Spin until you crash

Some call it propaganda. Others — spin. It really is only a matter of perspective and the perspective is binary (sorry). If we’re doing it, it’s spin. If the enemy is doing it, it’s propaganda. Just how important the dubious art of spin is in politics was brilliantly demonstrated in an episode of Parks and Recreation. Here’s the quote because it really is brilliant:

Ben: Hypothetical crisis: Leslie just tried to answer a question, but audibly farted and then threw up. Spin.
Chris: Leslie Knope is literally overflowing with ideas for this town. And speaking about methane, have you heard about her plan to limit greenhouse gas emissions?

This week, an unnamed official from the U.S. Treasury said that failure to agree price caps on Russian export oil would cause a spike in oil prices, possibly to as much as $140 per barrel.

In fairness, the official added that the price caps would need to be accompanied by sanction exemptions for cargos that sell for prices below the cap, highlighting the fact that it is sanctions on Russian oil rather than any price caps that would push prices higher unless some mitigation measures (price caps) are implemented.

Judging by the lack of any new details about those caps, it seems agreeing them might turn out to be a little bit more challenging than their authors would like. Analysts already warned them about the challenges. And the spin that puts the caps in the spotlight as the tool to avoid higher oil prices suggests these analysts were right.

Indeed, that same unnamed official went on to admit to the centrality of sanctions, saying, per Reuters, “Treasury modeling showed that implementing the sanctions without the price exception could trigger significant increases in the price of crude oil, potentially sending it to around $140 per barrel from around $100 per barrel now.”

But that’s not all. The implementation of the price cap, according to the discussions, is to be tied to the global shipping insurance industry, which is almost entirely concentrated in the UK, Europe, and the U.S. But there’s 10% of other insurers. There is also the option of China and India insuring Russian oil cargos. It makes sense, right? Well, it might make sense, but “Treasury officials did not share this view.”

This is where the otherwise commendable spin drops dead, like so many spins before it. The Treasury official could learn something from Chris Traeger. As can Germany’s deputy finance minister Joerg Kukies.

Kukies said this week that Germany will stop importing Russian coal from August 1 and crude oil from December 31. So far so good, and in line with sanctions agreed months ago. And then he dropped the ball, admitting that quitting Russian gas will be quite hard. That’s okay, it’s not news and it has never been a secret.

But Kukies went on to talk figures. He said that while Europe imports more than 150 billion cu m of gas from Russia annually, LNG from the United States and Qatar could only replace 30 billion cu m of that.

The gap that remains to be filled is, not to put too fine a point on it, considerable. It is so considerable it may be impossible to put a positive spin on the situation. Unless you’re Chris Traeger, that is. Kukies clearly isn’t. Kukies appears to be attached to the truth: "We can't just imagine this problem away," he said.

Indeed, politicians cannot imagine this problem away, no matter how much political leaders talk about African LNG — stirring certain feelings among African leaders, by the way — and no matter how fast Germany builds its first ever LNG import terminal.

What they can, and in a better world would, do is to perhaps take a step back and assess the effectiveness of the sanctions against Russia. Because from a step back they are about as effective in achieving their goal as the U.S. sanctions on Iran or Venezuela, the only difference being that these sanctions are a lot more harmful to the sanctioners than the Iranian and Venezuelan sanctions.

Enough with the sanction topic and on to greater and more global things such as the supply of critical metals for the energy transition — a topic that came up at this week’s Sydney Energy Forum.

At the event, the head of the International Energy Agency Fatih Birol warned — after correctly pointing out that any Russian oil price cap must include fuels — that the world is over-dependent on Russia, China and countries like the DRC for the supply of critical materials. And that this needs to change.

I sometimes stop and think what my life would be like if Birol wasn’t head of the IEA. If instead of him, the agency was headed by someone who shunned the spotlight and instead worked on solutions that would enhance the energy security of the world and improve the access to reliable energy of more than a billion people who currently have zero such access. Not that this is the IEA’s job, of course.

Anyway, life is as it is, and Mr. Birol does like to talk to the media, which is good for me and others like me because thanks to his love for the media we stay entertained.

"Critical minerals security will be an important issue for energy security in the future," Birol said at the Sydney forum, as quoted by Reuters. You might think this is a shocking revelation but it’s more than that. It’s a call to action.

"It is the reason that IEA ministers asked the IEA to consider building a safety network and coordination among its members and associate members in terms of a major disruption in the availability of critical minerals,” Birol said and then the narrative broke because he then went on to tell Reuters it was too early to say what this network would entail and how long it would take to build.

All he did say was that there was great solar technology potential in the U.S., Australia, India, and Indonesia as a way of diversifying away from China, which, Birol admitted, had cornered the market thanks to its cheap electricity. Where this cheap electricity came from was omitted because there must be limits to how much truth you can admit before it gets embarrassing.

All in all, the EU, the U.S. and Birol (the man is an institution, you can’t dispute this) are great at talking, planning, and warning. The problem is that a lot of the talk is actually spin, and spin doesn’t always survive upon contact with reality.

Look at this piece of news from yesterday: Reuters reported on a memorandum of understanding between the European Commission and the Azerbaijan government for the expansion of the Trans-Adriatic Pipeline to boost supply of Azeri gas to Europe.

Sounds good, doesn’t it? Very diversificatory, or perhaps diversificationary, whichever sounds better. Until you get to the place where the report notes that gas shipments to Europe via the Southern Gas Corridor, which ends in TAP, last year stood at the grand total of 8 billion cu m.

Europe has a 120+-billion-cu-m gas gap to fill in its annual gas imports. No amount of spin and shorter, strategic showers, can do the filling. The world, meanwhile, has an oil problem that may just get graver if G7 imposes price caps on Russian crude. And then G7 will definitely need Chris Traeger to come and spin the crisis.