Page 66 - The Economist20171214

66 Finance and economics The Economist December 16th 2017
Energy disruptions in Europe ming the WTO’s process of settling dis-
The cracking putes. As negotiations progressed, some
delegates groused that American leader-
forties ship was lacking. Some even speculated
that the Americans might be happy ifmul-
tilateral talks foundered. What better
proof, afterall, that the system is broken?
Ms Malcorra, without mentioning the
As markets tighten,supplydistortions Americans by name, warned against creat-
ripple around the world
ing scapegoats out of those who might re-
ALL it the hydrocarbon equivalent of cently have “shifted gear”. The WTO, after
Cthe butterfly effect. As oil and gas sup- all, had problems before Mr Lighthizer
plies tighten during the northern winter, tookup hisjob. Decisionsare made by con-
disruptions as remote as a hairline fracture sensus, which leaves deals vulnerable to
on a piece of Scottish pipeline, and an ex- hostage-takers. In some cases, the victim is
plosion in an Austrian natural-gas plant, the negotiating agenda. Still hanging over
have repercussions felt around the world. theWTOisa 16-year-old negotiatinground,
Start with the pipeline. After Ineos, a in theory meant to further global develop-
chemicals company, detected a growing ment. Until that round is concluded, mem-
crack on a piece of pipe near Aberdeen, on bers such as South Africa are reluctant to
December 11th it said it would shut the negotiate on any new issues, like rules on
main Forties pipeline carrying North Sea e-commerce orinvestment facilitation.
oil and gas to Britain for weeks. The sus- The Baumgarten blast Members arrived in Buenos Aires in
pension of a pipeline carrying 450,000 disagreement, and refused to budge. The
barrelsaday(b/d)ofcrude,inaglobalmar- As Britain struggled with its gas sup- Indian delegation wanted to lift restric-
ketofalmost98mb/d,wouldnotnormally plies, elsewhere in Europe had to cope tions on its government’s ability to distri-
be disruptive. Yet Brent crude, the bench- with an explosion at the Baumgarten gas bute stockpiles of food. When the Ameri-
mark for pricing much of the world’s sea- hub in Austria on December 12th that cans refused, the Indians looked for a way
borne crude, is itself partly priced on the killed one person. It stopped the flow of to retaliate. Theyended up killingan agree-
flow of crude from 80 fields that feed the Russian gas through Austria into Italy, ment to ban subsidies for illegal, unreport-
Forties pipeline, magnifyingthe impact. sendingday-aheadpricesforsuchgassoar- ed and unregulated fishing—as national
Futures prices for Brent crude delivered ing.Italy,whichdependsonRussiangasfor leaders had agreed to do by 2020 as part of
in February and March surged to two-year about a third of its consumption, declared the United Nations’ Sustainable Develop-
highs, above $65 a barrel, before falling a state of emergency. But later that night ment Goals. Cecilia Malmstrom, the Euro-
back. That emphasised how little slack the Russian gas reached Italy again after OMV, pean trade commissioner, called this fail-
market has, after the extension last month Baumgarten’s operator, diverted flows. ure “horrendous”.
of a production cut by OPEC, the produc- Predictably, the Kremlin used the incident Amid the triumph of self-interest over
ers’ cartel, Russia and other petrostates. to press for more pipelines to Europe. But the greater good, there were some grounds
Ann-Louise Hittle of Wood Mackenzie, a the EU is reluctant to lean too heavily on forcheer. Fornow, it seems MrLighthizer is
consultancy, says some European refiner- imports ofRussian gas. It sees LNG, includ- planning to influence the multilateral sys-
ies rely on Brent crude to produce heating ing from America, as a useful alternative tem from within. A joint statement re-
oil for sale in Germany and elsewhere. that could enhance its energy security. 7 leased by America, Japan and the Euro-
“Suddenly half a million barrels are out of pean Union pledged “to enhance trilateral
action at a delicate time goinginto winter,” co-operation in the WTO” when dealing
she says. Those refineriesmaynowreceive The World Trade Organisation with excess capacity, forced technology
some shipments ofAmerican crude. transferand local-content requirements.
The mishap also highlighted the fragil- The art of the Perhaps more importantly, members
ityoftheBrentbenchmark,whichispriced are actuallymovingahead on some issues.
based on demand for four types of crude impossible A coalition of countries ranging from
produced in ageing North Sea fields run- America and the EU to Cambodia has
ning through pipelines dating from the signed up to negotiate newruleson e-com-
1970s. EarlierthisyearS&P Global Platts, an BUENOS AIRES merce on a plurilateral, ratherthan a multi-
agency that assesses the Brent price, said it lateral, basis. As long as enough members
would incorporate from January a fifth Aministerial meeting disappoints agree among themselves for the deal to be
crude from a Norwegian field, to ensure a HERE is life after Buenos Aires,” worthwhile, and do not discriminate
more stable mixofproduction. “Tsoothed Susana Malcorra, chair of against other members of the WTO, a deal
The pipeline also carries a tenth of Brit- the 11th ministerial meeting of the World is possible. The message was clear: if some
ain’snatural-gassupply. StuartElliot ofS&P Trade Organisation (WTO). Multilateral- members want to block discussion, then
Global Platts says that, in Britain, whole- ism may not be dead, but it has taken a they will be left behind.
sale gas prices surged by 40% followingthe kicking. Expectations were low as the Itseemsunlikelythata surge of plurilat-
shutdown, until terminals storing lique- meeting began in the Argentine capital. eral agreements will be enough to jolt the
fied natural gas (LNG) disgorged some They sank even lower as it progressed. De- WTO into life. For that, the organisation’s
stock. Indicating the global reach of the in- legates failed to agree on a joint statement, memberswill need to showmore commit-
cident, he says Britain may stock up on gas let alone on any new trade deals. ment to it—and to learn the art of compro-
by buying a cargo from the first tanker Many arrived with a culprit already in mise. Roberto Azevêdo, the WTO’s direc-
bringing LNG from Yamal, a field in the mind. Robert Lighthizer, the United States tor-general, wrapped up the conference by
Russian Arctic, which was inaugurated by Trade Representative, was the face of an reminding members that “multilateralism
PresidentVladimirPutin on December8th. administration that is both questioning doesn’t mean that we get what we want. It
Much ofits gas is destined forChina. the benefits of multilateralism and jam- means we get what is possible.” 7