The Economist - UK (2022-04-30)

68 Finance&economics TheEconomistApril30th 2022

moredependentthaneveronfiscalstimu­

lus.Ata meetingofthepowerfulCentral

CommitteeforFinancialandEconomicAf­

fairsonApril26th,XiJinping,China’spres­

ident,calledformoreinvestmentininfra­

structure, from rural roads and urban

drainstosmartelectricitygridsandartifi­

cial­intelligence platforms. Citigroup, a

bank,forecaststhatinfrastructurespend­

ingcouldgrowby8%thisyear.Butaccord­

ingtoNatixis,anotherbank,Chinawillnot

meetits(increasinglyforlorn)growthtar­

getofaround5.5%unlessinfrastructure

investmentgrowsbyalmost18%.Evena

conventionalemergingmarketwithvast

infrastructure needs would struggle to

boostspendingbythatmuch.China’sfear

offloatinghasinhibiteditsmonetaryre­

sponsetoitseconomicwoes.Andthathas

raisedfearsofitsfloundering.n

Europeangas

Tit fortaps

N

ot longagoit seemedthatthegameof

energypokerbeingplayedbyEurope

andRussia,thoughdangerous,wasunder

control.Oilandgaswasoneofthefewsec­

torsEuropehadnottargetedwithsanc­

tions.Russiahadkeptsuppliesflowing.

Yes,Europewasmullinga banonenergy

imports, and Russia demanded in late

Marchthat“unfriendly”countriespayfor

theirnextgasdeliveriesinroubles(rather

thaneurosordollars),orbecutoff.But

eachsidethoughttheotherlackedtheguts

togoallin.Afterall,Europeimports40%

ofitsgasfromRussia,whichinturnmakes

about€400m($422m)a dayfromitssales.

OnApril27th,however,Russiaupped

theante.Gazprom,a state­ownedenergy

giant,stoppedsendinggastoBulgariaand

Polandaftertheymissedthedeadlinesthat

Russiahadsetforpayinginroubles.The

euisscramblingtorespond;Europeangas

prices jumped by a fifth on the news

(thoughtheyhavesincefallena little).

TheimmediateeffectofRussia’slatest

move,whichtheeuhasdescribedasbeing

a breachofcontract,islimitedinscope.Po­

land’simports,of 10 billioncubicmetres

(bcm)a year,andBulgaria’s,of3 bcm,to­

getheraccountforjust8%oftotaleuim­

ports.Poland’scontractwithRussiawas

duetoexpireinDecemberanyway,sothe

revenueRussialosesfrombreachingitis

small.AndalthoughBulgariaandPoland

bothreliedonRussiaformostoftheirgas

imports,theymaybeabletocopewithout,

saysXiNanofRystadEnergy,a consultan­

cy.Polandshouldstartreceivinggasfrom

NorwayinOctober.Nearbyregasification

terminalscouldhelpitimportmorelique­

fiednaturalgas(lng). Bulgariaisexpected

tostartimportingAzerigasviaGreecelater

thisyear.

Exactlywhomightbecutoffnextisnot

clear.Russia’sdeadlinesforpayinginrou­

blespartlyreflectthedetailsofcontracts

thatarenotpublic.Butsourcescanvassed

byTheEconomistthinktheywillfallinMay.

Thestakesarehigh.ItisnotthatEurope

needsthegasnow:astemperaturesrise,

consumption is ebbing. But the bloc’s

stocksareonlyat33%ofstoragecapacity.

The European Commission has urged

memberstatestoensurethattheirfacili­

tiesare80%fullbyNovember,implyinga

spikeindemandtocome.

Still,ifRussiaweretocutoffbigim­

porters,itwoulddepriveitselfofsomeof

thecashitneedstofunda costlyandpro­

tractedwar.Sowhowillfoldfirst?Most

Europeanbuyers havealreadyruled out

payingdirectlyinroubles.ButMoscowis

offeringa compromise.Buyerswouldopen

twoaccountswithGazprombank(alender

thatisnotundersanctions).Theywould

payeurosintothefirst,andaskthebankto

convertthesumintoroublesanddeposit

themoneyintothesecondaccount,which

wouldthenbewiredtoGazprom.

ManyEuropeancountries dislike the

plan, which wouldlook asthough they

were giving in to Russian bullying and

riskscreatinglegalheadaches. Theywill

fallintothreegroups.One,whichincludes

Belgium,BritainandSpain,importslittle

ornogasdirectlyfromRussia,andmayre­

fuse to compromise. Another groupin­

cludesbigbuyerssuchasGermanyandIta­

ly,whichwillstruggletoreplaceimports

quickly;theymaytakethedeal.A thirdset

ofwaverersincludescountriesthatareon­

lypartiallydependentonRussia,andmay

alsohavecontractsthataresoontoexpire.

Eventhissituationwouldcreateuncer­

tainty. One countrybeing cut off could

have knock­oneffectsonothers,forin­

stanceifgastransits throughittoother

places.Norisit clearwhowilltaketheRus­

siancompromise,orwhetherRussiamight

eventuallyturnthetapsoffanyway.

IfGermany,say,werecutoff,gasmar­

ketswouldgo haywire. European prices

arealreadysixtimeshigherthantheywere

a yearago.Theywouldsoartonewpeaks,

luringmorelngfromtherestoftheworld

andcausing prices elsewhere to rise in

turn.JackSharplesoftheOxfordInstitute

forEnergyStudies,a think­tank,reckonsa

fullshutdown ofRussiangasto Europe

maywellcausea globalrecession.Russia’s

gameofpokerisgettingscarier—andthose

losingtheirshirtscouldincludebystand­

ers,too.n

RussiahascutoffgastoBulgariaand

Poland.Who’snext?

The energy stakes

Gas imports, 2021, bn cubic metres

Source:Rystad

Restof world

Imports from:

Russia

Bulgaria

Hungary

Austria

Poland

Belgium

Netherlands

Spain

France

Britain

Italy

Germany

0 30 60 90

How do I turn this thing back on?

America’seconomy

Surveying the

coming wreckage

A

mericans have much  to  like  and

much  to  dislike  about  the  economy

these  days.  Thanks  to  a  red­hot  labour

market,  it  is  unusually  easy  both  to  find

work  and  negotiate  a  pay  increase.  At  the

same  time,  rising  prices  have  taken  a  bite

out of their earnings in real terms. To get a

handle  on  how  people  perceive  these  op­

posing trends, analysts can look at surveys

that measure consumers’ sentiment about

the economy. There is, however, a problem

at  the  moment.  Like  the  contradictory

trends, the two main surveys are present­

ing different pictures.

The first is a survey of consumers by the

University  of  Michigan.  Started  in  1946,  it

is  respected  as  a  leading  indicator  of

whether Americans are planning to spend

money or tighten their belts. As such, it is

WASHINGTON, DC

A big divergence in consumer surveys

adds to recession worries