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Sensemaker: Gas and hot air

Sensemaker: Gas and hot air

What just happened

Long stories short

  • A Pentagon official said US special forces have secretly been helping Taiwanese troops prepare for a Chinese attack. 
  • Security forces freed 187 men, women and children kidnapped by armed gangs in northwestern Nigeria.
  • Curt Smith of Tears for Fears, which has released its first album in 17 years, said he once performed ‘Everybody Wants to Rule the World’ in a Vancouver karaoke bar without anyone realising it was his song.

Gas and hot air

The Nord Stream 2 pipeline is a little like Vladimir Putin. Both often serve as explanations for complex developments that are not otherwise easily understood. And they both feature prominently in coverage of gas price rises that are hurting households from Spain to Poland and could add £400 to UK energy bills from next April.

In reality the prices of most sorts of energy are surging in most places because…

  • demand is surging too, as big economies emerge from the pandemic. Indian power prices are up 63 per cent year on year and industrial users in China’s Guangdong manufacturing hub were hit last month with a 25 per cent power price increase for peak hours;
  • Xi Jinping has put a squeeze on Russia’s gas supply to its western customers by ordering Chinese state-owned energy companies to stockpile gas “at all costs” so as not to repeat shortages that hurt the economy last winter;
  • calm weather and low wind power levels in western Europe last summer led to a demand boost for gas with a lagging effect on wholesale prices that is only now starting to subside; and
  • the UK in particular is vulnerable to gas supply squeezes because it has only seven days’ storage compared with 90 days’ in France and Germany, while North Sea gas output is in decline and UK fracking is barely off the drawing board. 

That said, Nord Stream 2 and Putin do each have roles in this:

  • Nord Stream 2 was built under the Baltic next to Nord Stream 1 partly to boost Russian gas deliveries to western Europe, but it hasn’t been switched on yet. 
  • It hasn’t been switched on because it hasn’t been certified by German regulators, who have been under US pressure to slow-roll the process to punish Russia for annexing Crimea and jailing Alexei Navalny. 
  • Putin could have eased Europe’s gas supply crisis even so, by sending more through Nord Stream 1 and the bigger, older pipeline network that traverses Ukraine and Belarus, but until this week he preferred to let Europe experience life without that flexibility.
  • Then, on Wednesday, Putin hinted he would unbend on supply, and spot gas prices tumbled by more than a third, from $155/MWh to $92/MWh. 

Putin and his defenders, who in this context and others include Sir Tony Brenton, the former UK ambassador to Moscow, note that Russia has fulfilled all its contracts with western European customers. They say it seeks only to be a reliable supplier. Putin notes further that Europe’s switch away from long-term gas contracts to more spot-trading on world markets makes for more volatility. He has a point. 

But let’s be clear: the main purpose of Nord Stream 2 for Russia is to bypass Ukraine so that Gazprom can do as it pleases with supplies to Kiev without upsetting Germany. As soon as it’s switched on, Ukraine will be at Moscow’s mercy once again. Winter is coming. 

Wealth investment, fairness, prosperity

British business
Remember Blair? He knew Labour couldn’t win or govern without business backing, so he went to the City and won its leaders round. Even John McDonnell understood this as Corbyn’s shadow chancellor. He tried the same trick and failed. Now it’s Keir Starmer’s turn with Rachel Reeves, and Boris Johnson seems to have given them a heaven-sent opportunity by treating business leaders at his Manchester conference like unwanted guests. Paul Waugh reports in the i paper (h/t Politico) that on Monday, when ministers were supposed to make CEOs feel like rock stars, Johnson gave a perfunctory 20-minute speech that turned out to be a rehearsal for his main one on Wednesday, then left without taking questions. Waugh quotes a senior shadow minister referring to a famously dismissive Johnson remark from the 2018 Brexit maelstrom: “He’s turned ‘fuck business’ from a throwaway line into actual government policy.” 

Belonging identity, society, beliefs, countries

Poland v EU
Poland’s constitutional court rejected the primacy of (some) EU treaties over its own constitution yesterday – a first in the EU’s history. Poland’s prime minister, Mateusz Morawiecki, asked the country’s constitutional court in April to rule on the “collision between the norms of the European law and the national Constitution”. It was a direct response to claims from the European Commission that Poland’s disciplinary chamber within its Supreme Court undermined judicial independence. The Commission said the Polish court’s ruling “raises serious concerns” by questioning the primacy of EU law and authority of the European Court of Justice. What can the EU do? Brussels is already withholding €23 billion in grants and €34 billion in cheap loans for pandemic recovery until Poland fixes what the EU sees as weaknesses in its rule of law. There were initial signs Poland would back down, but Morawiecki’s government is now standing firm. An unravelling of the relationship between Warsaw and Brussels could in principle lead to “Polexit”. In practice 80 per cent of Poles are enthusiastically for EU membership, and at some point they’d have to be heard. Wouldn’t they? 

The 100-year life health, education, living, public poliCY

Awkward acupuncture
Yoon Seok-youl would like to be South Korea’s next president and is likely to run as the right-of-centre opposition People Power Party’s candidate. But first he needs to get past an awkward run of stories about the company he keeps. His opponents have found video footage of him chatting to a “mysterious preacher” whom they liken to Rasputin, and to an “unlicensed anal acupuncturist”, Lee Byeong-hwan, who might never have featured in Korean politics had Yoon not denied ever meeting him. The video said otherwise, although in fairness to Yoon the acupuncturist said on Facebook it was he who approached Yoon, not the other way round. It’s hard to know whether this is evidence of democracy in rude health or decay. 

Our planet environment, natural resources, geopolitics

Bears ears
In 2017 Donald Trump, responding to lobbying by local politicians and businesses, shrunk two national monuments in Utah in the biggest reversal of federal land conservation in US history. He reduced the size of the Bears Ears National Monument (created by Barack Obama) by 85 per cent and of the Grand Staircase-Escalante National Monument (created by Bill Clinton) by half, saying it wasn’t the federal government’s business to tell Utah what to do with its land. Today President Biden reverses those changes by executive order, re-preserving 3.23 million acres of wilderness. Utah’s all-Republican congressional delegation objects to the move not so much on its substance as because it’s been made unilaterally. Mitt Romney laments a “squandered opportunity” to build consensus with stakeholders to create a permanent solution. As it is, the next Republican president is likely to reverse the executive order with one of their own. 

New things technology, science, engineering

Squid Game surprise
Squid Game is on track to become Netflix’s biggest hit ever and is currently the streamer’s top-rated show in most of its markets. But not in South Korea, where it was made. Reviewers there were underwhelmed and viewers have moved on. They find its violence excessive and its characters clichéd, even though many are played by Korean household names. “Nobody around me understands the global hype and neither do I,” one viewer who stopped watching after two episodes tells the Economist. Brawls have been reported in Paris among people waiting to have their picture taken next to a person in a pink suit like those worn by guards in the show. TikTok is awash with videos inspired by it. But Netflix’s top-rated show in South Korea is now Hometown Cha-Cha-Cha. Nobody dies. People just fall in love. One for the weekend?

Thanks for reading, and do share this around.

Giles Whittell

Phoebe Davis

Produced and edited by Phoebe Davis. 

Photographs Peter Kovalev/TASS, Bernd Wustneck/dpa/AFP, Youngkyu Park/Netflix & Getty Images