PM — Redrawing energy markets

Good afternoon, friends. We have another news cycle filled to the brim with updates on the war in Ukraine and the ripple effect the conflict is having on different corners of the global market.

UKRAINE WATCH- Russian troops are closing in on their biggest target so far in Ukraine, claiming earlier today to have taken over the southern city of Kherson, Russia’s RIA news agency reported, quoting defense ministry spokesman Major General Igor Konashenko. The city, close to Russian-annexed Crimea, is now “completely surrounded” by Russian troops, its mayor Igor Kolykhayev said, downplaying Russia’s claim of full control, according to Sky News. Kherson would be the largest city Russia has successfully captured in Ukraine, as they continue to struggle to capture the capital, Kyiv.

He said, she said: Updated intelligence on the invasion from the UK’s defense ministry said that, “while Russian forces have reportedly moved into the center of Kherson in the south, overall gains across axes have been limited in the last 24 hours.”

Ukraine has reportedly thwarted an assassination attempt against President Volodymyr Zelensky, the chief of the country’s National Security and Defense Council Oleksiy Danilov said, according to a Telegram post by Ukraine’s state-run Centre for Strategic Communication. The plot was carried out by a unit of Chechen special forces, known as Kadyrovites, who have since been “eliminated,” he said.

Kharkiv’s casualties are rising, with at least four killed and nine injured in missile attacks that hit the center of the country’s second-largest city since the morning, the mayor of Kharkiv said, Sky News reported. This adds up to a previous death toll of at least 21 people killed and 112 injured due to the strikes in the past 24 hours, regional governor Oleg Synegubov said earlier today, according to Reuters. At least four people have been killed on Tuesday in a strike in Zhytomyr, west of the capital, with five killed after Russian forces struck a TV tower in Kyiv, while a missile attack was also launched on a police station in the capital, the Ukrainian defense ministry said.

The attack this morning came hours after Russian paratroopers stormed a military hospital in the city as they near the Ukrainian capital with a military convoy around 20 miles northwest of Kyiv. No Ukrainian forces were killed in the fighting overnight, according to the city’s regional police chief, Sky News reported.

Overall death toll: Over 2k Ukrainians have been killed since the beginning of the Russian aggression, with hundreds of transport facilities, residential buildings, hospitals and kindergartens destroyed, Ukraine’s emergency service said in a statement on Facebook.

Ukraine said that 5.8k Russian troops have been killed since the beginning of the invasion, according to Ukraine’s General Staff of Armed forces. Earlier, the Ukrainian president said in a video address that the number was close to 6k. Russia continues to remain tight-lipped on its casualties since the invasion.

As the invasion wears on, Zelensky wants the West to do more to help Ukraine, including supporting his country’s bid to join the EU and imposing harsher punitive measures on Russia.

There may, in fact, be more sanctions coming: UK Prime Minister Boris Johnson agreed with Zelensky in a call earlier today that more sanctions are needed, with Johnson saying that the UK will “rally UN General Assembly members … to ensure the strongest possible condemnation of Russia,” according to a press release by Downing Street.

But a second round of talks may be underway, despite the ongoing Russian aggression, with Kremlin spokesperson Dmitry Peskov telling reporters on Wednesday “in the second half of the day, closer to evening, our delegation will be in place to await Ukrainian negotiators,” the Associated Press reported. Ukrainian foreign minister Dmytro Kuleba said officials are ready for new talks, yet his country wouldn’t accept any Russian demands. The venue of the talks, which come days after the first round of talks held along the Belarusian border failed to reach a breakthrough, remains undetermined.

The UN General Assembly is meeting today to vote on a draft resolution rebuking Russia over the invasion, Reuters reported, as nearly half of the 193-member assembly signed as co-sponsors of the draft, which demands Russia fully withdraws military forces from Ukraine. Today’s draft resolution is similar to one that was vetoed by Moscow in the Security Council on Friday, but veto powers do not exist in the General Assembly.

Belarus is getting dragged into the sanctions corner, too: EU diplomats have approved fresh sanctions against Belarus over its support of the Russian invasion, the French Presidency of the EU Council announced. The sanctions include Belarusian officials and military involved in the aggression, and “certain sectors of the Belarusian economy.”

The corporate exodus from Russia shows no signs of abating, with yet more companies exiting the country or suspending operations, including Apple, Google, Ford, Harley-Davidson and Exxon Mobil over the invasion, Reuters reported, piling further economic misery for Moscow amid imposed sanctions by the West. Boeing and Airbus are also joining the chorus, bringing a halt to technical support for Russian planes, they said in emailed statements to the media. Japanese automobile maker Honda Motor is also planning a boycott, temporarily suspending exports of its cars and motorbikes to Russia due to the weight of economic sanctions against Moscow, broadcaster NHK reported.

Italian oil giant Eni is also joining in moves of peers for isolation of Russia, it told Reuters in emailed comments, saying it will exit the Blue Stream pipeline that connects Russia to Turkey by selling its 50% stake in the joint venture it co-owned with Russia’s Gazprom since 1999.

On the humanitarian front, the European Commission proposed granting temporary protection of up to three years to those fleeing Ukraine, Reuters reported. The protection provides a residence permit, jobs access, social welfare and medical treatment for 1-3 years in all EU states. It will be applicable as soon as the proposal is greenlit by EU interior ministers, which the commission hopes happens tomorrow.

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THE BIG STORY AT HOME TODAY-

UAE-based asset management firm Gulf Capital plans to invest some USD 250 mn in Egypt over the next five years, Hapi Journal quoted CEO and co-founder Karim El Solh as saying at a presser today. The investment will come as part of its Gulf Capital Equity Partners Fund III, and will target companies in the tech, fintech, e-commerce and healthcare sectors.

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• Local harvest will be a critical cushion as Russia-Ukraine war challenges global market: The Madbouly government plans to buy 5.5 mn tons of wheat from local farmers during the upcoming season, upping previous purchase plans by more than a third as Russia’s invasion of Ukraine has thrown the global grain market into disarray.
• CI Capital lands mandate to IPO (parts of) the new capital: State-owned New Administrative Capital Company for Urban Development is moving forward with plans to list its subsidiaries on the EGX and has hired CI Capital as its advisor.
• Saudi’s Sary acquires Egyptian marketplace Mowarrid: Saudi B2B wholesale marketplace Sary has acquired Egyptian e-commerce platform Mowarrid for an undisclosed amount, in the first step of Sary’s plan to expand into MENAP markets.

HAPPENING NOW-

Consoleya is holding its second Women Meet-up today to discuss topics including inclusivity in investment. The agenda includes a panel discussion on gender-lens funding here in Egypt.

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HAPPENING TOMORROW- PMI: Purchasing managers’ index figures for February for Egypt, Saudi Arabia, the UAE, and Qatar will be released tomorrow at 6:15am CLT. Non-oil business activity in Egypt contracted for the fourteenth consecutive month in January on the back of weaker demand and inflationary pressure, recording the lowest reading since April 2021 and falling below the series average.

???? CIRCLE YOUR CALENDAR-

Key news triggers to keep your eye on over the next few weeks:

• Foreign reserves: February’s foreign reserves figures will most likely be announced this week or next.
• Inflation: Inflation figures for February will be released on Thursday, 10 March.
• Interest rates: The Central Bank of Egypt (CBE) will hold its next monetary policy meeting on Thursday, 24 March.

Contemporary art and culture center Darb1718 is hosting its 3031 Art Festival from 4-12 March on its premises in Fustat, Old Cairo. Unique collections of multidisciplinary art will be on display along with live music, dance, theater performances, and interactive workshops. Guest speakers Adsum Art Consultancy will be on hand to discuss investing in art. Catch a full day of activities from 1:00pm–9:30pm on weekends and weekdays from 4:00pm–10:00pm

The Diarna Handicrafts Fair kicked off last Thursday and runs through 7 March at Cairo Festival City from 10am until 10pm daily.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

☀️ TOMORROW’S WEATHER- Expect a daytime high of 20°C tomorrow and a nighttime low of 10°C, our favorite weather app tells us.

Ukraine’s tech diaspora is mobilizing an “IT army” against Russia: Ukrainians working at tech companies in the West are petitioning their managements to do more for war-torn Ukraine, reports Reuters. Employees at companies such as Google, Amazon, and Cloudflare are calling on the tech giants to block misinformation from Russia, close Russian accounts, and send supplies and aid to Ukraine. In the past few days, tech companies have involved themselves in the Russian-Ukrainian war by helping the West introduce punitive measures to the Russian economy by cutting ties or suspending operations and access.

Could the sanctions also push the UK’s Chelsea FC to be up for sale? It seems so, as sources told ESPN that the football club’s owner, Russian b’naire Roman Abramovich, is willing to begin fielding bids as pressure mounts over his ownership amid Western sanctions imposed on Russia in the wake of its invasion of Ukraine. The 55-year-old businessman had attempted to avoid putting the club up for sale by passing stewardship of Chelsea to its trustees earlier this week. However, it is believed that a sale is now inevitable due to pressure to freeze assets of rich Russians in the UK with any alleged ties to Russian President Vladimir Putin.

???? ON THE TUBE TONIGHT-
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A docile family man finds himself in a battle against a mob boss: In last year’s film Nobody, Bob Odenkirk played Hutch Mansell, a gentle, overlooked dad and husband who rarely pushes back against life. Mansell’s docile attitude continues until two petty thieves rob his house and he refuses to defend himself or his family — losing the respect of his wife and son. As his close ones pull away from him, the incident strikes a match to Mansell’s dormant rage and once it starts burning, it can’t be stopped. His sudden release of years of untapped rage soon put him in the line of fire from a Russian crime boss whom he upset. The film shows how Mansell goes from a “nobody” to a gun-rearing, fist-throwing adversary that even the mafia boss can’t bring down. You can find the film on OSN Streaming.

⚽ The FA Cup is on today: Luton Town will play against Chelsea at 9:15pm in the European championship while Southampton will compete against West Ham at 9:30pm and Liverpool will face Norwich City at 10:15pm.

El Zamalek is playing against Future in the Egyptian Premier League today at 8pm.

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The Institut Français d'Archéologie Orientale will showcase a traditional Taḥṭīb performance, which originated in Upper Egypt during Mawalid. Taḥṭīb is a sport where two men duel with sticks in tune to music being played from a mizmar and tabla. The performance will take place tomorrow at 7pm.

Mashrabia Gallery is hosting a solo exhibition by artist Ahmed Lesi called All Eyes On Me. Lesi explores ego in the Freudian psychology sense asking whether there is a dark side to the ego in his paintings. Opening night is today at 6pm.

???? UNDER THE LAMPLIGHT-

Have a boss you just can’t get the message across to? Bridge the Gap is written by Jennifer Edwards and Katie McCleary, who work as coaches to Fortune 500 companies and social enterprises. The book aims to help you advance your communication skills, and nurture your relationships at work where colleagues should be treated with understanding and respect. Every interaction at the workplace “has the power to improve or deteriorate a critical professional relationship,” they write. Bridge the Gap teaches readers how to ensure that these interactions help to connect and engage, as opposed to shutting people down or creating drama. It all depends on the tools and communication methods you decide to utilize in certain situations, with Edwards and McCleary putting together a guide on how to navigate work friendships, clashes, and management styles.

EARNINGS WATCH-

Amer Group’s bottomline rose 226% y-o-y in 2021 to EGP 83.2 mn, according to the company’s financials (pdf). Revenues increased 29% y-o-y to EGP 1.8 bn in 2021.

MARKET ROUNDUP-

The EGX30 fell 0.8% at today’s close on turnover of EGP 829 mn (17% below the 90-day average). Foreign investors were net sellers. The index is down 6.4% YTD.

In the green: Qalaa Holdings (+3.6%), CIRA (+2.9%) and Telecom Egypt (+2.8%).

In the red: Palm Hills Development (-3.1%), Cleopatra Hospital (-2.7%) and Rameda (-2.7%).

The EU is preparing to redraw its energy supply map as war rages in Ukraine. Europe is reliant on Russia for around a third of its natural gas — but given Russian President Vladimir Putin’s new status as an out-and-out warmonger, the bloc is now looking to change that state of affairs, permanently. The European Commission is set to unveil a plan to reduce reliance on Russian energy imports next week, the New Scientist reports.

The supply switch could take years to enact — but Europe is also preparing to replace Russian gas fast if need be. The EU is drawing up contingencies for a supply-shock scenario where Russia turns off the gas taps to Europe in retaliation for Western sanctions, Bloomberg reports. EU energy ministers earlier this week held an emergency meeting to discuss their energy plan-B if Russian gas drops off the menu, though Russia has made no signs as of yet that it is seriously considering that option.

Europe would have to cut demand by at least 10-15% if Russia decides to suspend imports altogether — but if the country fulfills its long-term contracts with the EU, “depleted storage could easily be replenished before the next heating season,” Bloomberg reports, citing a study by Belgium-based think tank Bruegel. That said, making the switch to alternative suppliers won’t come without a cost, which could run as high as EUR 70 bn — seven times more than in previous years.

For now, Russian supply continues to flow — but try telling that to the markets. While Western sanctions have so far spared the vital energy sector, uncertainty over the war has sent the price of basic commodities soaring, and oil is no exception. Buyers are reportedly shunning Russian oil altogether, with tenders failing to attract any bids even when offered with deep price reductions, according to Bloomberg. Brent crude is currently trading at USD 111.88 per barrel.

The US is stepping in to try and calm prices: Members of the International Energy Agency will deploy 60 mn barrels of emergency oil stockpiles in a bid to bring prices back down to earth. The US will contribute half the amount from its strategic reserve, President Joe Biden confirmed in his State of the Union address last night.

But don’t expect OPEC+ to do much: The cartel is expected to offer another round of gradual supply increases at its meeting today, as members are already struggling to meet production targets as they currently stand. (Plus: Russia is OPEC’s second largest member and will presumably be more than happy to watch its Western foes sweat.)

Looking ahead, the loss of Russian supply could imperil green targets: Germany is mulling extending use of coal to replace Russian gas, said Robert Habeck, vice chancellor and minister for economy and energy, Bloomberg reports. Coal plants in the country — which gets more than half of its gas from Russia — could run beyond 2030, when Germany had targeted to phase out the fossil fuel.

EU leadership has insisted that the best path forward would be to accelerate the use of renewables — and the plan set to be unveiled next week will reportedly include a target to reduce fossil fuel use by 40% come 2030, according to the Washington Post. But while Habeck said transitioning to clean energy remains the ultimate goal, his first priority is to release Germany of dependency on Russian supply.

Algeria has apparently thrown its hat into the ring as an alternative supplier: A Spanish government minister has said the North African nation is ready to step up exports to Europe if supplies from Moscow are disrupted, Bloomberg reports — while pointing out that the OPEC member’s exports have stalled in recent years, and that current capacity is already tied up in long-term contracts with European buyers.

What about us? Egypt last week held talks with the EU over shipping more natural gas to Europe as worries ratcheted up over Ukraine, though we’ve had no word so far on the outcome. Egyptian officials have repeatedly signaled their desire to ramp up gas exports to the continent as a key part of ambitions to become a Mediterranean gas hub. Boosting exports would be good for us, good for the EU, and good for East Mediterranean countries. But with our LNG exports apparently maxed out for now, it’s a solution that will take longer than Europe — and Russia — might be willing to wait.