Wed. Oct 5th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

June 14, 2022

War is tragic, a waste of human lives and mass destructions of infrastructure. But human beings keep waging war against each other! Of course, each war has villain vs martyr. In the old days, it was black and white: when nations were separated by rivers, mountains, and man-made barriers. So is the end of war: winner takes all.

Now, whether you like it or not, nations are connected or mutually dependent to some degrees. Especially in terms of essentials such as food and energy. War’s impact can be felt thousand miles away from the battlefield: the Ukraine war is already threatening a global food shortage. People who is not a party of conflicts and has no control over ending the war will be hurt for big time!

As Ukraine war rages on, the sanctions and embargos are making one of the two war parties looks very silly. Because all the hyped energy sanctions designed to “defeat” Russia via economics are backfiring badly. The headlines such as “Russia earns $97bn on energy exports since invasion” is stunning. Because effectively, US led west sanctions against Russia, with the intention of stopping the war and teaching Russia a lesson, are actually paying for Russian war machine to continue the war! Is it silly?

Even the gallant Ukraine warriors defending their homeland are depending on Russian gas for survival as well meeting around 10% of national budget! Is it silly? Because Russia has not cutoff natural gas passing through Ukraine yet, should Russia be appreciated for the gas as well as the national income?

While EU nations and Britain are making plans to minimize the suffering of reduced Russian energy supply, their economy is bound to be hurt with the sad prospective of a global recession! Is the Ukraine war silly?

The most glaring irony is that EU and NATO are providing more arms to Ukraine every day so the war against Russia can go on, but no one is seriously working to end this silly war!

BBC: Ukraine war: Russia earns $97bn on energy exports since invasion

Published June 13, 2022

Russia earned nearly $100bn (£82.3bn) from oil and gas exports during the first 100 days of the war in Ukraine, according to a report.

Revenues have been falling since March, as many countries shunned Russian supplies, but remain high, the independent Centre For Research on Energy and Clean Air (CREA) found.

It also warned of potential loopholes in efforts to curb imports from Russia.

The EU, US and UK are among those to have pledged to cut Russian imports.

But the CREA report found Russia still earned $97bn in revenue from fossil fuel exports in the first 100 days of the Ukraine conflict, from 24 February to 3 June.

The European Union made up 61% of these imports, worth approximately $59bn.

Overall, exports of Russian oil and gas are falling and Moscow’s revenue from energy sales has also declined from a peak of well over $1bn a day in March.

But revenues still exceeded the cost of the Ukraine war during the first 100 days – with the CREA estimating that Russia is spending around $876m per day on the invasion.

The EU plans to ban Russian oil imports arriving by sea by the end of 2022, which would cut imports by two-thirds.

In March, the bloc also committed to reducing gas imports from Russia by two-thirds within a year.

However, so far it has been unable to agree on an outright ban.

Meanwhile, the US has declared a complete ban on Russian oil, gas and coal imports. The UK is to phase out Russian oil imports by the end of the year.

The CREA report said the EU’s planned oil embargo would have a significant impact.

But it warned large quantities of Russian crude oil were now being shipped to India, which increased its share of Russia’s total crude exports from around 1% before the invasion of Ukraine to 18% in May.

The report said a “significant share” of this was being refined and sold on – often to customers in the US and Europe – which it described as “an important loophole to close”.

It added that strong sanctions against tankers transporting Russian crude would significantly limit the scope for this practice.

The report points out that as Russia seeks new markets for oil, much of it is being transported by ship – and the majority of the vessels used are owned by European and US companies.

As well as India, other countries that increased imports of Russian fuel included France, China, the United Arab Emirates and Saudi Arabia, the report said.

UPDATE 2-U.S. allows some Russian energy-related transactions until Dec. 5

Tue, June 14, 2022, 8:27 AM

WASHINGTON, June 14 (Reuters) – The United States will allow certain energy-related transactions with Sberbank, VTB Bank, Alfa-Bank and several other Russian entities to continue through Dec. 5, the U.S. Department of Treasury said on Tuesday.

Treasury’s Office of Foreign Asset Control said it was extending the general license authorizing the transactions with entities including Russia’s Central Bank, Sovcombank, Vnesheconombank, and others.

The United States has banned imports of Russian fossil fuels and imposed punitive sanctions on the country for its invasion of Ukraine. But Washington has allowed bank transactions on Russian oil and gas sent to European countries to continue, allowing those nations time to transition to different sources of fossil fuels and into alternative energy.

The Dec. 5 extension date is the same day that the EU intends to impose a ban of seaborne imports of Russian oil that it agreed to this month.

“This suggests U.S. sanctions could correspondingly tighten at that time by ending the energy payment carve-out,” ClearView Energy Partners, a Washington-based nonpartisan research group said in a note to clients.

The EU has depended on Russia, one of the world’s top energy exporters, for about 40% of its natural gas and 27% of its imported oil. (Reporting by Daphne Psaledakis, Timothy Gardner and Caitlin Webber; editing by Bernadette Baum and Richard Pullin)

Ukraine’s State Energy Company Keeps Russian Gas Flowing as War Rages

An uneasy alliance between Ukraine’s Naftogaz and its Russian counterpart sustains gas supply to Europe and fills government coffers on both sides of the fighting

Even as Russian rockets have peppered its facilities, Ukraine’s biggest state company has done hundreds of millions of dollars in energy business with Moscow. But the uneasy commercial truce is showing signs of collapse, threatening to sever an influx of money into Ukraine’s coffers and a primary conduit of Russian natural gas into Europe.

Ukraine’s NJSC Naftogaz has carried on its business of routing Russian gas to Europe since Russia invaded. Its longstanding but rocky partnership with Russian government-controlled energy giant Gazprom PJSC is so politically and financially important to both sides that neither has been willing to shut the spigot.

Yet the alliance is unlikely to survive long-term no matter what the outcome of the fighting, analysts and insiders say. The European Union has pledged to stop using Russian oil and gas by 2027.

The war has already stretched the relationship to breaking point. Naftogaz has moved to bring a legal case against Gazprom alleging underpayment by Russia as a result of its sending less gas through Ukraine in recent weeks. A Gazprom spokesperson didn’t respond to a request for comment.

Naftogaz CEO Yuriy Vitrenko is racing to bolster the state energy giant so that any end to its partnership with Moscow, combined with lower production and the costs of wartime subsidies to its customers, doesn’t sink the company or further drain Ukraine’s public finances.

“Historically we were in the middle of Russia and Europe, transporting Russian oil and gas to Europe,” Mr. Vitrenko said. “That’s still a big part of our business despite the war.”

Mr. Vitrenko faces pressure to find billions in new financing while showing that Naftogaz is making progress on lower-carbon energy and diversification. He traveled to last month’s gathering of the world’s elite in Davos, Switzerland, and was in Washington last week asking U.S. officials to help provide as much as $8 billion to supply Ukraine with natural gas this winter.

“That is the immediate and highest priority,” Mr. Vitrenko said of the fundraising. “We are future-proofing.”

A White House spokesman said, “We remain committed to Ukraine’s energy security and will continue to work closely with the government to identify effective solutions.”

Naftogaz is one of Ukraine’s largest energy companies, with a future deeply intertwined with the country’s economy. Its subsidiaries include Ukraine’s largest domestic gas producer and its biggest oil producer. The company also distributes gas for heating and electric power.

In 2021, Naftogaz contributed almost 11% of Ukraine’s state budget through taxes, dividends and other payments, according to Fitch Ratings. Russia paid about $1.2 billion in transit fees for the routing of 42 billion cubic meters of gas into Europe through Naftogaz and Ukraine’s state-owned transmission operator, according to the company’s 2021 financials.

Ukraine funneled almost a third of the European Union’s gas-pipeline imports from Russia in the final quarter of 2021, according to EU data. Since Russia invaded Ukraine in late February, the interchange has taken on a dark irony, with Russia deploying Europe’s gas money to fund the war, and the transit fees Russia sends monthly to Naftogaz accounts via correspondent banks helping bolster Ukraine’s defense.

Keeping Naftogaz running through the war means sustaining a company that contributed almost 11% of Ukraine’s state budget last year.

If Russia were to cut flows through Ukraine to the EU, it would dry supplies and boost prices inside Ukraine, which uses some Russian gas for domestic consumption. Some analysts, industry officials and lawmakers say Naftogaz will need to produce more natural gas from Ukraine’s domestic reserves to survive in a postwar future.

Damage from fighting depressed domestic production—which covered two-thirds of Ukraine’s gas needs before the invasion—by about 12% in April compared with the eve of the invasion, said Iryna Sereda, an analyst at Energy Exemplar. Mr. Vitrenko has projected a full-year decline in gas production of 3% to 6% stemming from the war.

Boosting domestic gas production will depend heavily on foreign financial and technical support, Mr. Vitrenko said. But a long history of corruption in Ukraine and underinvestment in the country’s gas fields present difficulties, investors and analysts say.

Even as Mr. Vitrenko urges the world to shut off Russian gas, he isn’t sure where or how it will be replaced. He has been working to secure Ukrainian access to liquefied natural gas shipped into Europe, but says there are no easy answers.

Write to Jenny Strasburg at [email protected] and Joe Wallace at

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