IEEJ e-NEWSLETTER
No. 231(Based on Japanese No. 223)

Published: April 19, 2022
The Institute of Energy Economics, Japan(As of April 18, 2022)

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: Realism Emerging in Energy-related Debates
2. EU: Clear Stance of Strengthening Energy Security against Russia
3. China: Pursuing Decarbonization while Ensuring Energy Security
4. ME: Conflicts Spreading behind the Ukraine War
5. Russia: Putin Administration Increasingly Isolated by the International Community

1

Summary
1. 1. US: Realism Emerging in Energy-related Debates
As energy prices continue to surge, senior government officials have begun to request oilcompanies to increase supply. The supply-demand outlook issued by the US Energy
Information Administration also published policy-neutral outlook.

2. EU: Clear Stance of Strengthening Energy Security against Russia
Russia’s invasion of Ukraine has united Europe in their resolve to strengthen energy security
against Russia and reduce their dependency on the country. REPowerEU released by theEuropean Commission reflects this change in policy toward Russia.
3. China: Pursuing Decarbonization while Ensuring Energy Security
The government decided to proceed with decarbonization with discipline while aiming for5.5% economic growth and ensuring energy security. As the Ukraine crisis attracts attention, agovernment policy mentioned “absolute safety” as a requirement for developing nuclear power.
4. ME: Conflicts Spreading behind the Ukraine War
Having been approaching Russia in recent years, Middle Eastern countries are responding to
the Ukraine crisis in various ways. The war in Yemen, in which Saudi Arabia is involved, andthe Israel-Iran conflict are prolonging and deteriorating.
5. Russia: Putin Administration Increasingly Isolated by the International Community
As the Russian invasion intensifies, Europe, the US, and Japan are tightening their economic
sanctions. With the Putin administration showing no sign of compromise, international pressureis growing while discontent within Russia is also mounting.

21. US: Realism Emerging in Energy-related Debates
Yoshikazu Kobayashi, Senior Economist
Manager, CCUS Group
Fossil Energies & International Cooperation Unit
Inflation continues to rage in the United States. The Consumer Price Index was up 7.9% yearon-year as of February 2022, the highest in 40 years. According to the US Bureau of Labor
Statistics, this increase is driven mainly by energy prices, which are believed to account for
26% of the overall inflationary effect. The national average gasoline price was $4.18 per gallon
as of March 14, passing the 4-dollar mark as feared. Domestic electricity prices are also trending
upwards as coal and natural gas prices rise.
Amid these circumstances, at an energy-related event held in Houston on March 9, Energy
Secretary Jennifer Granholm called on US upstream oil companies to increase supply. When
asked if the Biden administration’s policies have led to the energy price increase, she repliedthat the government expects domestic oil and gas supplies to increase and that now is not thetime for infighting, and promised to handle the licensing process for development projects
swiftly. The fact that Secretary Granholm, who has so far given top priority to climate action,
has switched to a more realistic approach indicates renewed recognition of the importance ofthe balance of the three Es in energy policy—energy security, energy efficiency, and theenvironment.
These realistic views are clearly reflected in Annual Energy Outlook 2022 published on
March 3. As the first to be published since the Biden administration took full control of thegovernment, the Outlook had been keenly awaited. It envisions a 2050 power mix consisting of
44% renewable electricity (21% in 2021; the same hereafter), 34% natural gas (37%), 12%
nuclear (19%), and 10% coal (23%), based on a reference case subject to the current laws andregulations. The Outlook also contains eight more scenarios, but none of them anticipates
electricity reaching net-zero emissions in 2035, despite the Biden administration’s publicpromise. Furthermore, natural gas-fired thermal power has a lower share in 2050 than in 2021
but the output itself is actually higher. Moreover, coal-fired thermal power still accounts for
10% of all power even in 2050.
Moreover, the Outlook assumes that the existing fossil-fuel-centered energy supply-demand
structure will continue as a whole, with four out of the five scenarios anticipating that domestic
natural gas output will continue to increase toward 2050, 79% of new cars will continue to be
powered by internal combustion engines (gasoline and diesel oil) in 2050, and that EVs andplug-in hybrids will only account for 13% combined. The US Energy Information
Administration has always remained firmly “policy-neutral” and based their analyses onobjective assumptions wherever possible. The fact that a US government organization issued
an outlook predicting that the country’s fossil fuel dependency will continue despite the global
tide toward decarbonization suggests that such views are still dominant within the country.
32. EU: Clear Stance of Strengthening Energy Security against Russia
Ichiro KUTANI, Senior Research Fellow, Manager
Global Energy Group 1, Assistant to Managing Director
Strategy Research Unit
Europe continues to suffer soaring energy prices. Natural gas and electricity prices haveskyrocketed since last summer and remain at high levels. Oil and natural gas supply insecurity
has worsened since Russia’s invasion of Ukraine, pushing up energy prices further.
There has long been concern about the danger of depending on Russia for energy supplies.
In particular, after gas supplies passing through Ukraine were cut off in the middle of winter in
2009, regulations and measures were put in place to strengthen the stability of gas supply.
Nevertheless, the responses of EU member states varied, with none specifically targeting Russia.
However, Russia’s invasion of Ukraine this time was a wake-up call that has forced Europe toramp up their energy security against Russia and reduce their dependency on the country. The
so-called REPowerEU policy released by the European Commission on March 8 reflects thechange in the EU’s policy toward Russia.
REPowerEU aims for more affordable, stable, and sustainable energy and consists of threepillars: measures to respond to rising energy prices, replenishing gas stocks for next winter, andreducing EU dependency on Russian gas supply.
The actions to deal with rising energy prices are: 1) strengthening monitoring of retail energy
prices with price regulation as an option, (2) more taxes on energy companies making excessive
profits, (3) considering energy subsidies for companies, and (4) optimizing the structure of theelectricity market. Europe has been deregulating its energy markets since the 1990s, and now
seems to be correcting its course of action to protect consumers and companies.
Regarding replenishing gas stocks for next winter, the EU will consider setting a minimum
stock level aiming to replenish underground gas stores to 90% by October 1, 2022, and will
also provide aid for purchasing natural gas to be stocked and monitor the behavior of Gazprom
and other facility operators.
For reducing EU dependency on Russian gas supply, six actions have been indicated: (1)reducing fossil energy consumption by households and commercial buildings through solar
power, heat pumps, and energy efficiency, (2) decarbonizing industry by switching its energy
sources to electricity and hydrogen, (3) speeding up the licensing process for renewable energy,(4) doubling the current target for biomethane production from agricultural wastes, (5)diversifying sources of natural gas imports, (6) strengthening and diversifying hydrogen supply
capacities by upgrading storage facilities, ports, and other related infrastructure.
These powerful measures will not only accelerate the EU’s comprehensive decarbonization
measures centering on energy efficiency and renewable energy, but also encourage various
clean energy supplies including hydrogen. Developments in EU energy policies, including therevision of nuclear power in France and elsewhere, deserve close attention.
43. China: Pursuing Decarbonization while Ensuring Energy Security
Li ZHIDONG, Visiting Researcher
Professor at Graduate School
Nagaoka University of Technology
According to the National Bureau of Statistics, the GDP growth rate in 2021 was 18.3% for Q1,
7.9% for Q2, 4.9% for Q3, and 4.0% for Q4, and 8.1% for the full year, surpassing the government’s
target of “at least 6%.” The power supply shortages, which affected more than 20 regions including
Guangdong Province since the start of the year, were mostly resolved by November thanks to thegovernment’s efforts to stabilize energy supply, and this underpinned economic growth.
Decarbonization also made progress. Primary energy consumption increased 5.2% to 5.24 billiontce (tons of coal equivalent; 1 tce = 7×106 Kcal), but the share decreased by 0.9 percentage points
to 56% for coal and by 0.4 points to 18.5% for oil while it increased by 0.2 points to 8.6% for natural
gas and by 1 point to 16.9% for non-fossil energy (including 14.5% for renewable energy). Energy
consumption per unit GDP (energy intensity) decreased by 2.7%, trailing the government’s target
of around 3%, but CO2 emissions per unit GDP (emission intensity) decreased by 3.8%.
The government’s activity policies and the annual economic and social development plan for2022 were adopted at the fifth session of the 13th National People’s Congress that closed on March
11. The government’s GDP target, which attracted attention both in and outside the country, wasset to around 5.5%. This is lower than last year’s target and result but is higher than the 5.3%
predicted by the Chinese Academy of Social Sciences in December last year and the 4.8%
announced by the International Monetary Fund (IMF) in January. Heading toward the 20th National
Congress of Communist Party of China (CPC), which will decide on the third term of General
Secretary (and President) Xi Jinping, employment and social stability are of paramount importanceand it is estimated that GDP growth of 5.5% is necessary to secure them. Furthermore, “seeking
progress, with stability as the top priority (穏字当頭、穏中求進)” was set as the basic government
policy in response to the three pressures facing the Chinese economy of shrinking demand, supply
shocks, and weakening expectations, in addition to the uncertain international situation.
As part of the basic governance policy, it was decided to pursue decarbonization with discipline
while securing energy security. As specific measures, the government will accelerate thedevelopment of domestic resources, ramp up fossil fuel stocks, and curb price increases, while
powerfully driving measures forward in an integrated manner such as building large wind and solar
power farms, increasing high-efficiency coal-fired thermal power that provides flexibility, andbuilding ultra-high voltage transmission networks that connect these regions with demand centers,
all in the northwest region with abundant wind, solar and coal resources. The policy is to use these
new coal-fired thermal power plants not as a base power source but as adjustment capacity, whichis essential for a stable power supply. For energy conservation, instead of setting an annual target
as in other years, it is stated that the target of the five-year plan to decrease energy intensity by
13.5% from 2020 may be reached by 2025. Further, because renewable energy contributes
concurrently to decarbonization, energy security, and stable growth, any increase in renewableenergy consumption will be excluded from the regulatory target for total energy consumption. The
policy also stated that the benchmark for determining whether the target is achieved will be changed
from a combination of energy intensity and the regulatory total energy consumption target to CO2emission intensity and the regulatory emissions target.
Meanwhile, Prime Minister Li Keqiang did not mention nuclear power in the government’s
activity report. On the other hand, the annual plan prepared by the National Development andReform Committee stated that nuclear will be developed actively and with discipline while ensuring“absolute safety.” This is more exacting than last year’s activity report and annual plan whichsimply required ensuring “safety.” This suggests strong awareness of the issue of how to secure
nuclear safety in case of emergency, which has emerged due to the Ukraine crisis. Attention mustbe paid to nuclear development going forward.

5

4. ME: Conflicts Spreading behind the Ukraine War
Sachi SAKANASHI, Senior Research Fellow
Assistant Director, JIME Center
Middle Eastern countries are responding in various ways to Russia’s invasion of Ukraine.
This is because they have been approaching Russia in recent years as the United States
gradually moved away from the region in its attempt to pivot to Asia. For example, the UAE(same as China and India) abstained from voting on the UN Security Council resolution
condemning Russia submitted on February 25. Israel, which is on good terms with both Russia
and the US, declined to co-sponsor the resolution. Both the UAE and Israel voted in support of
the resolution condemning Russia adopted at the UN General Assembly on March 2, but Syria
voted against it, while Iran, Iraq, Sudan, and Algeria abstained.
Meanwhile, major Persian Gulf oil-producing countries have not responded to requests toincrease production amid soaring energy prices. When the Biden administration failed to win
support from Saudi Arabia, with which relations had been cooling, UK Prime Minister Boris
Johnson also paid a visit to Saudi Arabia and the UAE, to eventually achieve little. Like theBiden administration, PM Johnson reportedly conveyed “concerns over human rights” to Saudi
Arabia, while both Saudi Arabia and the UAE are discontent with the Biden administration. For
instance, Yemeni Houthi militants have repeatedly launched attacks on Saudi and UAE oil
facilities, threatening stable energy supply. The countries feel that despite these attacks, theBiden administration has not given adequate support to help them fight the Houthis, and is evenshowing signs of compromising with Iran which backs the Houthis.
It has been expected that the Iran nuclear deal (JCPOA) will be rebuilt through the ongoingnegotiations between the US and Iran, which would result in the lifting of the US sanctions
against the Iranian oil, which would help ease supply and demand. However, the negotiations
are not proceeding as had been hoped. Iran is demanding that the US lift its designation of theIslamic Revolutionary Guard Corps (IRGC) as a terrorist organization, but not only Saudi
Arabia and Israel but also the US Congress is strongly opposed to agreeing to this demand,claiming that “the regional activities of the IRGC (such as supporting the Yemeni Houthis)have not changed.” As a result, Iran’s nuclear activities––the country’s leverage for rebuilding
the JCPOA––have made substantial progress and the country is now producing near-weaponsgrade (90%) uranium enriched up to 60%. In response, Israel is stepping up its covert operations
in Iran and a series of mysterious explosions have occurred at Iranian nuclear facilities, while
Iran’s nuclear activities continue.
Increasingly wary of Iran’s regional activities, Israel launched drone strikes on February 14
on an armory of the IRGC in western Iran, destroying hundreds of drones stored there. In
response, on March 13, the IRGC launched missile attacks on an “Israeli target” in Kurdistan
in neighboring Iraq as a warning to the country. In sync with the war in Ukraine, theconfrontation between Iran and Israel, which had continued behind the scenes in recent years,
is gradually becoming more open and fierce.

65. Russia: Putin Administration Increasingly Isolated by the International Community
Shoichi ITOH, Manager, Senior Analyst
Global Energy Group 2, Strategy Research Unit
Despite severe criticism from the international community, Russia continues to invade
Ukraine. On March 2, an emergency special session of the UN General Assembly adopted aresolution deploring Russia’s actions in the strongest terms, with 141 countries voting in
support. However, on the same day, Russia’s foreign minister Sergei Lavrov warned theinternational community that a third world war would be nuclear.
Russian forces seized Kherson province in Southern Ukraine on March 15 and Izium to thesoutheast of Kharkiv, the country’s second largest city, on the 17th. On March 22, in Mariupol,a city on the coast of the Sea of Azov under siege and which the Russian forces had demanded
its surrender, the number of deaths topped 3,000, with hundreds of thousands of civilians
reportedly trapped in buildings. UN Secretary General Antonio Guterres made a strong appeal
to end the living hell that the Ukrainian people are enduring. As of the same date, there havebeen 7,000 to 15,000 deaths among Russian forces since the start of the invasion (estimate by
the North Atlantic Treaty Organization (NATO)). Believed to be suffering a decline in moraleand supply shortages, and reported to have given up on the initial objective of seizing Kyiv, theRussian forces are facing staunch resistance by the Ukrainian forces in many regions.
Ukrainian president Volodymyr Zelensky is steadily broadening the circle of support for
Ukraine among the international community, delivering speeches online in the parliaments of
G7 countries starting with the UK on March 8, followed by the US and Japan on March 16 and23, as well as Israel. On March 12, the Society for Worldwide Interbank Financial
Telecommunication (SWIFT) announced that it will remove seven of Russia’s major banksfrom its computer system as part of economic sanctions by the West and Japan. Further, on
March 15, 14 members of the World Trade Organization (WTO) including Japan, the US, theEU, and Australia issued a statement announcing the revocation of Russia’s most-favorednation status and condemning Russia for its egregious violation of international law anddisrespect for international institutions. Meanwhile, President Putin demanded that “unfriendly
countries” pay for Russian gas exports in rubles.
In Russia, the impacts of the economic sanctions are spreading; inflation is accelerating (up12.54% year-on-year as of March 11, the greatest since the 1998 financial crisis) as the ruble
plunges and logistics are disrupted. Meanwhile, the Putin administration is tightening
censorship and clamping down on anti-war protests. On March 14, a female staff courageouslyinterrupted a live broadcast on Russian state TV carrying an anti-war message, attracting global
attention. Senior government officials have also resigned, including major figures such as
Anatoly Chubais, special envoy of the Russian president (for relations with internationalorganizations).
On March 24, at the G7 emergency summit held after the NATO emergency summit inBrussels, the leaders issued a joint statement confirming that they will spare no effort to holdPresident Putin accountable for his actions, warn against the use of chemical, biological andnuclear weapons, support the gathering of evidence of war crimes, and fully implement
announced sanctions. The international community is observing the stance of Japan as the onlyG7 member from Asia.

7

Past IEEJ Events
Energy and Economy Indicators of JapanIEEJ Homepage Top
Back Numbers of IEEJ e-Newsletter
Back Numbers of IEEJ Newsletter (Original Japanese Version - Members Only)

The Institute of Energy Economics, JapanIEEJ e-Newsletter Editor: Yukari Yamashita, Managing Director
IEEJ j-Newsletter Editor: Ken Koyama, Senior Managing Director

The Institute of Energy Economics, Japan (IEEJ)Inui Bldg. Kachidoki, 13-1 Kachidoki 1-chome, Chuo-ku, Tokyo 104-0054, Japan
Tel: +81-3-5547-0211 Fax: +81-3-5547-0223

ｃ IEEJ 2022
IEEJ： April 2022 ○8