Vitaly Yermakov

CCEIS expert Vitaly Ermakov gave a commentary to the Valdai International Discussion Club where analyzed the energy policy of Russia and Western countries. Key ideas:
-Energy trade has been the backbone of the overall economic relationship between Russia and the West, especially Europe, but now it appears that this era is ending;
-Amid the uncertainty about who will pay for the restoration of Ukraine, the plans to confiscate Russia’s export earnings have emerged; 
-An import tariff on the Russian energy export and schemes with escrow accounts in Western banks are among those plans; 
-The EU introduces and considers additional tough measures to reduce Russia's energy exports: an embargo on Russian coal supplies is already in place from August 10, 2022, an oil embargo is being discussed, and plans are being worked out to phase out Russian gas; 
-Due to the inelasticity of supply and demand in the energy markets, the interdependence of Russia and Europe cannot be eliminated by directives; 
-The introduction of the “gas for rubles” scheme by Russia was a pragmatic response to attempts to control export revenues from the EU, the rejection of this scheme by PGNiG and Bulgargaz has already led to a halt in direct gas supplies to Poland and Bulgaria;
-The discussed oil embargo against Russia or problems with the "gas for rubles" scheme could trigger a series of extreme disasters, politicians are raising the stakes in an energy game that could get out of hand

V. Ermakov, a CCEIS expert, analyzed the prospects for the development of Russian-Chinese cooperation in the gas sector in an article for the Valdai International discussion club.Main points:
·In the new reality Europe is going to reduce its energy dependence on Russia as soon as possible and regardless of collateral damage;
·Russia must accelerate its Pivot to the East, which makes China a clear winner since it would be able to use the situation to get Russian oil and gas at discounted prices;
·In order to diversify their foreign trade options Moscow and Beijing have accepted a package of commercial contracts for the supply of Russian oil and gas;
·China’s gas consumption is growing, and according to estimates, its own production by 2030 will be able to cover only half of the future increase in demand. That is why the deal now is more relevant than ever.
·Gas supplies via  the Power of Siberia gas pipeline with the addition of  gas from the Russian Far East will give Gazprom a competitive edge compared with other importers in the northern and eastern provinces of China. 
·Russia and China continue to negotiate a new giant contract on gas supplies from Yamal, and both sides have demonstrated a pragmatic acceptance of a possibility to include third-party transit (via Mongolia) into their plans.

V. Yermakov, an expert at CCEIS, wrote an article for the Valdai International Discussion Club on Russian gas supplies to Europe amid the crisis. Key ideas: 
• Despite the fighting in Ukraine and an avalanche of Western sanctions, Russia continues to supply gas to Europe without interruptions;
• After a decline in January, gas supplies to Europe from Russia returned to their previous level in February and even increased in the first ten days of March;
• Gas transit through Ukraine was not disrupted even by fightings;• Over the past two years, the European gas market has gone from a supply surplus to a crisis caused by supply constraints (exacerbated by events in Ukraine), driving up prices;
• For over 50 years, Russia-Europe gas relationship has been underpinned by the concept of cooperatively managed interdependence producing mutual benefits, but it cannot remain immune to the increasing geopolitical animosity between the great powers and the emergence of extreme bargaining positions; 
• Gazprom's existing production capacity is sufficient to meet the company's obligations under long-term export contracts and cover seasonal peak in domestic demand, but investment in new capacity is required to meet additional new demand;
• Prior to the start of the special operation, Gazprom took a wait-and-see attitude, making it clear that without guarantees of demand there would be no major investments;
• There is a reorientation of gas supplies to Asian markets, and the launch of a special operation reinforces the need for a “pivot to the East”

Key points:  
1. Russia considers the NSR a strategic economic priority since it is instrumental for suppling Russian northern territories. Its importance has grown in the past few years with the expansion of Russia’s oil and gas projects in the Arctic. The NSR allows to monetize vast oil and gas resources located near the coastline and transport them economically to target markets. 
2. The realistic possibilities for the NSR to develop into a major trade artery to Asia. The NSR is an Arctic shortcut that saves time and reduces transportation costs on a route between Europe and Asia. But it is necessary to take into account that navigation in Arctic seas is still difficult and it could cause significant risks for ships. Russia is trying to increase its Arctic capabilities by building a new generation of powerful nuclear icebreakers and Arctic class ice-resistant tankers. Initially, Russian exports of oil, condensate, and LNG are going to represent the lion’s share of the transportation turnover via the NSR. When year-round navigation via the NSR becomes a reality, international transit might increase as well.  
3. The NSR and its geopolitical implications.  In a world of increasing global rivalries, Russia’s control over a major trade route connecting Europe and Asia is an asset. Unlike other marine routes to Asia that could be controlled by the US Navy, the NSR emerges as an important factor in the Russia-China relationship.

On December 11^th, Vitaly Yermakov, CCEIS expert, spoke at the RAND Business Leaders Forum.
Vitaly’s topic was “COP-26 and Russia”, and his main points were as follows: 
- The results of COP-26 have demonstrated that the tradeoffs between growth and climate mitigation are real and difficult causing the international politics of climate change to lead to disunity in case of a radical and hasty transition. 
- An attempt to shift the policy agenda at COP-26 away from demand-side measures to supply-side pressure and restrictions, declaring coal the main “enemy” and casting any investment incentives for hydrocarbons as “inefficient fossil fuel subsidies” has run into the opposition of the developing countries that need to address energy poverty and maintain economic growth.
- Power crunch in China and gas crunch in Europe are powerful reminders that energy transition is going to be costly and volatile and is going to lead to political upheavals.
- Elections will be lost by politicians who placed their bets on the green agenda but failed to deliver energy security. 
- Russia’s energy strategy is evolving in response to climate change agenda but the official documents like ES-2035 are outdated and are no longer relevant. Russia’s recent policy guidance suggests the readiness for course corrections but also the intent to protect its vital interests. This results in pragmatic approach to energy transition based on Russia’s strategic strengths and free of ideological dogmas. At the same time, Russia’s leadership has realized that it must be actively involved in shaping the global climate agenda. Russia’s pledge of reaching net zero by 2060 will be achieved via a combination of processes, involving energy efficiency, greater role of natural gas combined with CCUS followed by a gradual introduction of hydrogen, new generation of nuclear, and increasing the absorption capacity of Russia’s forests.

On November 24, the Oxford Institute for Energy Studies published a new research paper by CCEIS' expert Vitaly Yermakov and Anastasia Yermakova -The Northern Sea Route: A state priority in Russia's strategy of delivering Arctic hydrocarbons to global markets.

On 8-9 November 2021, in virtual format was held Global Energy Conference by JP Morgan. Vitaly Yermakov, the CCEIS Expert, has participated in it and spoke about the causes and solutions of Europe's gas crunch.

Vitaly Ermakov, the CCEIS expert, published the new study concerning Russian gas exports  
Key points:
- Russian gas output in 2021 has reached limits of near-term productive capacity responding to spikes in demand at home and abroad
- Russian gas exports increased robustly y-o-y, focusing mostly on Turkey and Germany
- This has proven to be insufficient to meet the rising call on Russian gas in Europe in Q3, which contributed to a price spike
- The configuration of Russian gas flows is changing, reflecting the shift in the geography of Russian gas supply

Vitaly Yermakov, CCEIS expert, took part in the discussion "Transition to Net-Zero focusing on IEA’s recent report Net Zero by 2050", where he presented a report on the topic " Energy transition and Russia's low-carbon adaptation strategy".

VitalyYermakov participated in the panel Diplomatic Energy Club-Croatia / EU Online, moderated by ProfDaria Karasalihović Sedlar
Vitaly’s key points:
- The finalization of Nord Stream 2 construction, now imminent, marks the success of Russia's strategy of minimizing the risks of third country transit.
- This strategy stems from the fundamental changes in the geography of Russian gas supply and the new configuration of Russian pipelines that connect new productive capacity on Yamal with the target market of Germany with the shortest possible route through the northern regions of Russia and via Nord Streams.
- Conversely, the irreversible decline of gas production in Russia's legacy fields in Nadym-Pur-Taz and ageing pipeline infrastructure leading towards Ukraine create constraints on future transit flows through Ukraine.
- The characterization of Nord Stream 2 as a "redundant" pipeline fails to consider these important facts and leads to false expectations regarding the future role of Ukrainian transit.