Page 12 - bneMag April 2022 Russia living with sanctions

12 I Companies & Markets bne April 2022
a further 10 bcm, and by 2030, replacing gas boilers with 30mn heat pumps could save an extra 35 bcm.
The proposals follow mounting calls from European governments for embargoes to be placed on imports of Russian energy. But these calls come at a time when Europe is already in the grip of an acute energy crisis, as a result of robust demand, global supply constraints and low levels of gas in storage.
Data published by Gas Infrastructure Europe shows that
EU gas storage facilities are now less than 27% full. There
is usually more gas in stock at this time of the year, but Europe entered the heating season last year with much fewer reserves than usual, as the impact of the coronavirus (COVID-19) pandemic on markets meant that there was less incentive over last summer for governments and companies to inject supplies into storage.
Russian threats
While Europe looks to wean itself off Russian energy, Russia has meanwhile signalled it might restrict oil and gas exports
Ukraine's banking system under pressure but coping well during wartime
Vitaliy Vavryshchuk of ICU in Kyiv
Ukraine’s banking system is coping fairly well with the unprecedented crisis caused by the full-scale war with Russia. The majority of banking services remain available to customers, as long as the safety of personnel and clients is not compromised.
So far, liquidity challenges to banks have been minimal due to the hefty stock of high-quality liquid assets and limited deposit outflows. However, risks may increase as inflows of new funds to banks are expected to decline.
Profitability and solvency risks will be the key mid-term risks to the banking sector. We expect the vast majority of banks will end up with negative capital in 2022, due to war-related effects. Regulatory forbearance is thus going to be the only viable approach for the NBU this year and next.
The banking sector successfully managed to adjust its operations to war conditions and continues to function relatively well. Banks have efficient contingency and recovery
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in retaliation for Western sanctions, including gas volumes via the Nord Stream 1 pipeline.
Regarding oil, Europe can more easily find alternatives to Russian supply, though its vulnerability is much greater when it comes to natural gas. North Macedonia, Bosnia and Moldova are the most dependent on Russia for gas, relying on Gazprom for close to 100% of their supply. But given that these countries are outside the EU and have not backed sanctions against Moscow, they are unlikely to be cut off. But others that have turned against Russia over Ukraine, such as Germany, are vulnerable. Germany gets almost
half of its gas from Gazprom, and without any LNG import capacity, it could not easily replace this supply. It may be able to tap extra supply from the Netherlands, however, but only if the Dutch government allowed more production from the earthquake-causing Groningen field. Then there is Italy, which gets 46%, Slovakia, which gets 70%, Bulgaria 77% and Finland 94%, which have alternative sources of supply at hand, but again, would struggle to find replacements for all the lost Russian volumes.
Ukraine's banks are under pressure and likely to end the year with losses. But thanks to the reforms of recent years they went into this crisis with strong balance sheets and the system is functioning normally for the meantime.
plans that help them maintain operations in the areas that are not directly hit by the fighting. Ironically, the experience of personnel working remotely during the COVID-19 lockdown proved particularly valuable for banks.
Two local banks (out of 71) ultimately owned by Russian government (subsidiaries of Sberbank and VEB) were immediately sent into liquidation after the outbreak of the war. Those entities accounted for 2% of banking-sector assets, and their closure did not have any material impact on the stability of the financial sector.
In regions where the Russian army has invaded or threatens to invade, most bank retail outlets are closed. However, as of the beginning of this week, in about half of all Ukraine’s regions (predominantly western and central) more than 90% of all outlets of systemically important banks were open. In Kyiv roughly 1 in 10 outlets were open as of start of the week.
The war prompted the National Bank of Ukraine (NBU) to introduce limits on cash withdrawals, which are currently