I hope that everyone is doing great. The heatwaves are travelling around the world and I have been reading of temperatures touching 40C even in London. For people of South Asia that is very common. We run, workout and do normal chores in this. However, for western europe such levels of temperature can be really troublesome and unmanageable. These heatwaves once again highlight the urgency to solve the dilemma of energy transitions and decarbonization – we will get to that. Like the heatwaves, Mark was travelling too and this week we couldn’t film our ECON show. In this article, therefore, I would try to provide some important news developments and provide short commentary on some of them.
Let’s start with the tricky turbine issue: We all know by know that Russia’s alibi to not increase gas flows to Europe was that there is a missing turbine piece that was sent to Canda to be repaired. The sanctions delayed its return and hence, a 60 percent reduction in flow from Nord Stream 1. Recently, Canada decided to send the equipment back so that there is no alibi. It was sent to and received by Germany which will ship it to Russia taking around a week or so. So far Russia hasn’t confirmed that they have received it. However, Germany later revealed that the turbine was only required in the month of September apparently calling Russia’s bluff. During the same days, Nord Stream 1 went to maintainence and many had warned that it might not come back online. The big day was 21st of July, Thursday. But it did. Gas flow resumed at 30 percent of capacity. But issues remain when we talk about the longer term. Gas storage facilties are are 65 percent in Germany. This is impressive as after a few months it can go up to the target of 95 percent. But the call for gas rationing and curtailing usage of gas by 15 percent has made Germany scramble for energy as other countries have refused to fill in for the shortage.
The looming energy crisis for Europe, which will certainly have serious consequences around the world, is still there.
On the same day, ECB increased its interest rate as well for the first time in 11 years! ECB made a 50 basis point increase taking it to 0.0 perceny (the interest rate has been negative in order to improve the economy). Some have said it was too late, some said it was unwarranted. Time will tell. I belong to the former group.
Then there was a key event: Putin going to Iran and his meeting with the supreme leader and Turkey’s Erdogan as well! Among other things, there was an agreement signed in energy cooperation. National Iranian Oil Company and Gazprom signed an MoU of $40 billion. However, it is a tentative deal and also involves Gazprom helping the NIOC in developing gas and oil fields in Iran.
Finally, a few intersting charts that show the magnitude and extent of heatwaves in Europe and around the world.