Page 12 - bne IntelliNews monthly magazine December 2024

12 I Companies & Markets bne December 2024
countries. The sanctions regime has driven Russia into
the arms of not only China – probably a major strategic blunder by the US – but has also catalysed the development of major non-aligned organisations like the BRICS+ and the G20, which will only weaken the West’s influence in an increasingly fractured world.
It has also created unlikely beneficiaries. Central Asia is the big winner from the Ukraine war thanks to the windfall from not only amplified trade with Russia, but now there is an FDI and manufacturing boom underway that is lifting all boats in the region, which is also undermining the West’s influence in the region as it is not in the ‘Stans economic interests to adopt sanctions against Russia or cooperate in anyway with the Western campaign.
Russia's engagement with nations across Central Asia, the Middle East and Africa has intensified and has been met with enthusiasm, creating new opportunities for bilateral agreements and partnerships. Russian President Vladimir Putin’s message of anti-colonialism plays well in Africa where resentment to the colonial era remains strong.
And the discounts offered to “friendly countries” buying Russian commodities, nuclear technology and arms are very attractive. On the flip side, the US aggressive lobbying of countries to adopt sanctions also goes down very badly.
Moreover, these alliances are not just economic; they represent a broader realignment of geopolitical loyalties,
as Russia seeks to anchor its position outside the sphere
of Western influence. Putin started the war in Ukraine specifically to keep Ukraine out of Nato, but more generally, he wanted to break up the unipolar hegemony of the US in geopolitics and replace it with a multipolar model. And in this he has been largely successful. The implications of these shifts are significant, potentially laying the foundation for
a new set of international alliances and the end of the Pax Americana.
The continued adaptability of Russian and Chinese enterprises in finding solutions to maintain trade flows
also highlights a broader trend of financial decoupling. As Western nations tighten restrictions, both Russia and China are increasingly investing in developing alternative financial systems, such as cross-border interbank payment systems that bypass SWIFT. The dollars dominance in global trade and reserves currencies gave it enormous power, not to mention the ability to borrow limitless amounts of money at all-but no cost. Undermining trust in the dollar could prove an extremely costly mistake and the dollar’s share in reserve currencies has already fallen below 50% in the last two years, although it will take decades for the dollar to lose its privileged position.
Russia cuts off gas supply to Austria's OMV Newsbase
Russia’s Gazprom cut off its natural gas supply to Austria’s biggest oil and gas company OMV on November 16, the latter’s trading arm reported on the previous day, triggering a spike in European gas prices. The move came three days after OMV warned that Gazprom might halt deliveries in response to the Austrian company deducting from its invoice for current supplies more than €230mn ($243mn) in damages from the Russian supplier for past contract violations.
OMV reported on November 13 that it had been awarded €230mn in damages plus interests and costs from Gazprom Export by the Paris-based International Chamber of Commerce (ICC) for irregu- lar supplies in Germany in 2022, which were halted in September of that year. OMV said it would take steps to enforce the ruling immediately, with OMV Gas Marketing & Trading (OGMT) offsetting its claims against invoices billed to Gazprom.
OMV acknowledged that taking this step was expected to cause “a deterioration of the contractual relationship” with Gazprom, including a potential halt to gas supplies.
In a statement on the Central European Gas Hub on November 15, OGMT said Gazprom Export had notified it that
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gas supplies would be suspended the following morning. The front-month contract at the Dutch TTF hub exceeded €47.3 per MWh ($530 per 1,000 cubic metres) in afternoon trading when the announcement was made, building on daily gains from €43.7 per MWh on November 13.
When announcing the arbitration award, OMV said that if the supply was cut off, “small one-time hedging losses could occur, but will be clearly outweighed by the positive effects from the recovered damages”. It added that it would be able to fully satisfy the demand of its customers in this scenario, noting it had secured options for gas supply from Norway and in the form of LNG, and that its storage facilities in Austria were filled to more than 90% of capacity.
Austria relies on pipeline gas supplies for Russia to cover most of its demand, with its dependency reaching as high as 98% in December last year. The majority of purchases take place under OMV’s long-term contract with Gazprom, which does not expire until 2040.
Following the cut-off, the only two remaining significant buyers of Russian pipeline gas in Europe are Hungary and Slovakia. While