Page 13 - bne IntelliNews magazine February 2025

bne February 2025 Companies & Markets I 13
and fall to a mere 0.5% this year. Russia won’t have a crisis this year, but Putin also can’t afford to keep the war machine going indefinitely and from 2025 will be under growing pressure to bring the hostilities to halt.
On October 28, Vladimir Putin convened a meeting of senior officials, including the head of the CBR, to discuss problems around the “structure and dynamics” of Russia’s “corporate debt portfolio.” Since then, he has publicly shown heightened sensitivity to defence spending levels and the state’s use of preferential lending to achieve “strategic tasks.” This chain
of events was capped in December with Nabiullina’s surprise decision to keep rates on hold.
“Unlike the slow-burn risk of inflation, credit event risk – such as corporate and bank bailouts – is seismic in nature:
it has the potential to materialise suddenly, unpredictably and with significant disruptive force, especially if it becomes contagious,” the report says.
The Kremlin still has the resources to be able to cope with a credit crisis, but what will be far more damaging is a crisis would strip away the veneer of normality carefully built up by the Kremlin, which has strived to insulate the lives of normal Russians from the effects of the war. That will undermine its hand in mooted talks with Kyiv as well.
“Moscow now faces a dilemma: the longer it puts off a ceasefire, the greater the risk that credit events uncontrollably arise and weaken Moscow’s negotiating leverage,” says Kennedy.
Western tactics going into the talks should include making it clear it is prepared to drag the conflict out as long as it takes until a Russian credit crisis arrives with suitable commitments to a long-term support package for Ukraine. Also to refuse to even discuss sanctions relief that Russia needs to generate more revenues to deal with a mounting pile of deteriorating debt, unless there is a comprehensive and “just” peace deal, says Kennedy.
TurkStream is now the only route for Russian gas to Europe
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Assuming that Ukrainian gas transit does not resume – despite Slovakia lobbying aggressively for this, with its Prime Minister Robert Fico threatening to cut electricity supplies and withhold aid to Ukraine if it does not allow continued flow – this leaves TurkStream.
Gazprom losing further revenues, should Russian fears of a successful sabotage attack by Ukraine come to materialise, or some other disruption occur. Indeed, Russia’s defence ministry claimed on January 13 that nine Ukrainian drones were shot down attempting to take out a TurkStream compressor station in the Krasnodar region of southern Russia.
TurkStream, consisting of two strings under the Black Sea from Russia to Turkey, has a combined capacity of 31.5bn cubic metres per year. For the first time, the pipeline handled more Russian gas bound for the EU and Moldova than Ukraine in 2024, with deliveries increasing by 23% to 16.7
TurkStream is now the only export route for Russian gas to Europe.
Transit through Ukraine ended on January 1 after the expiry of the contract between Moscow and Kyiv.
High gas prices will restrain gas demand in Europe, which will resort to extra LNG to replace Russian gas.
The TurkStream pipeline is now the only export route for Russian natural gas to Europe, following the expiry of the contract between Moscow and Kyiv covering transit through Ukraine at the start of this year.
Assuming flow via Ukraine is not resumed, Russia stands to lose billions of dollars of revenue from gas sales this year, and reliance on a single route poses an energy security risk for remaining European buyers of Russian gas, and a risk of
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TurkStream
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