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Britain Is Doomed To A Winter Of Discontent

Britain is doomed to a Winter of Discontent, warns Ukraine’s gas king

Ukraine’s pipeline chief has a stark winter warning for Britain: the geopolitics of Europe’s escalating gas war with Russia are intractable, and the coming supply crunch is likely to force brutal demand destruction in industry and homes.

Yuriy Vitrenko, head of the Ukrainian energy and pipeline nexus Naftogaz, said that Western capitulation to Vladimir Putin’s gas blackmail would embolden Russia to launch a full-scale war on former Soviet territory.

He warned that the Kremlin has taken advantage of an acute global gas shortage to weaponise flows to Europe. “Last year Gazprom booked 65bcm (billion cubic metres) of transit through Ukraine and this year it is only 40bcm. That’s why you are not getting your 25bcm of gas. It’s as easy as that,” he told The Daily Telegraph.

The alleged aim is to force German regulators to nod through a “quick and dirty” approval of the ultra-political Nord Stream 2 pipeline; or, failing that, to secure emergency “pre-certification” flows, which establish an irreversible dependency on the new Baltic route. Both options deprive Ukraine and Poland of self-defence leverage and change the balance of power in Eastern Europe.

“They had planned to ship 25bcm through Nord Stream 2 this year and didn’t expect it to be held up. So now they are withholding the gas. If that is not a gas war, I don’t know what is,” he said.

Britain is just as exposed as the rest of Europe to this Gothic drama, even though it buys very little gas directly from the Russian state monopoly Gazprom. “We have an integrated European gas market. Russian gas that goes to Germany or the Netherlands can go on physically to the UK. Prices are the same and they’re going up for the entire European market together,” he said.

“Nord Stream 2 is clearly not compliant with the letter and spirit of EU rules so they need to put pressure on the regulator, basically the German authorities. But it is part of a bigger geopolitical game: Putin is testing the Biden administration. It’s a very Soviet tactic, they were always testing the West like that,” said Mr Vitrenko.

Gazprom supplied normal volumes to Europe over the first half of the year but that was not enough to prevent stocks falling to drastically low levels following a wet, cold spring and the V-shaped economic recovery that caught forecasters off-guard.

Flows through the Ukraine pipeline system then dropped abruptly at the end of June, just at the moment when surging East Asian and Chinese demand was soaking up the global supply of liquefied natural gas.

Gazprom has since been working to rule, delivering basic contract volumes but not the usual season top-up flows. It booked almost no extra capacity for July, August, September, and now October. It has booked minimal amounts through the Polish Yamal pipeline, another twist that is seriously alarming markets.

Gazprom says it has made up much of the shortfall to Europe with extra flows through the southern Turk Stream pipeline, which opened last year. Whether this comes close to compensating is hotly disputed.

Mr Vitrenko says the Kremlin was emboldened after President Joe Biden overrode US Congressional sanctions against Nord Stream 2 and subsequently agreed to a fig-leaf deal with Germany’s Angela Merkel that gave Moscow what it wanted. “The Russians perceived it as a chance to increase pressure. Right after they started to withhold gas and prices sky-rocketed,” he said.

Mr Biden was arguably playing the “reverse Kissinger” card, hoping to dial down tensions with Moscow and head off a deeper strategic alliance between Vladimir Putin and China’s Xi Jinping. But the accord has been bitterly criticised, decried as a latter day Yalta that throws Ukraine to the wolves.

Gazprom has made clear that Europe’s gas woes could end quickly if Nord Stream 2 is given the green light. Export chief Elena Burmistrova says the company “would be able to cover additional demand” once certification goes through. Kremlin officials have made similar noises.

Mr Vitrenko warned that giving in to energy blackmail would be to trade an immediate fuel crisis for an even bigger geopolitical crisis down the road. “If there are no longer any physical flows through Ukraine there will be a full-scale war between Ukraine and Russia,” he said.

Once Mr Putin is able to ship all his export gas to Europe via Nord Stream and other pipelines under his control, there will no longer be a deterrent. “Russia has a myriad of opportunities to provoke a war: by controlling separatists in the Donbas; or by creating a water supply crisis in Crimea, and claiming that it is intervening to prevent a humanitarian catastrophe,” he said.

“If there is a war we’re afraid that all we’ll hear from European politicians are expressions of ‘deep concern’ but Russia is not afraid of ‘deep concerns’,” he said.

Counter-pressure against Russia is building. Over 40 Euro-MPs have called on Brussels to investigate Gazprom for alleged price manipulation. The International Energy Agency (IEA) has issued a rare statement saying Russia “could do more to increase gas availability to Europe” and should attend to its reputation as a “reliable supplier”.

Not everyone agrees that Gazprom can produce more gas quickly after running down investment in drilling and exploration. The old Cenomanian fields of Western Siberia dating back to the 1970s are in terminal decline. “Gazprom is firing on all cylinders to satisfy growing demand at home and abroad,” said Vitaly Yermakov from the Oxford Institute for Energy Studies.

“It cannot wave a magic wand and deliver extra gas to any place in Europe that requires it on short notice. No matter how hard Gazprom tries, it cannot single-handedly balance such a huge market as Europe,” he said. Russia needs to refill its own depleted inventories. Stocks were just 25bcm in late June, far short of the 75bcm deemed the safe threshold for the long winter.

Mr Yermakov says the whole structure of Russia’s industry is changing as the centre of gravity moves to new Arctic fields in the Yamal Peninsula. More gas is earmarked for Asia over time. Russia cannot quickly replace the 40bcm slide in Dutch output from the Groningen fields over the last five years.

It makes commercial and ecological sense for Gazprom to supply Europe through the upper Baltic route rather than piping the gas through leaky Soviet infrastructure into the Ukrainian nexus, which also entails extra transit fees. This transition creates a mismatch: the old Soviet system is in decay but the new Yamal system is not yet fully up and running.

Expert opinion is split. Most analysts agree with the IEA that Russia has been playing games with gas supply. “They could easily have pushed another 5bcm so far this year via Ukraine,” said Prof Thierry Bros, a former gas strategist at the French economy ministry and now at Sciences Po.

Prof Bros said storage in Europe would still have been low but at least within historical bands, eliminating some of the panic premium currently driving gas prices.

Mr Vitrenko said the argument that Gazprom cannot produce more contradicts the stated rationale for the Baltic pipeline. “If that were the case, you wouldn’t need Nord Stream 2 at all. Russia can easily ramp up production, not overnight perhaps, but I can remember times when daily flows through Ukraine were three times as much,” he said.

Whatever the commercial arguments, no major European state is likely to take Moscow’s word at face value after the invasion of Crimea. Gazprom has long served as an instrument of Kremlin geostrategy. The new Turk Stream infrastructure has dual military usage, with a sonar surveillance system installed.

Many in Europe clearly wish to secure gas whatever the political price. They are pushing for immediate pre-certification flows through Nord Stream 2 before the industrial core of the Ruhr Valley starts to shut down, and aborts the economic recovery.

But events in Washington have again intruded. The US House of Representative passed a fresh amendment last week demanding the reimposition of sanctions. If the Senate follows suit, the White House may be forced to act. “No one will buy gas from Gazprom going through Nord Stream 2,” said Mr Vitrenko.

Mr Vitrenko said the mix of tightening US policy, a Polish legal challenge within the EU and Mr Putin’s behaviour are all now conspiring to block the pipeline for the foreseeable future. The Greens may soon be in the German government. They want to axe Nord Stream 2 altogether.

“It’s now very unlikely to happen. German regulators know it would just be too noticeable. They have a rule of law in their country, and others do care, so they can’t just ignore it,” he said.

It could be a long painful winter for Europe and the UK. Utilities are turning frantically to biomass, booster compressor stations, and coal where they can, and potentially even to oil substitution in power plants. “Everything comes into play at these prices,” said Mr Vitrenko.

In the end there may have to be price rationing, nature’s cure in the energy markets. “Many industries are just switching off, as we are seeing with companies in the UK. Households adjust their consumption. They’ll be emergency measures by European governments,” said Mr Vitrenko

How long will this stand-off last? “Frankly, I don’t know. It is difficult to predict what is inside Mr Putin’s head,” he said.

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DMO Issues Two FGN Savings Bonds At N1,000/unit

The Debt Management Office (DMO) has announced its Dec. issuance of two Federal Government of Nigeria (FGN) Savings Bonds at N1,000 per unit.

According to a statement by the DMO, the first offer is a two-year FGN Savings Bond due on Dec. 14, 2022, at an interest rate of 12.255 percent per annum.

The second one is a three-year FGN Savings Bond due on Dec. 14, 2025, at a 13.255 percent interest rate per annum.

It said that the opening date for the issuance of the bonds is Dec.5, the closing date is Dec. 9, the settlement date, is Dec. 14 while coupon payment dates are March 14, June 14, Sept. 14, and Dec. 14.

“They are issued at N1,000 per unit subject to a minimum subscription of N5,000 and in multiples of N1,000 thereafter, subject to a maximum subscription of N50 million.

“Interest is payable quarterly, while bullet repayment is made on the maturity date, ” it said.

It added that FGN savings bonds qualify as securities in which trustees can invest under the Trustee Investment Act.

“They qualify as government securities within the meaning of the Company Income Tax Act and Personal Income Tax Act for tax exemption for pension funds amongst other Investors.

“They are listed on the Nigerian Stock Exchange and qualify as liquid assets for liquidity ratio calculation for banks,” it said.

The statement said they were backed by the full faith and credit of the Federal Government of Nigeria, and charged upon the general assets of the country.

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DMO Says It has Raised N130bn From Sukuk For Key Road Projects

The Debt Management Office (DMO) says it raised N130 billion from its N100 billion sovereign al ’Ijarah sukuk opened on November 21, 2022.

DMO, in a statement on Monday disclosed that the offer of N100 billion was “upsized to N130 billion due to the over 165 percent subscription level”.

The Sukuk is a strategic initiative that supports infrastructure development, promotes financial inclusion and deepens the domestic securities market.

Since the establishment of the initiative in September 2017, Nigeria has issued four sovereign sukuk: 2017 (N100 billion), 2018 (N100 billion), 2020 (N162.557 billion), and 2021 (N250 billion).

According to the statement, this year’s total sovereign sukuk issuance moved to N742.557 billion.

“The Debt Management Office (DMO) is pleased to inform the public of the successful conclusion of the issuance of N100 billion sovereign al ’ijarah sukuk. The offer for N100 billion opened on November 21, 2022, and was supported by wide public sensitisation to encourage subscription from diverse investors, particularly the retail investors,” the statement reads.

“The initial offer size of N100 billion was upsized to N130 billion due to the over 165 percent subscription level. The Sukuk was issued at a rental rate of 15.64 percent per annum. This brings the total sovereign sukuk issuance to N742.557 billion as at date.”

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CBN Limits Withdrawal To N100,000 Weekly

The Central Bank of Nigeria (CBN) on Tuesday slashed the cash withdrawal by an individual to N100,000 per week by an individual.

The apex bank also fixed N500,000 as the amount a company can withdraw in a week.

By this new policy, account holders can only withdraw a maximum of N100,000 weekly through Automated Teller Machine (ATM), subject to a maximum of N20,000 daily withdrawal.

Under the new policy, which is to take effect from January 9, 2023, the maximum cash withdrawal via Point of Sale (POS) shall also be N20,000 daily.

This was contained in a circular issued by the CBN on Tuesday, signed by director of banking supervision, Haruna Mustafa and addressed to deposit money banks and other financial institutions.

According to the circular, deposit money banks and other financial institutions are also mandated to ensure that over-the-counter cash withdrawals by individuals and corporate entities do not exceed N100,000 and N500,000, respectively, per week.

It further indicated that all cash withdrawals in excess of the stated limits will attract processing fees of 5 per cent and 10 per cent respectively.

The new policy also states that third party cheques in excess of N50,000 shall not be eligible for over the counter payment, while extant limits of N10,000,000 on clearing cheques subsist.

“Only denomination of N200 and below shall be loaded into the ATMs.

“In compelling circumstances not exceeding once a month, where cash withdrawals above the prescribed limits is required for legitimate purposes, such cash withdrawals shall not exceed N5,000,000 and N10,000,000 for individuals and corporate organisations respectively, and shall be subject to the references processing fees in (1) above, in addition to enhanced due diligence and further information requirements,” the circular stated.

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