News round-up, Monday, January 02, 2023
“Dangerous
”In 2021, Russian gas exports to the European Union amounted to 140 billion cubic meters. They fell to 60 billion in 2022, and it is likely that in 2023 there will be no more Russian gas in our systems,” Fatih Birol, the International Energy Agency’s executive director, said at a press conference in Brussels on December, 12.”
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2022, a fitful year for commodity and energy prices
Russia's invasion of Ukraine caused upheaval and fears of shortages in the energy and commodities sectors. Experts warn of shocks in a volatile market.
Le Monde
By Laurence Girard and Marjorie Cessac
Published on January 2, 2023 at 10h15, updated at 10h51 on January 2, 2023
"The year of gas and grain." The expression is Philippe Chalmin's, a professor with Université Paris-Dauphine, when he was asked to describe 2022, a year that will likely be reminded as a special of its kind in the annals of commodities.
Market tensions were high, with speculative surges resulting in historic prices, followed by sharp declines.
"Through volatility, markets reflect the anxieties of the planet," Mr. Chalmin said, anxieties which, although very real, can be amplified by financial or political entities. In 2021 already, commodity prices were on the rise, propelled by Chinese purchasing and post-pandemic economic recovery which resulted in supply tensions. The invasion of Ukraine by Russia earlier this year further boosted prices.
In the energy sector, gas prices rose strongly as Russian deliveries to Europe were drying up. On the futures markets, they culminated to an average of €100-125 per megawatt-hour (MWh), with peaks of more than €300 per MWh during the summer, compared to €20-30 before the war started.
A slight respite took hold in December in Europe, where below-average temperatures, high gas inventory levels and a shrinking demand caused by imposed frugality allowed prices to fall back to around €85, or pre-February-24 levels. Electricity prices, which had also been soaring throughout the year, were also halved in December alone, returning to below €300 per MWh.
Patrice Geoffron, director of France's Center of Geopolitics of Energy and Raw Materials (CGEMP) said 2022 "unquestionably" marked a turning point. "As in 1973, there will be a before and after. Back then, we switched from oil to nuclear power to produce electricity. This time, we have no more Russian gas and, in all likelihood, we will not go back, unless peace returns, which is now more than hypothetical," he said.
Dangerous
"In 2021, Russian gas exports to the European Union amounted to 140 billion cubic meters. They fell to 60 billion in 2022, and it is likely that in 2023 there will be no more Russian gas in our systems," Fatih Birol, the International Energy Agency's executive director, said at a press conference in Brussels on December, 12.
This would "leave an even bigger hole in the European and world gas supply," he said, adding this would translate into consequences in the coming winters.
Until now, supplies have been partly offset by purchases of liquefied natural gas, notably from the United States and Qatar, but this cannot be sustained in the long run given the impact on climate. In addition, demand is likely to increase if China's activity picks up again.
At a historical high, reached in mid-May, a ton of milling wheat was trading at €438 on Euronext, a dangerous price level for the poorest countries' populations.
Grain was also in the news. The sudden halt of exports from Black Sea ports affected by the war in Ukraine cast a shock. The importance of Ukrainian, and even more so Russian, grain exports was brought to light.
The fear of wheat shortage triggered speculation. At a historical high, reached in mid-May, a ton of milling wheat was trading at €438 on Pan-European stock exchange Euronext, a dangerous price level for the poorest countries' populations, which rely heavily on imports.
An agreement sealed at the end of July between Moscow and Kyiv – under the aegis of Turkey and the United Nations – to secure grain exports from Ukrainian ports cooled the pressure, especially since it was renewed in mid-November for 120 days.
"Thanks to this deal, five million tons of agricultural products are exported from Ukraine each month," Arthur Portier, with agricultural intelligence company Agritel, said. Meanwhile, the world's granaries filled up, with a record harvest in Russia and Australia, and a decent one in Europe. "There is no shortage of wheat today," Mr. Portier said. The same is true for corn, even if production has been lower, and rapeseed.
'In the brains of Vladimir Putin and Xi Jinping'
Prices retreated as a result. In December, wheat fell below €300 per ton, returning to its end-February level but still up 20% this year. Corn, which had been priced at €377 per ton, fell back to €283 while rapeseed returned to its price of a year ago, above €550 a metric ton, after a peak close to €850.
"Cereal prices are down again, but everything is relative. Levels remain good," Benoît Piétrement, who chairs a large-scale-crop council at FranceAgriMer, a state agency in charge of allocating national as well as EU agricultural subsidies.
Similar curves were behind metal prices, whether it was copper, zinc, aluminum or nickel, all saw valuations decline, after peaking in early March. "Overall, most markets for industrial metals and non-ferrous ores are in surplus," Mr. Chalmin said.
Fears of a recession and questions over China's recent decision to loosen Covid-19 regulations are also on investors' minds. The sharpest correction affected ocean freight as logistical tensions appeared to be easing. "The freight rate for a 40-foot [12-meter] container from China to Europe fell from $10,000 to $3,000," said Mr. Chalmin.
What will happen in 2023? "A balance has been found," Mr. Piétrement said. "The market is walking a tightrope," added Mr. Portier. On the energy front, "we are assured to have to deal with higher, more unstable fossil fuel prices and shortages in Europe," said Mr. Geoffron.
"Even if we were to imagine a swift return to peace, it is obvious that Europeans will aim at reducing reliance on Russia in many areas and source elsewhere to diversify, which will be mechanically more expensive because it will be further away, requiring new infrastructure and new contracts."
Oil prices – which have been hovering around $80-85 since October, after reaching $120 in March – will also be on the radars, especially as an EU embargo on Russian crude has been active on December, 5. In retaliation, Moscow said it was ready to cut production by 5-7% in the coming days.
The decision came as North America was hit by "the blizzard of the century" and China was reopening, fueling a return of bullish trends on oil and other resources. "To make predictions, you'd have to be in the brains of Vladimir Putin and Xi Jinping," Mr. Chalmin said.
The rate rises by two tenths of a point in December after the European Central Bank's latest interest rate hike.
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Russia’s War Could Make It India’s World
The invasion of Ukraine, compounding the effects of the pandemic, has contributed to the ascent of a giant that defies easy alignment. It could be the decisive force in a changing global system.
By Roger Cohen
Dec. 31, 2022
NYT
Seated in the domed, red sandstone government building unveiled by the British Raj less than two decades before India threw off imperial rule, S. Jaishankar, the Indian foreign minister, needs no reminder of how the tides of history sweep away antiquated systems to usher in the new.
Such, he believes, is today’s transformative moment. A “world order which is still very, very deeply Western,” as he put it in an interview, is being hurried out of existence by the impact of the war in Ukraine, to be replaced by a world of “multi-alignment” where countries will choose their own “particular policies and preferences and interests.”
Certainly, that is what India has done since the war in Ukraine began on Feb. 24. It has rejected American and European pressure at the United Nations to condemn the Russian invasion, turned Moscow into its largest oil supplier and dismissed the perceived hypocrisy of the West. Far from apologetic, its tone has been unabashed and its self-interest broadly naked.
“I would still like to see a more rules-based world,” Mr. Jaishankar said. “But when people start pressing you in the name of a rules-based order to give up, to compromise on what are very deep interests, at that stage I’m afraid it’s important to contest that and, if necessary, to call it out.”
In other words, with its almost 1.4 billion inhabitants, soon to overtake China as the world’s most populous country, India has a need for cheap Russian oil to sustain its 7 percent annual growth and lift millions out of poverty. That need is nonnegotiable. India gobbles up all the Russian oil it requires, even some extra for export. For Mr. Jaishankar, time is up on the mind-set that “Europe’s problems are the world’s problems, but the world’s problems are not Europe’s,” as he put it in June.
The Ukraine war, which has provoked moral outrage in the West over Russian atrocities, has caused a different anger elsewhere, one focused on a skewed and outdated global distribution of power. As Western sanctions against Russia have driven up energy, food and fertilizer costs, causing acute economic difficulties in poorer countries, resentment of the United States and Europe has stirred in Asia and Africa.
Carrying a gas canister in the Old City of Delhi. India gobbles up all the Russian oil it requires, and even some extra for export.
A tangle of electrical wires in Delhi’s Old City. For India’s leadership, the need for cheap Russian oil is nonnegotiable.
A production line at a tea manufacturer near Chennai, southeastern India. The Ukraine war and the pandemic have pushed more corporations to use India to diversify supply chains.
Grinding trench warfare on European soil seems the distant affair of others. Its economic cost feels immediate and palpable.
“Since February, Europe has imported six times the fossil fuel energy from Russia that India has done,” Mr. Jaishankar said. “So if a $60,000-per-capita society feels it needs to look after itself, and I accept that as legitimate, they should not expect a $2,000-per-capita society to take a hit.”
Here comes Prime Minister Narendra Modi’s India, pursuing its own interests with a new assertiveness, throwing off any sense of inferiority and rejecting unalloyed alignment with the West. But which India will strut the 21st-century global stage, and how will its influence be felt?
The country is at a crossroads, poised between the vibrant plurality of its democracy since independence in 1947 and a turn toward illiberalism under Mr. Modi. His “Hindu Renaissance” has threatened some of the core pillars of India’s democracy: equal treatment of all citizens, the right to dissent, the independence of courts and the media.
Democracy and debate are still vigorous — Mr. Modi’s Hindu nationalist Bharatiya Janata Party lost a municipal election in Delhi this month — and the prime minister’s popularity remains strong. For many, India is just too vast and various ever to succumb to some unitary nationalist diktat.
The postwar order had no place for India at the top table. But now, at a moment when Russia’s military aggression under President Vladimir V. Putin has provided a vivid illustration of how a world of strongmen and imperial rivalry would look, India may have the power to tilt the balance toward an order dominated by democratic pluralism or by repressive leaders.
Which way Mr. Modi’s form of nationalism will lean remains to be seen. It has given many Indians a new pride and bolstered the country’s international stature, even as it has weakened the country’s pluralist and secularist model.
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A playground on the outskirts of Chennai. India has almost 1.4 billion inhabitants and will soon overtake China as the world’s most populous country.
India’s first prime minister, Jawaharlal Nehru, himself a mixture of East and West through education and upbringing, described the country as “some ancient palimpsest on which layer upon layer of thought and reverie had been inscribed” without any of those layers being effaced.
He was convinced that a secular India had to accommodate all the diversity that repeated invasion had bequeathed. Not least, that meant conciliation with the country’s large Muslim minority, now about 200 million people.
Today, however, Mr. Nehru is generally reviled by Mr. Modi’s Hindu nationalist party. There are no Muslims in Mr. Modi’s cabinet. Hindu mob attacks on Muslims have been met with silence by the prime minister.
“Hatred has penetrated into society at a level that is absolutely terrifying,” the acclaimed Indian novelist Arundhati Roy said.
That may be, but for now, Mr. Modi’s India seems to brim with confidence.
The Ukraine war, compounding the effects of the Covid-19 pandemic, has fueled the country’s ascent. Together they have pushed corporations to make global supply chains less risky by diversifying toward an open India and away from China’s surveillance state. They have accentuated global economic turbulence from which India is relatively insulated by its huge domestic market.
2022: A rollercoaster ride
Written in Spanish translation by Germán & Co
John Müller
ABC.es
Madrid, 31/12/2022
At first it was the verb: the game was called 'Wordle' and 'The New York Times' paid more than a million dollars for it. It was mainly circulating on Twitter, a social network that would become the talk of the town months after Elon Musk spent $44 billion to buy it. But in January, the volcano was already sleeping on La Palma and the euro was twenty years old. Rafael Nadal was enjoying his greatness in Australia and Daniel Ortega was beginning the fourth consecutive term of his dictatorship in Nicaragua. Omicron complicated Covid's exit. Until the ides of February arrived and everything changed.
The Popular Party became the Spanish Tory party, when we did not yet know how low the British Tories could sink with Boris Johnson and Liz Truss. Pablo Casado committed political suicide in front of his own creature - Isabel Díaz Ayuso - and gave way to Alberto Núñez Feijóo. That was on 23 February, but on the 24th, the following day, Putin, the man with the extra-long tables, invaded Ukraine and changed our future. There, 2022 became a real rollercoaster, never better said. It took us a while to realise that Putin was not crazy. His justifiers said the war was NATO's fault for trying to camp out in Russia's front yard like Chris Rock was responsible for Will Smith's slap at the Oscar ceremony. Unwittingly, the Russian leader enlarged NATO - Sweden and Finland asked to join - consolidated Ukraine as a national entity and united Europe. Then came the nuclear threat, the food crisis, the prominence of missiles, drones and anti-tank weapons, and the unexpected effectiveness of the Ukrainian resistance.
It was in March that Pedro Sánchez decided to change horses on the Sahara and support Morocco's plan, a Copernican turn in Spanish foreign policy that we learned about because Rabat was kind enough to publish the Spanish president's letter. Feijóo, without opening his mouth, jumped in the polls to Sánchez's beard without anyone being able to explain it properly. In April, the Galician asked for the VAT on food to be lowered. Sanchez heeded him in December.
Summer of fire
The summer scorched the Culebra mountain range and completely dried out Europe, but San Fermín returned to Pamplona. There was another tragedy at the Melilla fence, and the government showered the Moroccan gendarmes with praise. There was tension in Taiwan and a constant display of North Korean missiles. It was the year we deflected a meteorite with a rocket. The US Supreme Court overturned Roe v Wade and reminded us that Roe's baby was born, named Shelley, is 51 years old and has offspring (Roe's granddaughters) despite the fact that they wanted to abort her.
It was the year of the monkey pox, the cryptocurrency crash, the rise and fall of NFTs and the stock market values of digital platforms. Bendodo skated with Spain's 'plurinationality' and the Chileans shook it off by rejecting their 'woke' Constitution. Moreno Bonilla fixed it all with an unexpected absolute majority in Andalusia.
A wretch stabbed Salman Rushdie, on the orders of the ayatollahs, and another fanatic killed Shinzo Abe, the ruler who disguised himself as Mario Bros. And queens and kings died: Elizabeth II, the global grandmother; King Pelé, pop queen Olivia Newton-John and the last Soviet king, Mikhail Gorbachev. We still don't know who blew up the Nord Stream pipeline. Iran is walking on the edge of a revolution sparked by a young woman, Mahsa Amini, and Xi renewed his autocratic mandate, but stumbled against the Covid, who has tabled a motion of no confidence in him. Sombrero' Castillo was tempted by a coup in Peru and ended up in jail. ABC interviewed Pope Francis. Oh, and Argentina won the World Cup, Spain won the Eurobasket and Real Madrid won the European Championship again! Today, the greatest threat to economic prosperity is geopolitics and, for freedom, the degradation of our democracies.