Page 11 - bne Magazine February 2023

bne February 2023 Companies & Markets I 11
in Europe, will be much more severe, the IEA says. Currently the agency is forecasting a decline in production of 1.6mn bpd in the first quarter and of 1.3mn bpd to 9.7mn bpd on average for the whole year compared to 2022, The Bell reports.
Russian President Vladimir Putin has already lost the winter energy battle with the West thanks to record imports of LNG and an unusually warm winter. Birol believes that Russia will also lose the wider energy war with the West starting with defeats in the coming quarters in the expanding oil sanctions war, and even more so in the coming years as Europe remakes its energy supplies. It will become increasingly clear that India and China will not be able to entirely replace Russia’s European customers, the IEA believes.
On the same day the world's largest oil company, Saudi Aramco, released its outlook for 2023. It also hopes for a Chinese recovery and predicts additional demand for jet fuel, pointing to a shortage of new production of 4mn-6mn bpd.
After the IEA’s forecasts of record demand, the price of Brent
Foreign investment has transformed Eastern Europe, says wiiw report
Robert Anderson in Prague
Foreign direct investment (FDI) has stimulated economic growth in Central, East and Southeastern Europe (CESEE) over the past 30 years, helping convergence with Western Europe, but some forms of FDI have been much more beneficial than others, according to econometric research by the Vienna Institute for International Economic Studies (wiiw) published on November 30.
At a press conference, speakers from the wiiw and the German Eastern Business Association (which commissioned the report) insisted that despite a slowdown in FDI flows since the Global Financial Crisis, foreign investment
would continue to have a vital role to play in the region’s development, particularly now that international companies are rethinking their supply chains.
rose above $87 – the level of early December – before falling back to $85 by the close of trading.
For Russia the price of Brent is critical for the budget. The introduction of the crude embargo has already seen Russian budget revenues tumble in December to end the year with a 2.3% of GDP deficit, almost all of which was due to a collapse in Urals oil prices in December. For 2023, the government is now forecasting that the deficit will widen from around 2% to 3% as a result of the changes in oil and gas revenues expected this year.
Currently it’s not unclear how the price of Urals will be affected by the new sanctions after February 5, but it is obvious that Russia cannot replace Europe with new customers for all oil products it currently exports there. Russia will have to reduce both refining and oil production as a result. Domestic experts consider $40 per barrel as the level that will cause severe problems for the budget and in December-January, Russian oil already approached this level. However, Russia’s budget revenues may be rescued by the inflection in demand in the second half of the year, which could push oil prices up sharply.
Equity investments by German carmakers into greenfield plants in Central Europe have helped convergence much more than investments through loans in Southeastern European countries such as Montenegro, Serbia and Bulgaria, a path often followed by Chinese companies. / bne IntelliNews
Phillipp Haussmann of the German Eastern Business Association admitted that the German economy had benefited more than almost any other from the opening of markets and the lower production costs in Eastern Europe since 1989.
At €360bn, German trade with the CESEE region was now one fifth of Germany’s total trade, bigger than that with the US and China combined. “Our close economic ties with the region made a decisive contribution to Germany’s global competitiveness,” he said.
But he added that the investment and trade relationship between Germany and Eastern Europe had benefited both sides and was not a “one-way street”.
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