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IMPORT VOLUMES INCREASE 40%

European Union’s Russian LNG Dilemma

The European Union is on track to import record volumes of liquefied natural gas (LNG) from Russia this year, despite its goals to reduce dependency on Russian fossil fuels by 2027. Between January and July 2023, EU imports of Russian LNG increased by 40% compared to the same period in 2021. This surge is notably higher than the global average increase of 6% in Russian LNG imports. Belgium and Spain have emerged as the second and third-largest importers of Russian LNG, following China.

The import data, analyzed by NGO Global Witness using information from industry analytics company Kpler, reveals that the EU imported about 1.7% more Russian LNG than during its previous record high last year. The cost of LNG imports from January to July amounted to €5.29 billion. Most of these imports originate from the Yamal LNG joint venture, which is primarily owned by Russian company Novatek, along with stakes from France’s TotalEnergies and China’s CNPC.

These escalating import levels have raised concerns, as they result in substantial revenues for Russia and expose the EU to risks associated with sudden supply cuts. Russia's LNG accounted for 16% of the EU’s total LNG imports, making it the bloc's second-largest supplier after the U.S. EU officials have urged companies to avoid buying Russian LNG and have contemplated sanctions. However, they also caution that an outright ban could trigger an energy crisis similar to the one last year when gas prices soared.

Experts argue that unless the EU reduces its gas consumption by 10-15%, it risks recurring supply challenges. Meanwhile, some policymakers, like Spanish energy minister Teresa Ribera, have called the situation “absurd” and advocate for sanctions on LNG. Although EU gas storage is over 90% full, there remains significant apprehension over potential supply cuts, complicating the bloc's energy strategy.

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TRADE NEWS

The Shifting Tides of Globalization: What really impacted trade over the past decade.

The trajectory of global trade and globalization from 2015 to 2023 has been closely monitored, focusing on policy choices and external events. Initially, despite widespread talks of protectionism and nationalism, evidence suggested that globalization was not retreating. Global trade saw a decline due to the 2008 financial crisis and the 2020 pandemic but rebounded strongly afterward. Policies such as American and Chinese tariffs seemed to reallocate rather than reduce global trade, and regional agreements among other nations continued to foster economic integration.

The landscape is undergoing changes due to various pressures. The first is the global backlash against trade, particularly noticeable in advanced economies where workers feel left behind. This sentiment has led to political consequences such as Brexit and the U.S.-China trade war.

The second pressure comes from the pandemic, which ignited debates about the "resilience" of supply chains. Despite short-term disruptions, evidence suggests that international trade actually increases resilience by diversifying supply options.

Third, geopolitical events, like Russia's 2022 invasion of Ukraine, are causing nations to reassess their dependencies on single countries for critical resources. This has led to a shift in mindset from international cooperation to a zero-sum game, particularly noticeable in technology sectors. For instance, the U.S. has imposed export bans on critical technology to China, marking a competitive rather than cooperative global stance.

The future of globalization remains uncertain and is highly dependent on policy choices. Two potential paths are emerging: one involves limited interventions to restrict technology access, while the other could lead to a more fragmented world divided into rival camps. While the world has been highly interconnected, recent tensions and policy shifts are introducing uncertainties into the future of global trade. Only time will tell.

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