Ukraine: the pressure builds

By Richard North - July 12, 2022

It’s a weird world. On the one hand, we have the Ukrainians talking of building a million-strong army to take back their occupied territory from the Russians. And back in the UK, there’s another, wholly unreal war as the Conservative Party tears itself apart in its search for a new leader.

Of the two endeavours, the former might well be the more productive, if somewhat longer term. Under normal circumstances, the Ukrainian war could have a better chance of ending than the internal war dominating the headlines over here.

The only slight problem in making that a reality is that Zelensky’s grandiose dream needs a lot of money and external assistance from Ukraine’s friends and allies. And that requires the continued support of the voters of the different nations which make up the support base.

On the face of it, that support might seem solid, but it is early days and people have yet to experience the full adverse consequences of that support. But already there are hints of a dark, to say nothing of a cold future for some.

This is Germany, where hot water is being rationing, street lights are being dimming and public swimming pools are being closed. This is on top of huge increases in gas prices which have plunged Europe’s biggest economy into its worst energy crisis since the oil price shock of 1973.

Gas importers and utilities are fighting for survival while consumer bills are going through the roof, with some warning of rising friction. And, if anything, the situation is set to get worse as NordStream 1 – the biggest single pipeline carrying Russian gas to Germany – was shut down for annual maintenance yesterday.

And although the pipeline is scheduled to restart on 21 July, there are fears that Russia will extend the outage in response to the continuing sanctions regime, throwing European plans to replenish winter storage into disarray.

German economy minister Robert Habeck has warned that his country should confront the possibility that Russia will suspend gas flows beyond the scheduled maintenance period. “Based on the pattern we’ve seen”, he says, “it would not be very surprising now if some small, technical detail is found and then they could say ‘now we can’t turn it on any more’”.

Already, Russia has cut gas flows through NordStream by 40 percent of the pipeline’s total capacity, citing the delayed return of a gas turbine being serviced by Germany’s Siemens Energy in Canada.

And although Canada has said it will return the equipment – much to the dismay of Ukraine – this isn’t necessarily the end of the matter. Even if a permanent halt is avoided, the Russian state supplier, Gazprom, has not been re-routing flows via other pipelines, meaning a prolonged reduced flow rate is probable.

And that is an optimistic view. Timm Kehler, managing director of German industry association Zukunft Gas, says: “The last few months have shown one thing: Putin knows no taboos. A complete halt to gas supplies through the Nord Stream pipeline cannot therefore be ruled out”.

Furthermore, it is by no means just Germany which is affected. In France, we are told, France’s top three energy suppliers have called households and businesses to prepare to ration electricity and gas.

Catherine MacGregor, chief executive of Engie; Jean-Bernard Lévy, who heads up EDF; and Patrick Pouyanné, chairman of TotalEnergies; made their collective plea in French newspaper Le Journal du Dimanche, telling consumers that the French energy system had not been spared from Russian cutbacks.

Nor is there any obvious relief. They warned that, despite increasing imports, stocks of liquefied natural gas (LNG) were too limited to compensate for the decreases experienced. Thus, even at a time of lower summer use, the alert level for gas stocks at the European level is high and rationing measures have been put in place in some countries.

Italy is another country affected and, according to reports, is no longer getting reliable gas supplies. Supplies had been cut by a half and yesterday Gazprom announced a further cut by about one third.

It comes as Italy battles with drought and a heatwave that are hitting power generation and as the country struggles to fill storages for the winter. Significantly, this is being linked to Italy’s delivery of five PzH 2000 self-propelled howitzers to Ukraine, reinforcing the belief that Russia is using energy supplies as a weapon.

As well as energy issues, though, there are knock-on effects on food supplies and the Ukrainian war is being held responsible for hikes in food prices – not least because of the soaring costs of crop fertilisers. And here, it seems, tolerance is wearing thin.

A “Statista” poll commissioned by the European Parliament concludes that, in the event of rising energy prices, 58 percent of all citizens in Europe are no longer willing to support the sanctions on Russia, defending “the values of the EU”.

Much the same applies to food inflation. As many as 59 percent are “not at all ready” or “not very ready” to make sacrifices for Ukraine. And this despite the fact that inflation has not yet reached its peak.

But there is another dynamic which could affect public support even more severely. European competition for LNG is causing blackouts in developing countries as supplies are diverted to wealthier countries. Pakistan, for instance, has been suffering badly because of insufficient LNG supplies that the country needs to keep its power plants going.

This, plus pressure on food stocks, which is also having a greater effect in developing countries, is expected to trigger a huge surge in migration from the Middle East and Africa, as well as parts of Asia.

This will get worse as the war continues. Ukraine is one of the biggest grain exporters in the world and supplies have already been severely affected, with around 20 million tonnes of grain from last year’s harvest blocked in Ukrainian ports on the Black Sea. This year’s planting is down, and yields are likely to be reduced due to the limited supplies of fertiliser.

The head of UNHCR, Filippo Grandi, has warned that unless the growing food crisis caused by Russia was quickly resolved, the number of displaced people globally would swell well beyond the record 100 million already recorded, adding to the global migration pressure already being experienced.

Thus, for as long as the war in Ukraine remains unresolved, developed countries face a triple whammy of energy shortages and price hikes, similar effect on food supplies, and noticeable increases in third world immigration. The indirect effect of high inflation and the direct costs of financing the war and supporting Ukraine’s economy will further add to the pressure.

But what the European Parliament poll shows is that this is likely to have a significant impact on public support for the war. And while the political consensus throughout Europe is just about holding, it too is under strain. It would not take very much for the accord to fracture, especially if public support evaporates in response to the stresses created.

Ironically, the pressure on gas supplies is having a significant effect on the climate change agenda, with numerous European countries reverting to coal for electricity generation. Austria, Germany, Italy and the Netherlands announced plans this week to prepare to resurrect old coal plants as gas supplies dwindled.

The political impact of this is not yet evident but it does not seem unreasonable to suppose that this will make it more difficult for some states to continue supporting the Ukraine war.

Altogether, it begins to look as if Mr Zelensky is living off borrowed time, in a race to achieve tangible results against the Russians before the strains become too much for his supporters and the bulk of the support evaporates. Given the way the situation is deteriorating, this could be sooner than he thinks.