IEEJ e-NEWSLETTER
No. 229(Based on Japanese No. 222)

Published: March 16, 2022
The Institute of Energy Economics, Japan(As of March 14, 2021)

Sources:(1) DOE-EIA(2) Investing.com

Sources:(1) Ministry of Finance "Japan Trade Statistics"(2) Ministry of Economy, Trade and Industry (arrival month basis)(3) Estimated by World Bank (Netherland Title Transfer Facility)(4) DOE-EIA, NYMEX (Front-month Futures)

Source: x-rates.com

Sources:(1) Finance. Yahoo.com(2) Investing.com

Contents
Summary【Global Monitoring】
1. US: Biden Administration Faces Difficulty Addressing the Ukraine Situation
2. EU: Strengthening Ties with Ukraine
3. China: Decarbonization of Electricity Accelerates,
Led by Variable Renewable Electricity
4. ME: Yemeni War Intensifies and JCPOA Reaches Critical Stage
5. Russia: Tensions Reaching Boiling Point over the Ukraine Crisis
1Summary
1. US: Biden Administration Faces Difficulty Addressing the Ukraine Situation
With the Ukraine crisis pushing up energy prices, affecting domestic politics, the Biden
administration is faced with a difficult policy balancing act as the public remains reluctant to
be involved in the crisis.
2. EU: Strengthening Ties with Ukraine
The EU proposed extending a 1.2 billion loan to Ukraine as emergency economic assistance.
Russia’s actions are making the EU diversify its energy sources by using more renewables andadjusting its stance on nuclear power.
3. China: Decarbonization of Electricity Accelerates, Led by Variable Renewable
Electricity
In 2021, the share of renewable power in total power generation grew to 29.7% (including
7.8% wind power and 3.9% solar PV). Renewables will continue to drive decarbonization in
2022, during which electricity demand is predicted to grow by 5–6%.
4. ME: Yemeni War Intensifies and JCPOA Reaches Critical StageThe Yemeni war is intensifying and the UAE has suffered drone attacks. The Saudi-led
coalition has launched a major offensive on South and Centralthe Yemeni capital. The Irannuclear deal (JCPOA) is at a critical stage and it is speculated that an agreement will soon bereached.
5. Russia: Tensions Reaching Boiling Point over the Ukraine Crisis
Russia recognized the independence of the Ukrainian territories under the rule of pro-Russian
militants and maintains a hardline stance. A national state of emergency was declared in
Ukraine. The international community is concerned about a possible full-scale invasion by
Russian forces.

21. US: Biden Administration Faces Difficulty Addressing the Ukraine Situation
Ayako SUGINO, Senior Researcher
Associate Professor
Musashino University

Gasoline prices continue to soar in the US. According to the Department of Energy, thenational average price of regular gasoline was $3.37/gallon as of February 14, 2022, risingroughly 1 dollar year-on-year. This is not yet “abnormally high” considering that gasoline prices
averaged $3.45 between 2011 and 2014 and often threatened to surpass $4. However, prices
have surged rapidly from $1.65 in April 2020, the lowest in this decade, to the current level,causing greater pain for households.
One of the reasons for this price surge is the military tension between Russia and Ukraine.
On February 15, President Biden announced that the US will not exercise its military power
against Russia and will continue diplomatic efforts instead, while providing military assistanceto Ukraine and NATO member states. He went on to state that “freedom and democracy” areat stake and that there will be inevitable costs for US consumers in the form of higher energy
prices, and promised to take all possible measures.
Ahead of the November mid-term elections, the Democratic Party has a majority in bothhouses with one of the smallest margins in history, with 222 out of 435 seats in the House ofRepresentatives and 50 out of 100 seats in the Senate. Whether the Party maintains its majority
will depend critically on whether voters support the Biden administration’s response to the
Ukraine crisis and accept the energy price hikes as “a cost worth paying for.” A poll on the
response to the Ukraine crisis released this month showed that 50% agreed with imposing
sanctions against Russia and 40% with sending US troops to NATO countries; sending US
troops to Ukraine (for noncombat duties) had a support rate of 33% and using military force
against Russia had 13%. In another poll, 43% answered that the United States should stand with
Ukraine while 53% said that the US should not interfere. Further, 22% of Democratic Party
supporters, 40% of Republican Party supporters, and 38% of unaffiliated respondents answeredthat the Ukraine crisis is unrelated to the United States. One of the Biden administration’s publicpromises is “foreign policy for the middle class,” in other words, implementing foreign policy
while listening to the people. The public’s reluctance to be involved in the crisis is reflected in
the administration’s response: the president has reiterated that the US will continue to pursue
diplomatic efforts until the end.
In line with public opinion, groups of Democratic and Republican lawmakers who oppose
US interference in other countries’ affairs are expanding. On the Democrat side, leftist(progressive) lawmakers are voicing concern about applying military pressure on Russia, suchas exercising military force against Russia and providing military assistance and weapons to
Ukraine. On the Republican side, while the lawmakers who are calling for immediate sanctions
and other means of stronger pressure on Russia are still the mainstream, some lawmakers aredemanding that the US should not interfere. As a result, Congress has been unable to agree on
more stringent sanctions against Russia.
As of February 24 at the time of writing, Russia has just recognized the two regions in East
Ukraine as independent states. The US-Russia foreign ministerial talks scheduled for February
24 have been cancelled, as has the US-Russia summit. Developments deserve close attention.

32. EU: Strengthening Ties with Ukraine
Kei SHIMOGORI, Senior Researcher
Global Energy Group 1
Strategy Research Unit
As the Ukrainian situation grows tense, the EU is strengthening its support to the country.
The EU has a macro-financial assistance (MFA) program for crisis response, which extends
financial aid to partner countries experiencing a balance of payments crisis. MFA is a longterm, low-interest rate loan program and the funds needed for MFA are financed by the EU
through the capital markets. The EU began to extend MFA to Ukraine in 2014 and 5 billion
euros in total have been provided in five MFA loans till 2021. On February 1, the European
Commission proposed another loan of 1.2 billion euros as emergency MFA. It was tabled at therequest of Ukraine to strengthen the country’s resilience. This proposal by the European
Commission was approved by the Council of the European Union on February 11 and by theEuropean Parliament on the 16th.
Since September 2017, the EU and Ukraine have had the Association Agreement in effect,
which includes the Deep and Comprehensive Free Trade Areas (DCFTA). The Agreement
serves as the main tool for deepening bilateral ties. On February 11, the seventh EU-Ukraine
Association Council meeting was convened to discuss political reforms in Ukraine andeconomic cooperation. The joint press release issued after the meeting reaffirmed the
Association Council’s commitment to strengthening the political association and economic
integration of the two parties, and expressed support for reassuring the bilateral political andeconomic ties under the current circumstances. Both parties have reaffirmed the importance ofstronger efforts toward the rule of law, ensuring the independent and effective operation of anticorruption institutions, and comprehensive judicial reforms. It has also been pointed out thatissues still remain for Ukraine to be integrated in the EU.
On February 16, the European Parliament discussed EU-Russia relations. In the discussions,
European Commission President von der Leyen warned Russia not to weaponize the energy
issue. The President assured the EU that its gas supplies are on the “safe side” for this winteras other energy supplies have been stepped up, and noted that the EU must diversify its energy
sources to reduce its dependency on Russian gas, as one of the lessons to be drawn from thiscrisis. The Commission chief has always said that Europe’s future lies in renewable energy, andthis comment is consistent with that. The recent actions by Russia have strengthened the EU’s
motivation to use more renewable energy, adding to the reasons for decarbonization. The
renewed focus on energy security is thought to have also played a role in changing the treatmentof nuclear in the EU Taxonomy, alongside decarbonization.
The Commission President has stated that, should Russia invade Ukraine, the EU would
impose economic sanctions not only in the areas of finance and energy but also the export ofhigh-tech products. The EU’s sanctions against Russia have just been extended for six months
this past January; future developments must be watched.

4

3. China: Decarbonization of Electricity Accelerates,
Led by Variable Renewable Electricity

Li ZHIDONG, Visiting Researcher
Professor at Graduate School
Nagaoka University of Technology

China is pushing ahead with transitioning from coal-fired thermal power to non-fossil power sources
for achieving sustainable development and establishing a decarbonized society. Major progress wasmade in 2021, during which China aimed for a green recovery from the pandemic and achieved an
economic growth rate of 8.1%.
According to the China Electricity Council (CEC), in 2021, China’s generation capacity increased by
7.9% to 2,380 GW and the power output by 9.8% to 8,380 TWh. Of this capacity, coal-fired powerincreased by 2.8% in capacity to 1,110 GW and by 8.6% in output to 5,030 TWh, but its share in the
total installed capacity decreased by 2.3 points to 46.7% and in the total power output by 0.7 point to60.0%. In contrast, the installed capacity of wind power increased by 16.6% to 328 GW, solar PV/heat
power by 20.9% to 307 GW, hydropower by 5.6% to 391 GW, and biomass power by 27.2% to 37.98
GW. The total amount of renewable power increased by 13.8% to 1,065 GW. The share of renewable
power sources in the total installed capacity increased by 2.3 points to 44.8% and in the total power
output by 0.6 point to 29.7%. The share of variable renewable energy sources, namely wind power andsolar PV/heat generation, in the total installed capacity increased by 2.4 points to 26.7% (including
13.8% wind power, up 1 point, and 12.9% solar PV/heat generation, up 1.4 points), and in the total
power output by 2.2 points to 11.7% (including 7.8% wind power, up 1.7 points, and 3.9% solar PV/heatgeneration, up 0.5 point). Nuclear increased by 6.8% to 53.26 GW but its share in the total installedcapacity remained unchanged at 2.2%, while its share in the total output increased 0.1 point to 4.9%.
The share of non-fossil fuels as a whole grew by 2.3 points to 47% of the total installed capacity and by
0.7 point to 34.6% of the total output. The shift to non-fossil fuels has been driven by variable renewableenergy sources. Non-fossil fuels surpassed coal-fired thermal in installed capacity for the first time but
its share in the total output is 25.4 points lower than that of coal due to its lower utilization ratio.
In 2022, China is expected to step up efforts to decarbonize power sources. On January 24, the StateCouncil released the Work Plan for Energy Conservation and Reduction of Pollutant Emissions During
the Fourteenth 5-Year Plan Period. The plan set a regulatory target for the total amount of energy
consumption for each region, but decided to exclude any increase in renewable electricity consumption
from 2020 from the amount of consumption. CEC has forecasted that in 2022, the installed generation
capacity will increase by 220 GW to 2,600 GW as the electricity demand increases by 5–6% year-onyear in line with stable economic growth. Renewable power sources will grow by 180 GW to 1,244 GW
in total, with hydropower increasing to 410 GW, wind power to 380 GW, solar PV/heat generation to
400 GW, and biomass power to 45 GW. The share of renewable power sources in the total installedcapacity will increase by 3.1 points to 47.9% (including 30% for variable renewable power sources, up
3.3 points, namely 14.6% wind power, up 0.8 point, and 15.4% solar PV/heat generation, up 2.5 points).
Meanwhile, nuclear will expand by 2.31 GW to 55.57 GW, its share in the total installed capacity down
0.1 point to 2.1%. As a result, non-fossil fuel power sources will increase by 182 GW to 1,300 GW andtheir share in the total installed capacity will increase 3 points to reach 50% for the first time. Variable
renewable power sources are likely to continue to drive decarbonization in 2022.
Meanwhile, for coal-fired thermal power, its share in the total installed capacity is expected todecrease to 43.8% but its installed capacity will increase by approximately by 30 GW to 1,140 GW.
This is because coal-fired thermal power is still considered indispensable for ensuring supply flexibility
as electricity supply stability emerges as a challenge with the increase in variable renewable powersources. How China will gain the understanding of the international community deserves attention.

54. ME: Yemeni War Intensifies and JCPOA Reaches Critical Stage
Shuji HOSAKA, Board Member
Director of JIME Center
The Houthi militants who rule northern Yemen carried out drone attacks on Abu Dhabi
International Airport on January 17, and the UAE was attacked again on the 24th and 31st.
While the damage has been limited, security concerns have been rising in the UAE since
February as an obscure Iraq-based militia calling themselves “True Promise Brigades” claimed
responsibility for several attacks on the UAE and there are rumors that Burj Khalifa, the world’s
tallest building, as well as the Dubai Expo and port facilities will be targeted. Meanwhile,
offensives by Yemen’s legitimate government forces and the Saudi-led coalition are making
headway in Shabwa in southern Yemen and the strategically important Marib.
Meanwhile, oil prices climbed as tensions grew over Ukraine, causing WTI futures to rise
far above $90 per barrel. As any military clash could disrupt Russian gas exports to Europe,
there is renewed attention on the role of Qatar as one of the world’s key LNG exporters. Thereis focus on the possibility of diverting Qatar’s LNG to Europe, but doing so would present a
major challenge because most of Qatar’s LNG is supplied to Asia on long-term contracts.
Meanwhile, on January 31, US President Biden received a visit by Qatari Emir Sheikh Tamimbin Hamad Al Thani and conveyed his intention to designate Qatar a non-NATO ally of the US.
The discussions on rebuilding the Iran nuclear deal (JCPOA) have reached a critical stage
and the US and Iran are reportedly hammering out the details of the draft agreement. According
to media reports, the deal will be rebuilt in phases with Iran fulfilling its obligations to suspend
uranium enrichment above 5% before the United States lifts its sanctions.
Meanwhile, several changes were observed in the regional power balance in the Middle East.
The dialog between Saudi Arabia and Iran mediated by Iraq continues and this, along with the
JCPOA negotiations, may affect the course of the situation in Yemen. Furthermore, the guests
from the Middle East at the opening ceremony of the Beijing Winter Olympic Games included
President Abdel Fattah el-Sisi of Egypt, Emir Sheikh Tamim bin Hamad Al Thani of Qatar, andCrown Prince Muhammad bin Zayed (known as MbZ), highlighting the region’s strong ties
with China. Emir Tamim and Crown Prince MbZ had talks in Beijing, which emphasized theimproved relations since the signing of the Ula Agreement in January 2021.
Israel reinforced its ties with the Gulf countries. President Herzog of Israel visited the UAE,
becoming the country’s first president to do so, had a meeting with Crown Prince MbZ, andvisited the Dubai Expo. Further, Defense Minister Gantz of Israel visited Bahrain in February,
followed by Prime Minister Bennett in the same month as the first prime minister to do so inthe country’s history and spoke with King Hamad. Turkey has also improved ties with Armenia,
Bahrain, and the UAE, with whom the country has had difficult relations, and also offered toact as intermediary in the Russia-Ukraine confrontation.
On February 3, the US announced the death of Abu Ibrahim al-Hashimi al-Qurashi, the leaderof the terrorist group Islamic State (IS.) IS confirmed the death of its leader and announced Abu
al-Hasan became its new leader.

6

5. Russia: Tensions Reaching Boiling Point over the Ukraine Crisis
Shoichi ITOH, Manager, Senior Analyst
Global Energy Group 2, Strategy Research Unit
On February 18, UN Secretary-General Antonio Guterres spoke at the Munich Security
Conference about the Ukraine crisis, an issue of deep concern for the world, defended the UN
Charter as the fundamental pillar of international law, and stressed the need for all nations to“settle their international disputes by peaceful means.” He went on to say that the threat to
global security today is “more complex and probably higher” than during the Cold War whensafeguards and safety checks existed behind the scenes, and warned that any military clash overUkraine “would be catastrophic.”
Since the end of October 2021, the US media have been reporting that Russia is amassing
troops near the Ukrainian border. On January 7, 2022, State Secretary Blinken warned that the
number of troops had reached 100,000, and on February 18, Michael Carpenter, US
Ambassador to OSCE (Organization for Security and Cooperation in Europe), warned that the
number had reached up to 190,000, the largest since World War II. Russia is demanding awritten guarantee banning Ukraine from joining NATO, while the West maintains that there
are no plans for Ukraine to join NATO and that Ukraine should choose its future as a sovereign
nation.
The crisis has brought renewed attention to President Putin’s essay titled “On the Historical
Unity of Russians and Ukrainians” published in July 2021 as a basis for Russia’s unrelenting
stance toward Ukraine. The essay emphasizes that the Russians and Ukrainians are historicallyindivisible and that Russia will not recognize Ukraine’s sovereignty if it “separates itself” from
Russia; the writing was condemned by the international community as well as Ukraine. In apoll released on February 17 in Ukraine, the percentage supporting Ukraine’s joining NATOreached an all-time high of 62%, with reports that even in Eastern Ukraine regions where highpro-Russian sentiment is relatively high, the public are increasingly frustrated by the Putin
government’s military hostility, although still calling for a stable relationship with Russia.
Russian troops stayed on in Belarus (Ukraine’s northern neighbor) after the end of a joint
military exercise by the two countries (which began on February 10). On February 21, President
Putin signed an executive order that recognizes the Eastern Ukrainian provinces of Donetsk andLuhansk as independent states and issued an order to send in Russian troops in the name of“peacekeeping.” On the 22nd, UN Secretary-General Guterres expressed his concern about
Russia’s “perversion of the concept of peacekeeping,” while US President Biden criticizedPresident Putin’s actions as “the start of the invasion of Ukraine” and the scheduled US-Russia
summit and foreign ministerial talks were cancelled. On the 23rd, President Putin addressed thenation and declared that there is no room for negotiation on matters of national interest andsecurity, and has since maintained a hardline stance.
On February 24, Ukrainian President Zelensky declared a nationwide state of emergency(except in parts of Eastern Ukraine which Russia has recognized as independent). As the West
begins to step up economic sanctions, the international community is increasingly alarmed by
the threat of Russia’s full-scale invasion of Ukraine.
(This report was written on February 24.)

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