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58 I Eastern Europe bne September 2022
capacity by 2030 are unlikely to be reached, with 60-70bcm perhaps a more attainable goal.
To conclude, can Russia replace lost European sales in Asia? In the short- term this is unlikely, although it depends how fast and how far exports to Europe fall. If they decline to, say, 50bcm in the next couple of years
(a decline of 100bcm from 2021 levels) then this will not be replaceable on
a similar timescale as the only real options will be the redirection of
current LNG flows and the addition of Arctic LNG 2 train 1 – in total 23bcm – plus the continued ramp up of Power of Siberia flows to 38bcm (22bcm higher than today). However, by the late 2020s the current Power of Siberia contract could have expanded by 6bcm and we could see the Far East pipeline onstream with a further 10bcm, and
if contracts can be signed quickly for Power if Siberia 2 / Soyuz-Vostok then initial sales from a 50bcm contract could also have started. Extra LNG projects could also have started, albeit
more slowly than hoped, adding another possible 15-25bcm, meaning that by the early 2030 Russia could be sending an extra 116-126bcm of gas
to non-European markets. If some gas is still flowing to Europe at that stage, then a re-balancing could have occurred, after a likely dip in export volumes in the 2020s.
James Henderson is the chairman of the Gas Programme at the Oxford Institute for Energy Studies.
CEPR's action plan for Ukraine's
wartime economy
Ben Aris in Berlin
The war in Ukraine is starting
to look like it might last a long time and that means putting the economy onto a war footing. For the first six months of fighting, running
the economy has been little more than crisis management, but if Ukraine is going to fight for another six months, or longer, it needs a plan. Simply printing money to pay soldiers’ salaries and buy more ammo is not going to work for much longer.
A team of very distinguished econo- mists from the Centre for Economic Policy Research (CEPR) that includes Kenneth Rogoff, the author of the much talked about “This time it’s differ-
ent: Eight centuries of financial folly,” have released a paper outlining policy recommendations for putting Kyiv’s financial house in order to be able to pay for the defence of its country. That is not going to be easy.
“The government is mobilising as many resources and as much revenue as it can, having reinstated import taxes suspended at the outset of the full- scale invasion. It has cut non-military spending to the bone. Yet independent estimates, such as that of Moody’s, project a budget deficit of 22% of GDP,
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or $50bn, for this year,” the CEPR team said in its report.
Ukraine needs money, but the authors of the report say that expecting the West to provide enough cash to support the budget is “wishful thinking”.
Approximately one-third of govern- ment spending is covered by tax revenue, loans and grants from inter- national organisations. Ukraine’s allies cover another third, and the central bank prints money to cover the rest.
“In short, with limited reserves, the central bank cannot at the same time print money, defend the hryvnia and maintain macroeconomic stability. Continuation of the current policy will result in a crisis (high inflation, a currency crisis or a banking crisis),” the authors wrote.
As bne IntelliNews has reported, Ukraine is running out of money and the stress is beginning to show. Timothy Ash, the senior sovereign strategist at BlueBay Asset Management in London, wrote in a recent opinion piece that the West has been complacent in its financial support of Ukraine, which is not “in sufficient scale and in a timely enough manner.”
Since the start of the war international donors have given Ukraine a total of $12.7bn, or about $2.5bn-$3bn a month. As things get increasingly desperate
the US has promised another $4.5bn in financial aid (and another $1bn in mili- tary aid) to arrive in August and the EU will match this with €8bn in September. The US money is welcome, but it is
still only half of the $9bn Washington promised to send, and even the $4.5bn will only cover the shortfall for a single month. The Western financial aid has been dogged by bureaucratic delays and fears of corruption.
“To avert economic calamity, Ukraine’s allies should disburse larger amounts immediately. Given debt sustainability concerns, grants are strongly preferred, but if the choice is a loan versus no money, then a loan should be given and taken,” the CEPR team writes.
Ash complains that because most of the money being given to Ukraine is in the form of interest-bearing loans, Ukraine is “being charged to fight this war for us” and calls for more of the aid to be given as grants that don’t have to be paid back. According to the Kiel Institute for the World Economy, the share of grants in the EU aid