed without sharing a common reflection," he said.
Cooperate with objective and ethical thinking…
Image: Germán & CoRussia may demand compensation over Nord Stream pipeline explosions - diplomat
In an interview with the news agency, Dmitry Birichevsky, the director of the department for economic cooperation in the Russian Foreign Ministry, stated, "We do not rule out the subsequent raising of the question of compensation for damage as a result of the explosion of the Nord Stream gas pipes."
ReutersMOSCOW, March 27 (Reuters) - Moscow may seek compensation over damage from last year's explosions on the Nord Stream gas pipelines, news agency RIA Novosti reported on Monday, citing a Russian diplomat, who also said that the future of the projects was unknown.
The pipelines, which connect Russia and Germany under the Baltic Sea, were hit by unexplained blasts last September in what Moscow called an act of international terrorism.
"We do not rule out the later raising of the issue of compensation for damage as a result of the explosion of the Nord Stream gas pipelines," Dmitry Birichevsky, the head of Russia's Foreign Ministry department for economic cooperation, said in an interview with the news agency.
He did not say from whom Russia would seek damages over the incidents at the pipelines, which were jointly able to export 110 billion cubic metres (bcm) of gas per year, more than Russia's total gas exports of 101 bcm outside the former Soviet Union in 2022.
Birichevsky also said the future of the pipelines was not clear.
"At the moment, it's very difficult to speak about the future of the Nord Stream pipelines system. On the whole, according to experts, the damaged lines could be restored," he said.
The Kremlin has said it was for all shareholders to decide whether the Nord Stream pipelines should be mothballed.
Sources familiar with the plans told Reuters last week that the ruptured Nord Stream 1 and Nord Stream 2 pipelines, built by Russia's state-controlled Gazprom (GAZP.MM), were set to be sealed up and mothballed as there were no immediate plans to repair or reactivate them.
Nord Stream 1 had started operations in November 2011 having cost 7.4 billion euros ($8 billion). Construction of the $11 billion Nord Stream 2 was completed in September 2021, but it never entered into operations after Germany shunned the project days before Russia sent troops into Ukraine on Feb. 24, 2022.
Birichevsky added that Western countries were opposing a Russia-prepared draft U.N. Security Council resolution urging an independent international investigation of the Nord Stream blasts.
"Despite this, we intend to continue to insist on a comprehensive and open international investigation with the mandatory participation of Russian representatives," Birichevsky said.