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Apr 26 • 10 tweets • 4 min read
Breaking news on Russian energy today

1) Habeck declares (on a visit to Poland) that 🇩🇪 could stop oil imports from 🇷🇺 "within a few days"

2) Gazprom cuts off Poland from gas deliveries

You'd guess those two events are related. And they are! Short🧵

tagesschau.de/wirtschaft/hab…
Quite remarkably, almost all of German dependance on Russian oil has been cleared by now - down to just 12%. Much earlier than expected, and without @BMWK making a big fuzz about it. Good job!

Only unresolved issue is the oil refinery in Schwedt. /2

maz-online.de/Brandenburg/Di…
Schwedt is Rosneft (i.e. Putin) property and directly on the Druzhba pipeline

If that connection was closed, we'd effectively be independent of 🇷🇺 oil

But Schwedt shutting down means serious fuel shortage (esp. in North-East 🇩🇪), closure of BER airport, etc. Not an option! /3
Hence, Schwedt needs to be up and running with non-Druzhba oil.

But Rosneft could refuse to do that. It's their refinery, after all

That's why the gov passed a law yesterday allowing to expropriate Rosneft if they don't comply to run on other oil. /4

bmwk.de/Redaktion/DE/P…
But where does this "other oil" come from?

The direct pipeline from Rostock to Schwedt is way too small. Some additional shipping via fuel trucks could help, but it's just not enough.

That's where Poland enters the stage. /5
Reason for Habeck's visit to Warsaw was to strike a deal with the Polish gov to connect Schwedt to Gdansk harbour via the Plock pipeline.

With that connection, Schwedt (after expropriation) could continue operation - while we kiss goodbye to Russian oil. /6
Putin's decision to cut off Poland from gas was, basically, a revenge act against the Plock pipeline deal

Polish gov says they can cope, as their dependency on Russian gas is mild

But, obviously, there's another message - to Berlin /7

tagesschau.de/ausland/europa…
Namely: if we disconnect Schwedt from Druzhba, Putin's threatens to close gas supply also for Germany

As we all know, consequences would be *very* serious in the short run if that happens

(Gerhard Schröder would resign, too, but that's cold comfort) /8

nytimes.com/2022/04/23/wor…
So, should we be scared? Should we *NOT* disconnect Schwedt from Russian oil, because we fear a tit-for-tat in gas?

No! As I've argued here, I believe we can call Putin's bluff and go for the oil embargo. Gas will still keep flowing. /END

PS: Hope this prediction works out as nicely as my last one - last week I told @bild @JCBockenheimer that some type of oil embargo will arrive shortly after Macron has won the French presidential elections

And here we go 😎

bild.de/politik/auslan…

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More from @jsuedekum

Jens Suedekum Profile picture
Apr 9
Die 🇩🇪Industrie steht ohnehin unter extremem Transformationsdruck

Aber die Nonchalance, mit der einige hier das in eine völlige Disruption steigern wollen — in der guten Hoffnung, ein Gasembargo ließe sich schon managen und werde Putin irgendwie stoppen — ist schon bemerkenswert
Natürlich muss klar sein, dass die Zeit des billigen russischen Gases ein für allemal vorbei ist.

Geschäftsmodelle, die nur darauf basierten, werden sich in Deutschland nicht mehr rechnen.

Diesen Elefanten im Raum übersieht niemand mehr, der bei Verstand ist. /2
Aber der Umbau, kurzfristig auf teures LNG-Gas und langfristig auf grüne Alternativen, braucht eine gewisse Zeit.

Mit einem „cold turkey“ Entzug ist das schlechter zu realisieren als in einer Welt, wo russisches Gas über einen klar definierten Zeitraum von 2-3 Jahren ausläuft.
Read 5 tweets
Jens Suedekum Profile picture
Apr 4
The West *MUST* respond to #Bucha and sharpen its sanctions

Cutting energy imports is one option, but it's *very* costly to us. So here's another one: tighten export bans

It'd affect 🇷🇺 economy & consumers, but without causing a major recession in 🇪🇺 /1

som.yale.edu/story/2022/ove…
Simple embargo logic goes like this: as we don't buy oil&gas anymore, 🇷🇺 loses inflow of hard currency (FX)

This may not directly affect the the war machine, as soldiers, domestic weapon producers etc. are all paid in RUB, which Putin (the CBR) can produce at will /2
But the drama would unfold indirectly: Without FX flows, 🇷🇺 cannot pay for imports anymore.

It'd face massive inflation, as the exchange rate goes into free fall and all budget gaps are monetized with newly printed RUB

Recipe for chaos -> possibly a revolt against Putin /3
Read 17 tweets
Jens Suedekum Profile picture
Mar 23
Crazy plot twist

„Unfreundliche Staaten“ müssen Putins Gas in Rubel bezahlen

faz.net/aktuell/ukrain…
Auf jeden Fall kann man sagen: Putin ist eine Überraschung gelungen.

Substantiell ändert sich eigentlich erstmal nicht so viel.
Derzeit ist es so: wir bezahlen Gas in $ an Gazprom, die müssen es aber (zu 80%) bei der CBR in Rubel tauschen. Die $ landen also bei der CBR. /2
Nun sagt Putin offenbar: nix da! Ihr müsst Gazprom direkt in Rubel bezahlen!

Aber wo kriegen wir die her? Auf den int. FX-Märkten gibt's nicht genug davon. Woher dann? RICHTIG - von der russischen Zentralbank!

Sie hat also vorher und nachher die Devisen. /3
Read 8 tweets
Jens Suedekum Profile picture
Mar 22
Good news! Putin's war machine is NOT autarkic, but relies on imported components. Hence, Putin cannot simply sustain the war by "printing Rubles"

But that doesn't mean an EU energy embargo is the best (or only) option to force a ceasefire by drying up €$-flows. Some thoughts🧵
Sure, 🇷🇺 needs hard currency ($/€) to pay for imports. Noboby, not even China, accepts Rubles

And since the central bank's FX reserves ("Putin's warchest") are largely frozen, energy payments are the only source to get $€ to afford Western imports

Popular logic then runs as follows:

EU imposes embargo -> no more $/€-flows -> all Russian imports dry up, incl. military components -> war machine stops, stores turn empty -> 🇷🇺 people start a revolt against Putin

Maybe that logic goes through. But here're my concerns: /3
Read 18 tweets
Jens Suedekum Profile picture
Mar 1
So, what's up next in the 🇪🇺🇺🇸 sanctions against Putin's 🇷🇺?

In 1st stage, it was necessary to focus on finance (#SWIFT and all that) to quickly frontload the pain, as explained in this great🧵by @SonyKapoor

But that won't be the end. My thoughts (1/n)

Like Sony & @adam_tooze, I also think that oil/gas/coal exports are in spotlight soon

- Either Putin stops their delivery; that's the only econ retaliation he's got

- Or 🇪🇺🇺🇸 impose embargoes to drain the daily FX flows which help funding his war /2

faz.net/aktuell/wirtsc…
We haven't seen action on this front yet. Transit volumes of Russian gas through Ukraine are even *up* ever since the attacs

Check this great source @Bruegel_org :
bruegel.org/publications/d…

So, are we stuck in an "equilibrium of scare" to sustain 🇷🇺 energy vs. 🇪🇺🇺🇸FX flows? /3
Read 11 tweets
Jens Suedekum Profile picture
Feb 28
Vladimir Putin is meeting his team of economic advisors just now - in THIS very setting

It will be a fruitful and open exchange for sure...🤪
Vladimir Putin: "We'll never run out of money because my central bank can always print new Rubles. We'll be fine, regardless of the sanctions! Does anyone have a different opinion? Then speak out NOW!"
Disclaimer, before anyone takes this for granted: the quote is, of course, just satire. But the pics seem to be for real.
Read 4 tweets

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