L5 - Geopolitics of Energy

E-TRANSITION, SUSTAINABILITY AND ECONOMICS
L5 – GEOPOLITICS OF ENERGY
Ettore F. Bompard, Daniele Grosso

OUTLINE
➢ Issues on Growing Demand

➢ Russia-Ukraine crisis and effects on gas supply
➢ Economic Issues: the relationship between oil price evolution and geopolitical events
FARE CLIC PER MODIFICARE LO STILE DEL TITOLO
E. F.Bompard – E-Transition, Sustainability and Economics- 2

ISSUES ON GROWING DEMAND
Main issues about growing Demand are:

➢ Environmental:
o Fossil fuelsFARE CLIC PER
are responsible MODIFICARE
for Greenhouse Gases (GHG)LO STILE DEL
emissions and,TITOLO
consequently, they
are blamed for climate change, of which these emissions are a major contributing cause
➢ Geopolitical:
o Oil and natural gas supplies are often affected by geopolitical tensions between supplying and
importing countries or between supplying and transit countries (e.g., Russia-Ukraine tensions
2006, 2009, 2014, 2022; Russia-Turkey 2015) and possible terrorist attacks
➢ Economic:
o Often linked to the evolution of the price of oil, which in turn may be conditioned by events of a
geopolitical nature

NATURAL GAS IMPORT DEPENDENCY OF ITALY
Natural Gas Import by Country in Italy

(2020)
Source: Eurostat

2,6%
22,8%
43,3%
6,7% High
11,1%
dependency
10,5%
from Russia
1,4%
1,6%
Algeria Libya Norway Netherlands
Others Qatar Russia United States

NATIONAL ENTRY POINTS AND CAPACITIES
➢ TAG pipeline: ➢ Panigaglia LNG Terminal

✓ max. capacity 107 Mcm/d (max. cap. 13 Mcm/d)
✓ import from Russia ➢ Rovigo LNG Terminal
✓ entry point: Tarvisio (max. cap. 26.4 Mcm/d)
➢ TRANSITGAS pipeline: ➢ Livorno LNG Terminal
✓ max. capacity 59 Mcm/d
✓ import from Norway and
(max. cap. 15 Mcm/d)
Source: ARERA
Netherlands
✓ entry point: Passo Gries
➢ Maximum concurrent
➢ TRANSMED pipeline:
capacity from Transmed,
✓ max. capacity 102.2 Mcm/d
Greenstream and TAP:
✓ import from Algeria
123.4 Mcm/d
✓ entry point: Mazara del Vallo
➢ GREENSTREAM pipeline:
✓ import from Lybia
✓ entry point: Gela
➢ TAP pipeline:
✓ import from Azerbaijan
✓ entry point: Melendugno
Source: SNAM
THE ROLE OF GAZPROM
Russia-Ukraine crisis and effects on gas supply
Gazprom role
• Gazprom is the major Russian company
FARE CLIC PER MODIFICARE LOtheSTILE
• It covers DEL
whole gas TITOLO
supply chain:
➢ Geological exploration
➢ Production
➢ Transport
➢ Storage
➢ Selling
• In 2020 it held 70% of Russian reserves and
16% of global reserves
• It owns more than 176800 km of pipelines
• The yearly revenues in 2020 were approx.
equal to 70 billion €

RUSSIA-UKRAINE CRISIS AND EFFECTS ON GAS SUPPLY

RUSSIA-UKRAINE 2006 CRISIS – 1
➢ In Ukraine "orange revolution" and victory in presidential elections (26-12-2004) of Viktor Juščenko,
not appreciated by the Kremlin
➢ Ukraine moves more and more towards the European Union, reducing the weight of Russian
influence
➢ Ukraine, however, is in the orbit of Moscow and from an energy point of view depends on Russia for
energy. The majority of Ukrainian gas, in fact, comes from Gazprom, and is sold at a subsidized
price of 50 $/ 1000 m3
➢ Meanwhile, Ukraine obtains from EU the status of market economy → Gazprom begins to apply
market tariffs (at first 160 $/1000 m3 and then, after Ukrainian refU.S.l, 230 $/1000 m3) → attempt to
bind Ukraine to Russia
➢ Ukraine threatens to make withdrawals on gas destined to Europe as payment for transit fees (15%
of the total)

➢ Moscow points out that transit rights are already paid by Gazprom and, following rumors of a
possible rent increase for Russian ships stationed in Crimea, also questions the territorial
agreements with Ukraine
➢ Risks of the crisis:
o For Russia,FAREpossibleCLIC PERofMODIFICARE
alienation LO the
the sympathies of even STILE DEL TITOLO
Russian-speaking part of Ukraine
and stiffening of relations with the EU
o For Gazprom, possible blocking of the entry of European investors into the company's
shareholder base
o For Ukraine, possible significant crisis in the entire industrial sector, with serious repercussions
on the economy
➢ On December 30, 2005 the Russian President Putin proposed a compromise to Ukraine, with the
application of market prices only from April 1, 2006
➢ Juščenko asks for prices to be fixed in advance, but Moscow interprets the request as an attempt to
gain time and gives the green light to Gazprom to cut natural gas supplies to Ukraine

➢ On January 1, 2006 Juščenko states that the price of 230 $/1000 m3 is unacceptable. Gazprom then
announces the closure of the taps for the Ukraine, specifying that there would be no repercussions
for the supply of natural gas to the EU
➢ Despite the announcement, gas supplies to Europe immediately undergo a sharp drop, pushing
some importingFARE CLIC
countries to usePER MODIFICARE LO STILE DEL TITOLO
oil reserves
➢ On the same day, various European countries formally request Ukraine to ensure the gas flow
➢ On January 2, 2006 Gazprom accuses Ukraine of having illegally withdrawn 100 million cubic
meters of gas destined for the European market; the Ukrainian government replies specifying that
supplies come from underground deposits and from Turkmenistan, but reiterating that it has no
problems about intervening directly on supplies to the EU
➢ The crisis extends to Moldova, which has not accepted the 100% price increase proposed by
Moscow, suffering the stop of supplies as of January 1

January 2, 2006:
➢ Italy: 24% drop in imports;
➢ France: decrease of 25÷30%;
➢ Germany: unquantified drop;
➢ Croatia: drop of more than 30%;
➢ Slovenia: 25% decrease; risk due to high dependence of gas imports on Russia (55% of the total);
➢ Hungary: 25% drop, returning to normal in the evening;
➢ Austria: 30% drop; availability of reserves;
➢ Romania: 30% drop;
➢ Slovakia: 30% drop; availability of reserves;
➢ Poland: 38% drop.

➢ On January 4, 2006 Naftogaz (Ukrainian company) and Gazprom announce they have reached an
agreement: Ukraine will purchase Russian gas for the next 5 years at the price of 230 $/1000 m3, but
will also be able to purchase gas from other countries (such as Kazakhstan and Turkmenistan) at a
lower price (equal to 95 $/1000 m3), through a Swiss company with Russian and Ukrainian
participation (RosUkrEnergo)
➢ The fear of an energy crisis ends for Europe, with the price of oil reaching again the pre-crisis levels
➢ However, the problem of high energy dependence and problems deriving from possible geopolitical
crises is highlighted
➢ In Italy, in particular, the nuclear option is relaunched for the generation of electricity, which,
however, will be definitively stopped following the referendum of 2011, proposed downstream of the
accident at Fukushima

➢ The new crisis arises when - in 2008 - Gazprom refuses to sign the new supply contract with Ukraine
for 2009 until Naftogaz pays its past debts
➢ Gazprom proposed to raise the price to 250 $/1000 m3 from 179.5 $/1000 m3. Ukraine said it was
prepared to pay 201 $/1000 m3 and wanted to raise gas transit fees. Gazprom then raised the price
FARE
again to 458 $/1000 m3,CLIC PER MODIFICARE
unacceptable for Ukraine LO STILE DEL TITOLO
➢ Following the failure of negotiations, on January 1, 2009 the supply to Ukraine was stopped
➢ Russia accused Ukraine of stealing gas in transit towards Europe, and on January 7, 2009 Russian
Prime Minister Vladimir Putin ordered a stop: gas supplies through Ukraine were completely
interrupted for 13 days, totally blocking supplies to South-Eastern European countries and partially
blocking supplies to other European countries
➢ On January 12 Gazprom announces its intention to allow a transit of small quantities of gas to
South-East Europe through the Sudzha station, but Ukraine refuses the proposal citing technical
reasons and suggesting as an alternative the Valuyki and Pisarevka stations
➢ Kiev motivated its refU.S.l to let Russian gas enter from Sudzha with the fact that in this case four
eastern regions of the country would remain without supplies. The Ukrainian proposal is rejected by
Gazprom
Source: ENTSO-G

➢ On January 18, 2009 the Prime Ministers of Russia and Ukraine - Vladimir Putin and Yulia
Tymoshenko - stipulate a new ten-year supply contract (whose signature will cause Tymoshenko to
be sentenced to prison for abuse of office in 2011)
➢ On January 20, 2009 the supply of gas to Europe was restored and it returned to full capacity within
2 days FARE CLIC PER MODIFICARE LO STILE DEL TITOLO
➢ Negative impacts of the crisis:
o Drawbacks for Russia are related to Gazprom losses equal to 1.5 billion $ due to lack of gas
selling; furthermore, Russia suffered an image damage, starting to be considered an unreliable
supplier
o Drawbacks for Ukraine were the 100 millions $ losses due to the lack of gas transit fees;
considerable effects also on the productive sector and the country’s economy in general;
moreover, a loss of reputation, like for Russia
o Also for other European countries there were negative impacts, since they suffered significant and
social consequences; for instance, Bulgaria was forced to interrupt the production in some of its
important industrial sites, while Slovakia declared a state of emergency

➢ The 2009 crisis further highlighted the

need to diversify the EU’s gas supply
sources
➢ The various European countries are,
FARE CLIC PER
however, linked to Russia by medium-
MODIFICARE LO STILE DEL TITOLO
long term contracts (2025-2030) →
rather than a substitution with other
suppliers, the option of building new
pipelines from Russia able to bypass
Ukraine and preventing possible new
geopolitical tensions (e.g., Nord Stream
and South Stream) becomes the mostly
considered one
Representation of European countries involved in the reduction of gas supply during the Russia-
Ukraine crisis in 2009 (red: high impact; yellow: limited impact)
Source: Wikipedia

➢ From the legislative point of view, the EU discussed whether it needs to go beyond current
legislation in order to be prepared for new crises
FARE CLIC PERCOM(2009)

MODIFICARE LO STILE DEL TITOLO
363, 17 July 2009
"Proposal for a Regulation of the European Parliament and of the Council concerning measures to
safeguard security of gas supply and repealing Directive 2004/67/EC“
(http://eur-lex.europa.eu/legal-content/it/ALL/?uri=CELEX:52009PC0363)
" ...After the gas crisis between Russia and Ukraine in January 2009, which caused an
unprecedented interruption in the supply of gas reaching the Community through Ukraine, the
European Council and the European Parliament called for an early review of the current
Directive. Another major interruption of gas supply cannot be excluded and may even occur
before long. The Community must therefore be prepared for the possibility of further gas
supply disruptions. ..."

➢ This led in 2010 to the:
REGULATION (EU) NO. 994/2010 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
FARE CLIC PER MODIFICARE of 20 October 2010LO STILE DEL TITOLO
concerning measures to safeguard security of gas supply and repealing Council Directive
2004/67/EC
(http://eur-lex.europa.eu/legal-content/IT/ALL/?uri=CELEX:32010R0994)
➢ It introduces the N-1 formula, which describes the ability to meet total gas demand in the
considered area in the event of a major gas infrastructure failure relative to a day with
exceptionally high gas demand observed statistically once every twenty years

➢ The natural gas transmission network (including interconnectors), production facilities, liquefied
natural gas regasification terminals, and storage facilities are considered
➢ The remaining available capacity in case of failure of the main gas infrastructure must be at least
FARE
equal to the total dailyCLIC PER of
gas demand MODIFICARE
the considered areaLOrelative
STILEto aDEL TITOLO
day with exceptionally
high demand statistically observed once every twenty years (i.e. under worst case conditions)
➢ The value of N - 1, expressed in %, shall be ≥ 100 %
Available residual capacity
𝐸𝑃𝑚 + 𝑃𝑚 + 𝑆𝑚 + 𝐿𝑁𝐺𝑚 − 𝐼𝑚
𝑁−1 % = ∙ 100
𝐷𝑚𝑎𝑥 − 𝐷𝑒𝑓𝑓
Demand to be satisfied

𝐸𝑃𝑚 + 𝑃𝑚 + 𝑆𝑚 + 𝐿𝑁𝐺𝑚 − 𝐼𝑚
𝑁−1 % = ∙ 100
𝐷𝑚𝑎𝑥 − 𝐷𝑒𝑓𝑓

➢ EPm: max. daily capacity from entry points (in Mcm/day), therefore pipelines import
➢ Pm: max. daily production (in Mcm/day)
➢ Sm: max. discharge from gas storages (in Mcm/day)
➢ LNGm: max. capacity from LNG facilities (in Mcm/day)
➢ Im: unavailable capacity of the main gas infrastructure due to failure (Mcm/day)
➢ Dmax:total daily gas demand (in Mcm/day) relative to a day of exceptionally high gas
demand observed statistically once every twenty years
➢ Deff: share of demand (in Mcm/day) that, in case of supply interruption, may not be
satisfied (interruptible users)

Source: Gazprom Source: Gazprom
South Stream (planned for

2017): Nord Stream (active):
Russia-Bulgaria-Serbia- Russia-Germany
Hungary-Slovenia-Italy Capacity: 55 bcm / year
Capacity: 63 bcm / year

➢ Political crisis leading to the separation of the Crimean peninsula (with an ethnic Russian
majority) from the rest of Ukraine after local riots and the Russian military intervention, as a
reaction to the removal (in February 2014) of President Janukovyč and the government by the
Ukrainian parliament, as a consequence of the Euromaidan events1
FARE CLIC
➢ The local government PER
of Crimea MODIFICARE
refuses to recognize theLO
newSTILE
UkrainianDEL TITOLO
government and
president Poroshenko (recognized as legitimate by most countries, except Russia and some
others) declares the will to separate from Ukraine and annexation to Russia, calling a referendum
(March 16, 2014) among the population of Crimea
➢ The outcome of the referendum (97% in favor of autonomy) is not recognized by the EU, the U.S.
and 71 other UN member countries, which consider it a violation of the international law and the
Constitution of Ukraine; this outcome is instead considered valid by Russia
1Aseries of demonstrations started in Ukraine on November 21, 2013) following the suspension - by the
Ukrainian government - of an association agreement called DCFTA (Deep and Comprehensive Free Trade
Area) between Ukraine and the EU
➢ The EU then decides to apply economic sanctions (limiting access to EU capital markets by
Russia's five largest state-owned financial institutions and their subsidiaries, as well as three
major Russian energy and three defense companies; banning arms imports/exports; limiting
access to technologies that can be used for oil production) and related to economic cooperation
FARE
(with suspension CLIC
of some PERand
bilateral MODIFICARE
regional cooperationLOprograms)
STILE DEL TITOLO
➢ In response to the sanctions, on December 1, 2014, Putin declared the South Stream project
aborted, taking advantage of the European Commission’s indication that the project did not
comply with the Third Energy Package, which provides for the separation of commodity producer
and transmission system operator (Gazprom, specifically, would have played both roles)

➢ The South Stream would be replaced by the Turkish Stream (or TurkStream), a pipeline of equal
capacity (63 billion cubic meters: 16 for Turkey, 47 for the EU) directed from Russia to Turkey
through the Black Sea

➢ Advantages of TurkStream for Russia and Turkey:

Russia
o Possibility to export high quantities of gas to both Turkey and the EU → possible substantial
future revenues
o Possibility to bypass the transit through Ukraine
o Strengthening of the link with Turkey
o Keeping the EU in a condition of strong dependence both on Russia and now also on Turkey
Turkey
o Privileged agreement with Russia
o Possibility of obtaining gas at advantageous conditions to satisfy its growing energy needs

RUSSIA-TURKEY CRISIS – 1
➢ On November 24, 2015, Turkish F-16s shoot down a Russian Sukhoi 24 fighter jet flying near the
Turkish-Syrian border, which allegedly trespassed, violating Turkey's airspace
➢ Russian’s response was to impose several sanctions on Turkey, including suspension of visas for
Turkish citizens, restrictions on Turkish companies investing in Russia, and import restrictions on
Turkish products
➢ Another consequence is Russia's decision to halt the Turkish Stream project
➢ Over the course of 2016, there has been a thaw between the parties
➢ On October 10, 2016, Russia and Turkey signed the agreement to resume the Turkish Stream
construction project
➢ Gazprom started to deliver natural gas via TurkStream, including to Bulgaria and North
Macedonia, on January 1, 2020, replacing supplies via the Trans-Balkan pipeline through Ukraine
and Romania
➢ An expansion project (also called “Balkan Stream”) foresees the development of the Balkan lines
across Bulgaria, Serbia and Hungary, up to Austria, in order to supply central and Western Europe
with gas passing through the TurkStream

THE DONBASS WAR
➢ The period after the Crimea crisis was characterized by further tensions related to the Donbass
war
➢ One month after the Crimea independency, separatists in the regions of Donetsk, Luhansk and
Kharkiv, close to the Russia-Ukraine border claimed for independency, and the two self-
FAREand
proclaimed Donetsk CLIC PERPeople's
Luhansk MODIFICARE LOdeclared
Republics were STILE on DEL
AprilTITOLO
6, 2014
➢ This lead to an armed conflict between the central Ukrainian government and the separatists
(indirectly supported by Russia)
➢ A ceasefire agreement between Ukraine, Russia, the two self-proclaimed Republics, the Minsk
Protocol, was signed September 5, 2014
➢ Violations of this ceasefire on both sides were however continuous, and led to the need of a new
agreement (Minks II) on 12 February 2015
➢ After this agreement, the conflict was formally frozen, even if several violations and military
actions continued in the area even in the following years

RUSSIA-UKRAINE 2018-2019 TENSIONS
➢ A judgment of the Stockholm Arbitration Court of

28/02/2018 condemned Gazprom to pay Naftogaz
2.56 billion $ (equivalent to 2.3% of Ukraine's GDP)
for missed gas transits through Ukraine (on which
FARE CLIC PER MODIFICARE
Gazprom has LOtoSTILE DELfees):
pay transit TITOLO
the sum comes
from the penalty for missed transits ($4.637 billion)
minus back payments that Naftogaz owes Gazprom
($2.077 billion)
➢ As a reaction, Gazprom has deemed gas supply
and transit contracts with Ukraine no longer
economically viable

➢ To counteract the gas shortfall, Ukraine has been

buying gas from the European markets of Poland,
Hungary and Slovakia. This is largely Russian gas
but paid around 34% more. This has not, however,
prevented the closure of schools and public offices
➢ The EU has proposed itself as mediator between
the parties
➢ According to various analysts, behind Moscow's
choice there would be the intention to push the EU
to support alternative gas supply corridors, first of all
the Nord Stream 2 pipeline.
➢ This pipeline, however, would increase even more
the dependence of the EU on Russia from the
energy point of view

March 3, 2019
➢ On December 27, 2019, Gazprom payed to Naftogaz

2.918 billion $ of compensation under the Stockholm
Arbitration Awards of February 2018
➢ On December 31, 2020, Gazprom and Naftogaz signed a
➢ In March 2019 the debt of new contract: according to it, Gazprom will transit at least
Gazprom increases of 200 65 bmc/y of natural gas via Ukraine in 2020 and at least
million $ due to interests 40 bcm/y from 2021 to 2024
THE NORD STREAM 2 PIPELINE – 1
• Length: 1230 km
• Capacity: 55 bcm/y
• Expected start: 2022

THE NORD STREAM 2 PIPELINE – 2
May 2, 2018

THE RUSSIA-UKRAINE WAR – 2022
➢ On February 21, 2022 Russia formally recognized the separatists Donetsk and Luhansk People's
Republics
➢ On February 24, 2022 Russia military invaded the Ukrainian territory, and the war currently ongoing
started
Three main consequences from the energy point of view:
➢ Stop to the Nord Stream 2 gas pipeline, already completed in September 2021
and waiting for the operational approval
➢ Strong increase of the natural gas and oil prices, reflecting the uncertainties
caused by the conflict
➢ Decision of European countries of relevantly accelerating for reducing and – as
soon as possible – eliminating the energy import dependency from Russia

ECONOMIC ISSUES: THE RELATIONSHIP BETWEEN OIL
PRICE EVOLUTION AND GEOPOLITICAL EVENTS

THE OIL PRICE BENCHMARKS
➢ Often linked to the evolution of the oil price

➢ For the definition of the price, the two reference markets are the Intercontinental Exchange in
Atlanta and the NYMEX in New York (in the past, Brent was quoted on the International
Petroleum Exchange in London)
➢ 2 qualities traded:
o Brent:
Field in the North Sea off Aberdeen (Scotland), whose exploitation began in 1976. The term
"Brent" today refers to European benchmark oil (very light), the result of production from 19
North Sea oil fields. Storage and delivery at Sullom Voe (Shetland Islands, UK)
o WTI (West Texas Intermediate):
Light Crude type oil, characterized by high refining efficiency and wide range of use of
refined products. Storage and delivery at Cushing (Oklahoma - U.S.)

THE BRENT OIL FIELD
Source: http://www.offshore-technology.com/projects/brent-field-decommissioning-north-sea/brent-field-decommissioning-north-sea3.html

THE OIL PRICE BENCHMARKS
➢ Brent and WTI are benchmarks: each oil is quoted against the benchmark, adding a positive or
negative difference (premium), a function of quality:
o Lighter oil and lower sulfur content than the benchmark: positive premium
o Heavier oils with higher sulfur content than the benchmark: negative premium
➢ Brent is used to price oil produced in Europe (including Russia), Africa and the Middle East and
represents the benchmark for over 60% of transactions
➢ WTI is mainly used to price oil produced in North and South America
➢ Brent historical minimum: December 10, 1998, 9.55 $ /barrel
➢ Brent historical maximum: July 11, 2008, 147.25 $ /barrel
➢ Since then, values of around $40/barrel in 2009, over $90/barrel in 2011, sharp decline starting in
the second half of 2014, low of around 28 $ /barrel in January 2016

TIME EVOLUTION OF OIL PRICE
➢ Brent historical minimum: December 10, 1998, 9.55 $ /barrel

➢ Brent historical maximum: July 11, 2008, 147.25 $ /barrel

RELATIONSHIP BETWEEN OIL PRICE AND GEOPOLITICAL
EVENTS
Crude Oil prices 1861-2020 ($/barrel)
Source :BP

THE IRANIAN CRISIS
Iranian crisis 1946:

➢ In 1941, despite being officially neutral, Iran was invaded by the USSR and Great Britain, who
accused it of sympathizing with Germany
➢ With the entry into the war of the United States, the Americans took direct management of the
Persian corridor
➢ In 1943 the Teheran Conference was held between Stalin, Churchill and Roosevelt in which it was
decided, among other things, the withdrawal of occupation troops after the end of the war
➢ After the surrender of Germany, while the Americans and the British withdrew their troops, the
Red Army remained in the North of the country and the local communist parties proclaimed the
independence of the People's Republic of Azerbaijan and the Kurdish People's Republic of
Mahabad
➢ The Iranian government in 1946 raised the case to the Security Council of the United Nations
➢ In the face of American protests, the Russians agreed to open a table with Iran, which sanctioned
the withdrawal of Soviet troops in exchange for an oil concession on the North of the country

THE SUEZ CRISIS – 1
Iranian crisis 1946:

➢ After the withdrawal of the Red Army, the Kurdish and Azerbaijani Popular Republics were
repressed by the Iranian army
➢ In 1947 the new Iranian Parliament rejected the ratification of the Soviet oil concession, thus
triggering a new crisis between Iran and USSR
Suez crisis 1956:

➢ The Suez crisis coincided with the military occupation of the Suez Canal by France, Great Britain,
and Israel, which was opposed by Egypt
➢ The crisis ended when the Soviet Union threatened to intervene alongside Egypt and the United
States, fearing the widening of the conflict, forced the British, French and Israelis to withdraw
➢ The Suez Canal was a neutral zone under British protection. In 1947, with the independence of
India, this protectorate diminished in significance and the canal lost importance as a route for the
control of the British Empire but assumed importance as the main route for the transportation of
oil from the Persian Gulf to Europe
Suez crisis 1956:

➢ Starting from 1949, Egypt (whose policy was pro-Arab and nationalist) hindered in various ways
the transit of merchant vessels to and from Israel; for Israel, especially after the completion of the
port of Eilat in the mid-50s, it became essential to secure access to Suez through the Straits of
Tiran FARE CLIC PER MODIFICARE LO STILE DEL TITOLO
➢ In 1956 the Egyptian president Nasser announced the
nationalization of the Suez Canal (of which banks and British
companies held a 44% share), in order to finance the construction
of the Aswan Dam
➢ Israel, France and United Kingdom agreed on the invasion of
Egypt by Israel, followed by a subsequent intervention of French
and British who - pretending to be peacemakers - would take
control of the Suez Canal (Operation Muskeeter)
➢ On October 29, Israel invaded the Gaza Strip and the Sinai
Peninsula, moving towards the Suez Canal

Suez crisis 1956:

➢ As expected, France and United Kingdom offered to reoccupy the area and separate Egypt and
Israel
➢ Nasser refused the offer, and this gave France and the UK the pretext to invade Egypt in turn to
regain control of the canal and overthrow the Nasser regime
➢ The operation to take the canal was a military success but a political failure
➢ In fact the USSR took the field alongside Egypt, threatening to launch attacks (including nuclear)
on London and Paris
➢ U.S., fearing a widening of the conflict, put pressure on UK and France, forcing them to withdraw
in 1957
➢ A UN emergency force was stationed in Suez and Sinai to form a buffer zone and pacify the area

Suez crisis 1956:

THE SIX-DAY WAR – 1
Six-Day War 1967:

➢ In May 1967, Nasser received false reports from the USSR that Israel was massing troops on the
border with Syria (that had made a mutual defense pact with Egypt)
➢ Nasser then expelled the UN troops from Sinai
➢ Israel reiterated that a closure of the straits of Tiran would be considered an act of war
➢ On May 22-23, Nasser closed the straits of Tiran to Israeli ships, and on May 30 signed a mutual
defense pact with Jordan
➢ On June 5, Israel launched Operation Focus, a surprise air attack that in 2 days annihilated the
Egyptian air forces and opened the way for land intervention
➢ In 5 days Israel occupied the Sinai up to Suez, the Gaza Strip, Jerusalem, the West Bank and the
Golan.
➢ On June 9, Egypt agreed to an unconditional "ceasefire"; on June 10, the war was ended

Six-Day War 1967:

➢ The U.S. asked for the unconditional withdrawal from the
territories that had been occupied.
➢ Israel instead hoped to play the card of the exchange of
FARE CLIC PER MODIFICARE LO STILE
territories in order to reach a pacification of the area; the Arab
DEL TITOLO
countries however refused
➢ The great powers came to a compromise with the UN Resolution
242, which subordinated the Israeli withdrawal from the occupied
territories to the establishment of a condition of lasting peace
and to the cessation of terrorist activities by the Palestinians
➢ Israel adhered to it, as well as Egypt and Jordan, while Syria and
Palestinians refused
➢ In fact, there was a stalemate

Six-Day War 1967:

THE YOM KIPPUR WAR – 1
Yom Kippur War 1973:

➢ On October 6, 1973, in the day of Yom-Kippur (Jewish’s religious event that foresees that the
whole country stops for 25 hours, including the media, commercial activities, and military ones, to
dedicate to fasting and prayer → day of greater vulnerability), Egypt and Syria launched a joint
surprise attackFARE
towardsCLIC
Israel,PER
to try MODIFICARE LOGolan
to take back Sinai and STILE DEL TITOLO
➢ In the first phase of the conflict, Israel - taken by surprise - retreated, but then recovered positions
and turned the situation upside down in a couple of weeks
➢ In Sinai, Israel broke through the Egyptian lines and managed to cross the Suez Canal, occupying
also the western bank of the river
➢ On October 22 the UN imposed a "cease fire"; during the night the Egyptians broke the truce and
Israel reacted by totally isolating the III Army of the Egyptian army west of Suez
➢ This put Egypt in a condition to depend totally on the U.S. to put pressure on Israel to avoid the
destruction of the trapped Army
➢ The U.S. offered itself as mediator and, in fact, took Egypt out of the influence of the USSR


➢ The Camp David Accords of 1978 and the Israeli-Egyptian Peace Treaty of 1979 led to the
normalization of relations between the two countries, to the recognition of the State of Israel by
Egypt, to the restitution of the Sinai to Egypt and to the definitive rapprochement of Egypt itself to
the U.S. FARE CLIC PER MODIFICARE LO STILE DEL TITOLO
Yom Kippur War leads to
First Energy Crisis


THE FIRST ENERGY CRISIS – 1
First Energy Crisis 1973:

➢ Since the beginning of the Yom-Kippur war, most Arab countries sided with Egypt and Syria,
establishing
➢ 70% increase in oil prices
➢ decrease in production
➢ blocking of exports from OPEC countries to the U.S. and the Netherlands until January 1975
(embargo)
➢ The need for Western European countries to introduce measures to reduce oil consumption and
avoid wastage
Austerity


Italian austerity
➢ From December 2, 1973, imposed the absolute prohibition of circulation on holidays of private
vehicles (including ministerial cars and that of the President of the Republic); only from April 1974
were the measures loosened by introducing alternate license plates; in June 1974 the restrictive
measures for circulation were abolished
➢ Public lighting was reduced by 40%
➢ The price of fuels was increased
➢ A stop was imposed on television broadcasts at 23:00; the evening news of the National Program
was brought forward from 20:30 to 20:00 (a time that it still maintains today)
➢ Cinemas closed at 10:00 p.m. and bars and restaurants at midnight
➢ Speed on the roads was limited to 50 km/h in urban centers, 100 km/h on suburban roads and
120 km/h on highways
➢ Limits were imposed on temperature and periods of operation of heating systems, promoting the
use of insulation to insulate homes

Italian austerity
➢ Together with these measures, the government set out a comprehensive energy reform aimed at
a shift towards nuclear power for the production of electricity.
Consequences at European and International level
➢ Slowdown in the growth of the industrial sector
➢ Search for new sources of supply (e.g., Norwegian oil fields on the seabed of the North Sea)
➢ Push towards alternative sources to oil, such as natural gas and nuclear energy
➢ Awareness of the risks deriving from a strong energy dependence on potentially unstable
countries
➢ Birth of the International Energy Agency (IEA, 1974), with the aim of promoting homogeneous and
coordinated energy policies among member countries in order to ensure the stability of energy
supplies

THE IRANIAN REVOLUTION – 1
Iranian Revolution 1979:

➢ The regime of Shah Mohammad Reza Pahlavi in the 1970s became even more self-celebratory
and nationalist, with the worsening of the conditions of poverty of a large part of the population
➢ The monarchy, however, enjoys the support and subsidies of the U.S. for its pro-Western role of
"guarantee" in the Persian Gulf area
➢ The regime carried out mass arrests and murders and political parties were dissolved, thus
favoring the advent of underground resistance movements
➢ All opposition forces (of religious, national-liberal and Marxist inspiration) gathered around the
figure of Ayatollah Khomeini, in exile in Paris
➢ At the beginning, the Marxist-inspired fedayyin led the revolt, and they soon decided to join the
Islamic mujaheddin to widen the bases of the protest. However, the Shiites quickly became the
sole reference of the uprising, depriving the political groups of their power
➢ Shah Reza Pahlavi left for Morocco on January 16, 1979, leaving in Iran Prime Minister Bakhtiar

THE IRANIAN REVOLUTION – 2
Iranian Revolution 1979:

➢ On January 31, 1979, Khomeini returned home
➢ On February 11 the army renounced to fight and the Prime Minister in turn fled
➢ Khomeini assumed
FAREpowerCLIC andPER MODIFICARE
on March LO STILE
30, with a referendum, DEL
the birth TITOLO
of the Islamic Republic
of Iran was established, which radically changed - besides social habits - also the economic and
productive structure of the country, with intense expropriations and nationalizations
Iranian revolution leads to

Second Energy Crisis

THE SECOND ENERGY CRISIS
Second Energy Crisis 1979:

➢ Following the Iranian Revolution, sharp reduction in production and blocking of oil exports
➢ The consequences are:
FARE
o Understanding CLIC
of the PER
need MODIFICARE
for long-term LO STILE
energy planning, DEL
aimed at TITOLO
increasing energy
autonomy
o Push towards energy saving and strong development of nuclear power
o Scientific and technological research to obtain more efficient production machinery and to
identify and exploit alternative energy sources (in addition to nuclear, solar, photovoltaic, wind,
geothermal and hydroelectric)
o Search for new reserves of oil, gas and coal and exploitation of deposits once considered
uneconomic or not technically achievable

THE IRAN-IRAQ WAR
Iran-Iraq War 1980-1988:

➢ In 1980 Iraq (led by Saddam Hussein), claiming possession of some territories, attacked Iran by
surprise
➢ After a first phase in favor of Iraq, the conflict turned into a war of position and attrition
➢ USSR and U.S. supported and sustained - directly or indirectly - both the contenders, considered
unstable countries, in order to weaken them through attrition
➢ On August 20, 1988 was decreed the " ceasefire "
No significant effect on oil prices

THE INVASION OF KUWAIT
Invasion of Kuwait 1990-1991:

➢ On August 2, 1990, Iraq invaded Kuwait, claiming Kuwait as its own territory, in part in order to
control its large oil reserves and get its hands on its capital and international financial investments
➢ UN established sanctions and imposed an ultimatum, not respected
➢ On January 17, 1991 the U.S., with the support of a coalition of 35 countries, entered Iraq
(Operation Desert Storm)
➢ On February 28, 1991 was declared the end of the conflict and the liberation of Kuwait
➢ U.S. renounced to take Baghdad and to remove Saddam Hussein from power for fear that the
power vacuum would lead to an even more critical situation (e.g., a civil war in Iraq or a
convergence between Iran and Iraq), opting for a policy of containment

THE ASIAN FINANCIAL CRISIS
Asian Financial Crisis 1997-1998:

➢ Affected a number of Southeast Asian countries, including Thailand (epicenter of the crisis), South
Korea, Indonesia, Malaysia and the Philippines, and - by reflex - Japan and Singapore
➢ It originated from a series of financial speculations that caused a strong devaluation of the
currency and the uncoupling of various currencies from the value of the dollar, and in particular
was caused by the high indebtedness of the private sector (banks and companies) which caused
a flight of capital from foreign investors
➢ The crisis led to a depreciation of many currencies, the collapse of stock and real estate markets,
the bankruptcy of companies, banks and financial institutions, and an increase in the cost of living
and unemployment
➢ The impact on economic growth was limited, however, because the low value of currencies
actually favored exports

THE INVASION OF IRAQ
Invasion of Iraq 2003-2011:

➢ On March 20, 2003 an international coalition led by the U.S. invaded Iraq with the aim of deposing
Saddam Hussein, considered a supporter of Islamic terrorism, citing as the reasons for the conflict
the fear of an attempt by Iraq to acquire weapons of mass destruction (which later proved to be
unfounded) and FARE CLICoppression
the strong PER MODIFICARE LO STILE
exercised by the regime DEL
against TITOLO
its citizens
➢ On April 15,2003 all the principal cities fell under the control of the coalition
➢ On May 1, 2003 the American president G.W. Bush declared ended the military operations
➢ On December 13, 2003 Saddam Hussein was captured (tried, will be executed in 2006)
➢ From then on, however, the conflict turned into a war of liberation from foreign troops and into a
civil war between different factions
➢ The war will end only on December 15, 2011 with the final transfer of all powers from the U.S.
military to the Iraqi authorities

THE ARAB SPRING
Arab Spring 2010-2011:

➢ Indicates a series of protests that occurred predominantly in Syria, Libya, Egypt, Tunisia, Algeria,
Yemen, Iraq, Jordan, Bahrain, and Djibouti. Much lesser were the effects in other countries, such
as Saudi Arabia, Morocco and Kuwait
FARE CLIC
➢ Starting from December PERfollowing
17, 2010, MODIFICARE LOprotest
the gesture of STILE DEL TITOLO
of Tunisian Mohamed Bouazizi
(who set himself on fire in reaction to mistreatment by the police) several outbreaks of revolt were
triggered, flowing into the so-called Jasmine Revolution
➢ This revolt from Tunisia quickly spread to other Arab and North African countries
➢ In 2011/2012, four heads of state - in power for many years or decades - were forced to resign:
o Zine El-Abidine Ben Ali in Tunisia
o Hosni Mubarak in Egypt
o Mu'ammar Gaddafi in Libya
o Ali Abdullah Saleh in Yemen
➢ In Syria, the civil war paved the way for the entrenchment of ISIS Islamic fundamentalism,
resulting in the self-proclaimed Caliphate in 2014
THE ONGOING EVENTS:
COVID-19 AND RUSSIA-UKRAINE WAR
COVID-19 Pandemic 2020:
➢ The decrease in the demand caused by the widespread lockdown, with a relevant decrease of
mobility and a reduction of working activities led to a reduction in energy prices (offer higher than
demand)
Russia-Ukraine War 2022

L5 - Geopolitics of Energy

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E-TRANSITION, SUSTAINABILITY AND ECONOMICS

Ettore F. Bompard, Daniele Grosso

➢ Issues on Growing Demand

E. F.Bompard – E-Transition, Sustainability and Economics- 2

Main issues about growing Demand are:

E. F.Bompard – E-Transition, Sustainability and Economics- 3

Natural Gas Import by Country in Italy

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

Algeria Libya Norway Netherlands

Others Qatar Russia United States

E. F.Bompard – E-Transition, Sustainability and Economics- 4

➢ TAG pipeline: ➢ Panigaglia LNG Terminal

E. F.Bompard – E-Transition, Sustainability and Economics- 6

E. F.Bompard – E-Transition, Sustainability and Economics- 7

E. F.Bompard – E-Transition, Sustainability and Economics- 8

E. F.Bompard – E-Transition, Sustainability and Economics- 9

E. F.Bompard – E-Transition, Sustainability and Economics- 10

E. F.Bompard – E-Transition, Sustainability and Economics- 11

E. F.Bompard – E-Transition, Sustainability and Economics- 12

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

E. F.Bompard – E-Transition, Sustainability and Economics- 14

E. F.Bompard – E-Transition, Sustainability and Economics- 15

➢ The 2009 crisis further highlighted the

E. F.Bompard – E-Transition, Sustainability and Economics- 16

FARE CLIC PERCOM(2009)

E. F.Bompard – E-Transition, Sustainability and Economics- 17

➢ This led in 2010 to the:

E. F.Bompard – E-Transition, Sustainability and Economics- 18

Available residual capacity

E. F.Bompard – E-Transition, Sustainability and Economics- 19

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

E. F.Bompard – E-Transition, Sustainability and Economics- 20

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

Source: Gazprom Source: Gazprom

South Stream (planned for

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

E. F.Bompard – E-Transition, Sustainability and Economics- 22

E. F.Bompard – E-Transition, Sustainability and Economics- 24

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

E. F.Bompard – E-Transition, Sustainability and Economics- 25

➢ Advantages of TurkStream for Russia and Turkey:

E. F.Bompard – E-Transition, Sustainability and Economics- 26

E. F.Bompard – E-Transition, Sustainability and Economics- 27

E. F.Bompard – E-Transition, Sustainability and Economics- 28

➢ A judgment of the Stockholm Arbitration Court of

E. F.Bompard – E-Transition, Sustainability and Economics- 29

➢ To counteract the gas shortfall, Ukraine has been

E. F.Bompard – E-Transition, Sustainability and Economics- 30

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

➢ On December 27, 2019, Gazprom payed to Naftogaz

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

E. F.Bompard – E-Transition, Sustainability and Economics- 32

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

E. F.Bompard – E-Transition, Sustainability and Economics- 33

E. F.Bompard – E-Transition, Sustainability and Economics- 34

E. F.Bompard – E-Transition, Sustainability and Economics- 35

➢ Often linked to the evolution of the oil price

E. F.Bompard – E-Transition, Sustainability and Economics- 36

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO

E. F.Bompard – E-Transition, Sustainability and Economics- 37

E. F.Bompard – E-Transition, Sustainability and Economics- 38

➢ Brent historical minimum: December 10, 1998, 9.55 $ /barrel

FARE CLIC PER MODIFICARE LO STILE DEL TITOLO