Amber Bridge Fund » Germany http://en.abfund.org Amber-Bidge Tue, 08 Mar 2016 21:48:18 +0000 en-EN hourly 1 https://wordpress.org/?v=3.9.40 Germany’s Energiewende and the Baltic Sea region: Public opinion and systemic interactions http://en.abfund.org/?p=1105 http://en.abfund.org/?p=1105#comments Thu, 24 Sep 2015 20:46:26 +0000 http://en.abfund.org/?p=1105

Dr. Thomas Sattich is an Associate Researcher at the Institute for European Studies at the Vrije Universiteit Brussel, where he is working on energy- and industry-related topics. With various publications on EU energy policy and Germany’s energy transition (Energiewende), his focus lies on the power sector, the integration of renewables and the adaptation of the electricity transmission infrastructure to the needs of Europe’s sustainability agenda. 

Executive summary

Germany’s energy transition changes the demand for energy on regional and international energy markets. A major share of the country’s energy imports comes from, or passes through the Baltic Sea region, making Germany the area’s main energy importer. Public discourse does, however, not reflect this situation accurately. Imports of natural gas block the view on the importance of other energy carriers. The latter, especially oil and coal, are, however, equally important both as elements of the regional energy system and with regard to Germany’s energy future. This article therefore aims at going beyond the narrow focus on natural gas, and provides a more encompassing assessment of the impact Germany’s Energiewende is likely to have on energy flows in the Baltic Sea region.

Introduction

In 2011 Germany started enthusiastically into its Energiewende adventure. Since then it became clear that the goal of a nuclear free and carbon-neutral energy system is not to be achieved easily or cheaply. The international implications of the project have not received much attention in the beginning; yet in the energy sector things are per definition interrelated and not confined to the national level. Soon after the phase-out of the first eight nuclear power stations, the country hence saw itself confronted with the international dimension of the latest of its energy policy u-turns. But to the major surprise of the general German public, the idea of a quick nuclear phase-out and large-scale increase of renewables did not turn out to be an Exportschlager (export success).

On the contrary, the focus of countries, such as Poland, Sweden and Great Britain, remained on coal, gas and nuclear power. Others such as Spain even reduced their subsidies for renewables. But even though Germany’s energy transition causes only little enthusiasm in neighbouring countries, the Energiewende still has repercussions in the international energy system: being Europe’s largest importer of energy, the transformation of Germany’s energy system changes demand on international and regional energy markets. Moreover, electricity flows go through the interconnectors between national power systems, and thus have an impact on the emerging EU electricity market. It is thus very likely that the Baltic Sea region will not remain unaffected by the Energiewende.

The aim of this article is a twofold assessment of 1) the role of the Baltic Sea region for Germany’s Energiewende project and 2) the likely impact of this project on energy flows in the region. A short-term and a long-term scenario could serve as the basis for this analysis: according to Germany’s national energy strategy the nuclear phase-out is to be completed by 2022. At this point renewables should contribute with at least 18 per cent to meet national net energy demand, and with at least 35 per cent to electricity demand. The renewables are supposed to increase to 60 per cent of national net energy demand and 80 per cent of electricity demand by 2050 (BMWi 2014a). As the

Energiewende’s history suggests, sudden turns in Germany’s energy policy are possible. As a consequence, the article elaborates on the basis of a 2020/2022 short-term scenario.

What role does the Baltic Sea region play in Germany’s plans to transform its national energy sector?The following section provides an analysis of public discourse in Germany. Aiming at an assessment of those issues that will affect the region’s energy system in the following years, this analysis looks at the Baltic Sea region through the eyes of the country’s energy-interested public. Based on this assessment, the energy system of the region and the likely impact of Germany’s energy system itself is analysed. The focus of this step lies on import/export flows of different energy carriers.

 

Germany’s energy transition and energy flows in the Baltic Sea region: public opinion in Germany

 

The significance of a particular region for a country’s energy policy should be reflected in the national media coverage: the more important a particular region appears to journalists and experts to be as a source, supply route, and/or location for energy production of a given country, the more prominent its place in the energy-related media coverage should be. Similar patterns should be noticeable in the German case. On the basis of this assumption, the following analysis aims at assessing the relative importance of the Baltic Sea region for Germany’s Energiewende. It is based on a sample of 717 articles from five of Germany’s leading daily and weekly newspapers, covering the spectrum from centre-right to centre left and a time period from April 20051 to October 2014: Die Zeit (76 articles), Der Spiegel (63), Süddeutsche Zeitung (206), Die Tageszeitung (90), and Die Welt (282).2

 

How much attention does the Baltic Sea region receive in German debates around the Energiewende? From the sample of articles, 134 mention the term ‘Ostsee’ (the Baltic Sea), that is almost 19 per cent. However, this number shrinks drastically if the search term is amended with ‘erneuerbare Energie’ (renewable energy) or ‘Energiewende; only 33 (4.6 per cent), respectively 26 articles (3.6 per cent) discuss the role of the Baltic Sea for the country’s energy transition towards more renewables. In order to put these numbers – and hence the relative importance German press attributes to the Baltic Sea – into perspective, it has to be related to the prominence of other areas. Since Germany is not only a littoral state of the Baltic Sea, it seems logical to ask also about the prominence of the North Sea and other neighbouring regions in German energy-related press (Figure 1).

Based on the findings of this analysis, aforementioned search results appear in a different light. Even though other countries and regions rank higher on the echelons of energy-interested public awareness in Germany, a nevertheless considerable percentage of energy-related press articles seems to discuss the threats or benefits of the Baltic Sea for the country’s energy policy. It can hence be assumed that the Baltic Sea is considered an area of significant importance for Germany’s Energiewende project by German press (and thus the country’s energy-interested public). Moreover, this general interest in the Baltic Sea seems to increase (Figure 2). Yet the results of this analysis are indifferent with regard to the specific role the Baltic Sea plays in energy-related public debates in Germany; the relatively low number of articles in the year 2013, for example, cannot be explained on this basis. In order to provide a better view, a closer look on the specific targets of the Energiewende is necessary.

According to BMWi (2014a, 11), the Energiewende aims at distinctively changing central elements of Germany’s energy system: on the one hand, the share of renewables in Germany’s gross energy consumption is to be increased to 18 per cent until 2020 (60 per cent by 2050); on the other hand, the use of primary (fossil and nuclear) energy is to be decreased by 20 per cent (50 per cent by 2050). In sum, these and other measures are supposed to decrease green house gas emissions by 40 per cent in the same time period (80 to 95 per cent by 2050). The electricity sector has to play a fundamental role in this programme, with targets even more far reaching: power consumption is to be decreased by 10 per cent until 2020 (25 per cent by 2050), and full nuclear phase-out is to be achieved until 2022. By then (2020) renewables are to increase to a share of 35 per cent in gross final power consumption (80 per cent by 2050).

How does German press reflect these targets with regard to the Baltic Sea? While the percentage of newspaper articles from the sample generally reflect the significance of individual Energiewende targets, the Baltic Sea appears to be a blind spot in this regard: only a small fraction of those articles, which are dealing with Energiewende targets also mentions the Baltic Sea. A look at the different forms of energy explains why: German press mostly reflects on the Baltic Sea region with regard to conventional energies; most important in this context is gas and oil, but nuclear energy and coal also play a significant role. Renewable energy, such as solar, biomass and hydropower, on the other hand hardly appear at all (Figure 3). The exception that proves the rule in this context is wind power, as more than a third of those articles that mention the Baltic Sea deal with this form of power generation.

In a first approximation this analysis has examined the prominence of the Baltic Sea in German energy-related press; yet the search term ‘Ostsee’ (the Baltic Sea) is too narrow to include the entire region, that is those countries around the Baltic Sea. A deeper assessment therefore has to include the individual littoral states in German Energiewende-related press. There are slight differences between the numbers of articles that mention the search terms ‘Energiewende’, ‘erneuerbare Energie’ and individual countries around the Baltic Sea; yet all in all Poland, Russia, and Sweden appear to be at the centre of attention, whereas Denmark, Finland and Norway attain less attention and rank second in German press.3 Estonia, Latvia and Lithuania attract the smallest share of attention.Thus, a few preliminary conclusions can be drawn: if the prominence of the Baltic Sea in German press is taken as an indicator, it appears that the energy-interested public in Germany attributes only limited attention to this region in terms of the Energiewende targets. The interest is, however, growing. Moreover, by broadening the scope to include the littoral states of the Baltic Sea, the picture changes significantly, with individual countries, such as Poland, Russia, and Sweden attaining considerable attention by German press. Seen through the eyes of the German press, the Baltic Sea region is, however, of limited importance with regard to the primary targets of Germany’s energy transition, that is the reduction of (fossil) energy consumption and the increase of renewables. On the contrary, the German press perceives the Baltic Sea region mostly as a supplier for fossil energy, especially gas and oil, or as the location of conventional/nuclear energy based electricity generation capacity.

A closer analysis reinforces this impression: screening the sample of articles mentioning the Baltic

Sea for different search terms to appear in the same section as ‘Ostsee’ (the Baltic Sea), almost two thirds of the results account for the term ‘gas’, while only 18 per cent account for ‘wind’. Hence, not only do most articles in the sample largely cover fossil fuels; the particular sections within the articles that contain the search term ‘Ostsee’ also mostly cover the issue of natural gas which is mentioned. The conclusion of this analysis must hence be that gas largely predominates where public discussions in Germany mention the Baltic Sea region and the Energiewende. Given the Energiewende targets to decrease the use of carbon based energy carriers4, the following sections can hence be based on the hypothesis that – with the exception of wind power – the Baltic Sea region will lose some of its importance for Germany’s energy system.

Germany’s energy transition and energy flows in the Baltic Sea region: statistical facts and trends

Where the Baltic Sea region is mentioned, it is largely portrayed as a supplier or supply route for fossil fuels – namely gas – by the German press. In comparison, other forms of energy, such as nuclear energy or biomass, hold an inferior position. The construction of the Nord Stream pipeline might, however, have resulted in a place of gas imports in German public discourse disproportionate to its actual role. Beyond, renewables pose a serious challenge for gas-fired power plants in Germany. The role of natural gas might therefore decrease in the years ahead. The Energiewende targets to generally decrease the use of fossil fuels until 2020 and beyond. In order to provide a clearer idea of the interactions between Germany’s Energiewende and energy flows in the Baltic Sea, this section will therefore analyse the energy system of the Baltic Sea region in more detail. Basis of this analysis is Eurostat data on energy consumption and imports from 2010-2012 (see Annex at the end of this article).

If the territory of the littoral states is included in the analysis, the Baltic Sea region5 is an area rich in energy resources, with a three years (2010-2012) average surplus of primary energy production of 500.2 mtoe (million tonnes of oil equivalent). Unsurprisingly, the distribution of available energy resources is, however, highly unequal, with only three countries, namely Denmark (2010-2012 average surplus of 1.7 mtoe), Norway (2010-2012 average surplus of 169.6 mtoe) and Russia (2010-2012 average surplus of 602.5 mtoe), showing a positive balance between energy consumption and production. If one compares this (positive or negative) balance with gross energy consumption of individual countries, the seriousness of this situation becomes clearer: with the exception of the three net exporters, the countries of this region do not produce indigenous energy in numbers sufficient to supply the national economies (Figure 4). The energy supply gap of those countries6 with insufficient access to indigenous energy sources amounts to a (2010-2012) average of -273.7 mtoe.

With an index of -0.613 Germany is to be found amongst those countries that in the region with the smallest basis of indigenous energy. As a result of its internal energy situation and the size of the German economy, the country thus is confronted with a massive (2010-2012 average) energy gap of (-)198.1 mtoe, that is 72.38 per cent of the region’s combined energy supply gaps. 95.3 mtoe, or 48 per cent, of the necessary imports to Germany come from the littoral states of the Baltic Sea region.7 The Baltic Sea region can thus be described as the backbone of Germany’s energy supply, and should be of strategic interest for the country. Given that Germany also accounts for some 24 per cent of gross energy consumption in the Baltic Sea region (including entire Russia), any changes in the German system of energy production, imports and consumption can be expected to affect energy flows in the entire region (Figure 5).

Energy imports from the Russian Federation and Norway play a particular role in this regard, as they account for nearly the totality of imports from the Baltic Sea region to Germany, and hence fill almost half of the country’s energy gap. Including Norway and Russia in the analysis is, however, based on a very broad understanding of the Baltic Sea in terms of geography, as both countries stretch far beyond the geographical limits of that area. This analysis therefore requires a closer definition of the ‘Baltic Sea region’. In this regard, it is important to understand that Germany’s national energy system is located at the crossing point of several major Euro-Eurasian energy regions (Högselis, Aberg & Kaijser 2013, 56). German gas and oil imports from Norway, for example, come from fields in the North Sea, and cross that sea through different pipelines (via Europipe I, Europipe II, and Norpipe); from its entry points to the national German system – located at the shores of the North Sea – Norwegian gas then predominantly supplies areas in North-Western Germany (such as the Ruhr), which, in a more narrow sense, cannot be described as being part of the Baltic Sea region.

In the strict geographical sense, Norwegian gas (2010-2012 average of 25,003 mtoe) and oil (8.5 mtoe) supply to Germany can hence mainly be attributed to the North Sea Europe region (Högselis, Aberg & Kaijser 2013, 56); they are thus to be excluded from the following analysis. With energy from Russia, things are more complicated, as parts of the transit system are part of the Baltic energy system (Nord Stream, Yamal/Europol), whereas others (e.g. Brotherhood) pass through different regions. However, yearly transport capacities of individual pipelines9, and actual gas flows in these pipelines10 allow to infer an estimated 50 per cent of Russia’s gas and oil supply towards Germany passing through countries in the Baltic Sea region. The following analysis thus includes only those 50 per cent of German oil and gas imports from Russia that can be assumed to pass through the Baltic Sea region.

As a result of this, the overall picture of energy flows in the Baltic Sea region changes considerably, and leaves a clearer perspective on the interplay of Germany’s Energiewende with the flux of various forms of energy in the area (Figure 6). Accounting for approximately 79 per cent of energy exports, the predominance of Russia amongst the energy exporting countries remains largely unchallenged in this closer definition of the Baltic Sea region, whereas Norway’s role as energy exporter becomes far less important. Germany’s energy imports from the region reduces largely, to approximately 57.6 mtoe, that is a comparably small 36 per cent share. In other words, the importance of the Baltic Sea region for Germany’s energy sector diminishes if the analysis is based on a strictly geographical understanding of the geographic area.

Moreover, the perspective on different energy carriers as a commodity in the Baltic Sea region changes with an exclusion of Norwegian and Russian sources: while gas is most prominent in the German (Energiewende-related) press on the Baltic Sea region, its actual share amongst those energy carriers which are traded and shipped in the region, is small compared to other energy carriers, such as oil and the different forms of coal (see Figure 6). Compared to the flows of oil, gas is only the second most important energy in the energy system of the region, and depending on the share of coal among solid fuels13 it is likely that gas even ranks third. An analysis of the impact ofGermany’s Energiewende on energy flows in the region has to take this limited role of gas into account. Moreover, the place of electricity imports and exports in the region amongst other forms of energy flows has to be noted, as its relatively small share indicates that electricity generation still has a very strong national basis.

The impact of Germany’s energy transition on energy flows in the Baltic Sea region

Its scarcity of indigenous energy resources makes Germany irrelevant as an energy exporter.15

Regardless of major modifications of Germany’s energy system, such as the Energiewende, this is unlikely to change. As an importer Germany plays, however, an important role in different energy markets. With a yearly average of 57.6 mtoe (2010-2012) of energy imports, 25 per cent of Germany’s total imports of 176.4 mtoe (2010-2012 average) come from or pass through the Baltic Sea region.16 To put it differently, 36 per cent of the Baltic Sea region’s total energy flows enter Germany’s energy system. The Energiewende will affect this pattern (until 2020 and beyond), yet the question is, how and to what extent. Since Germany’s exports is unlikely to change significantly17, the reminder of this section focuses on energy imports.

Based on an energy scenario from 2010 (Prognos, EWI, GWS 2010)18 , it can be assumed that Germany’s energy imports from the Baltic Sea region will decrease by 27 per cent to 41.8 mtoe until the year 2020 (Figure 7). In today’s numbers, this implies that Germany remains the largest destination for energy flows within the region, but the country’s share of imports would reduce from 36 to 26 per cent. As a consequence, the region’s combined energy deficit of (-)273.7 mtoe (see Annex, Table 2) would be reduced by about 15 per cent. In other words, energy demand would decrease. Yet in order to infer from Germany’s national energy policy on future energy flows in the entire region, several factors need to be taken into account, namely economic growth, national policies of neighbouring countries, and energy prices.

Sound and continuing economic growth of Germany’s eastern neighbours, makes it, for example, possible that by 2020 Poland will be the region’s main importer of energy from the Baltic Sea region.19 In view of relatively large share of oil, development of road traffic and transport could be a decisive factor in this regard, both in Germany and other countries. National policies are very different in terms of their approach to road traffic: while Germany implemented programmes to promote the use of electric cars and increase their number from only 12,156 at the beginning of 2014 (Car Sales Statistics, 2014) to one million by 2020 (Bundesregierung), other countries did not. Depending on the success of Germany’s policy to convince consumers of the benefits of electric cars, oil demand will develop accordingly.

Other national policies, such as supply diversification programmes in Poland and the Baltic States – that is increased use of LNG from overseas and of indigenous shale gas, as well as the continued use of nuclear power (in Sweden and Finland) and/or the successful construction of new nuclear plants and the necessary grid infrastructure (in Poland and the Baltic States) – might generally reduce demand for gas in the region (largely gas from Russia). Whether Germany will actually retain its roleas the region’s main importer thus depends on the development of German demand for natural gas, bituminous coal, and solid fuels. Their place in Germany’s energy system is, however, very much unclear. The reason behind this uncertainty is to be found at the very core of Germany’s

Energiewende project – namely the phase-out of plants suitable for meeting base load requirements and increasing number of intermittent renewables.

Both technically and economically this combination of decreasing numbers of base-load generators and increasing numbers of peaking units such as solar and wind power is a complex issue, and – despite many scenarios and plans – there is no blueprint for a system where decentralised and intermittent renewables largely replace centralised base load plants. Flexible gas and biomass power plants are seen as the ideal technological link between the two elements; yet as the case of Europe’s most recent gas power plant in Irsching (FAZ, 2015)20, illustrates, investments in state-of-the-art equipment and turbines becomes unprofitable under the economic conditions of the Energiewende: as renewables have priority access to the grid, they are growing in numbers and come with low prices at peak hours, therefore, market for gas and other fossil fuels is shrinking. Moreover, gas faces a double challenge, as coal still outcompetes gas due to lower prices.

The development of Germany’s gas imports hence largely depends on the question whether policy makers agree on a capacity market that provides an economic framework suitable to keep gas plants in the system. Such a step is currently under discussion (BMWi, 2014b). Outcomes of this discussion and their implementation will certainly affect Germany’s demand for coal and gas imports. Notwithstanding the results of this political process, the demand for biomass is likely to increase in Germany over the following years, because this form of energy – either used in decentralised plants or in form of co-combustion in existing fossil fuel plants.21 The share of biomass amongst energy imports is thus to until 2020. Depending on the availability of biomass and the outcomes of Germany debates on capacity markets, this energy source is hence – to a larger or smaller extent – to replace either coal or gas in Germany’s energy imports from the Baltic Sea region.

Conclusions

Against the backdrop of energy imports and exports patterns in Northeast Europe, this article analyses the place of the Baltic Sea region in Germany’s public discussions about the country’s energy future; natural gas imports from Norway and Russia largely dominate this public discourse. The construction of the Nord Stream pipeline is likely to be one of the reason for this highly topical nature of gas in German public discourse; it can hence be assumed that the perception of the Baltic Sea region by the German public is largely distorted. This article therefore attempts to broaden the discussion by expanding the focus of the analysis to include other forms of energy such as coal and electricity. On the other hand, this article attempts to focus on the energy system of the Baltic Sea region in the narrower sense. As Norwegian oil and gas exports to Germany come from and through the North Sea, they are hence excluded from this analysis. And as about half of Russia’s oil and gas exports to Germany pass through Central Europe, they are equally excluded.

The result of this analysis is, that the importance of the Baltic Sea region for the future of Germany’s energy supply is not fully grasped by German public. Individual countries, such as Poland and Russia

obtain varying degrees of attention, and so do the various forms of energy. But all in all the narrow focus on gas largely hides the role of other forms of energy coming to Germany from or through the Baltic Sea region, and thus the true role of the area for Germany’s future energy system. Taking the bigger picture of energy flows in the Baltic Sea region into account, the role of gas imports from Russia appears overestimated in German discussions concerning the role of the Baltic Sea region for Germany’s energy supply: even though Russia is the region’s main supplier of energy, natural gas is not the most important energy carrier. The focus of German media on this topic hence seems to obstruct the view on other important energy carriers, such as coal and – most importantly – oil, which are at least equally important.

As a response to the growing role of renewables, Germany currently discusses a new market design for fossil fuel power stations. Capacity markets for coal and gas-fired plants will be the likely result of these debates, as backup for the notoriously volatile renewables is needed. As Germany is the region’s largest importer of gas and coal, the design of these markets will largely determine the impact of Germany’s Energiewende on regional flows. The way Germany’s Energiewende will affect patterns of energy exports and imports in the region depends, however, on more factors. The future of the German transport sector will at least be equally important, as oil represents the largest share in energy flows in the region. Widespread use of electric cars could serve as a storage battery for intermittent wind and solar power; in 2014 the German government therefore renewed its support with a broad range of incentives for the use of electric cars.

It remains, however, to be seen whether the customers of the German car industry see electric cars as an attractive option. If they do, Germany’s role as an importer of energy from the Baltic Sea region could diminish largely. In this case, Germany’s place in the energy system of the Baltic Sea region will be determined by the results of current discussions about a capacity market for flexible fossil power stations. Depending on the exact outcomes of these debates, German energy imports could decrease according to official scenarios. In such a case, Germany might lose its role as the region’s main importer of energy. For those countries in the region which have only limited access to indigenous energy resources and hence can only play a minor role in supplying Germany’s energy system, such a development is not necessarily a bad one, as their bargaining position on the regional energy market would improve, especially if they successfully implement programmes to further diversify their energy supply.

References

Auer J. and Anatolitis V. (2014) The changing energy mix in Germany. The drivers are the Energiewende and international trends. Deutsche Bank Research. Current Issues, June 26, 2014.

BMWi (2014a) Zweiter Monitoring-Bericht „Energie der Zukunft“. Berlin: Bundesministerium für Wirtschaft und Energie BMWi.

BMWi (2014b) An Electricity Market for Germany’s Energy Transition. Discussion Paper oft he Federal Ministry for Economic Affairs and Energy (Green Paper). Berlin: Bundesministerium für Wirtschaft und Energie BMWi. Bundesregierung (n.d.) Leitmarkt und Leitanbieter für Elektromobilität. Retrieved from http://www.bundesregierung.de/Webs/Breg/DE/Themen/Energiewende/Mobilitaet/podcast/_node.html, date accessed: April 9, 2014.

Car Sales Statistics (2014) 2014 Germany: Total Number of Electric Cars, March 29, 2014. Retrieved from http://www.best-selling-cars.com/germany/2014-germany-total-number-electric-cars/, date accessed: April 9, 2014.

CIEP (n.d.) Russian Gas Imports to Europe and Security of Supply. Fact Sheet. The Hague: Clingendael International Energy Programme.

FAZ (2015) Energiewende. Irrsinn in Herrsching. Frankfurter Allgemeine Zeitung, March 17, 2015.

Gazprom Export (2015) Transportation. Retrieved from http://www.gazpromexport.ru/en/projects/transportation/, date accessed: February 11, 2015.

Högselis P., Aberg A. and Kaijser A. (2013) Natural Gas in Cold War Europe: The Making of a Critical Infrastructure. In

The Making of Europe’s Critical Infrastructure. Common Connections and Shared Vulnerabilities, edited by Per Högselius, Anique Hommels, Arne Kaijser, Erik van der Vleuten, 2761-101. Basingstoke: Palgrave Macmillan.

OECD and IEA (2004) Energy Statistics Manual. Paris: Organisation for Economic Co-operation and development, International Energy Agency.

Prognos, EWI and GWS (2010) Energieszenarien für ein Energiekonzept der Bundesregierung. Studie für das Bundesministerium für Wirtschaft und Technologie. Basel, Köln, Osnabrück: Prognos AG, Energiewirtschaftliches Institut an der Universität zu Köln, Gesellschaft für Wirtschaftliche Strukturforschung mbH.

Sattich T. (2014) Germany’s Energy Transition and the European Electricity Market. Journal of Energy and Power Engineering, 8(2): 264-273.

Annex

Table 1. Yearly energy production and consumption in the Baltic Sea region (2010-2012 average, in ktoe)

Country Average consumption Average production Balance
DE 322773.17 124684.17 -198089
DK 18875.73 20578.53 1702.8
EE 6149.33 5019.9 -1129.43
FI 35892.37 17173.87 -18718.5
LI 6963.77 1306.27 -5657.5
LV 4514.33 2129.7 -2384.63
NO 30346.63 199960.77 169614.13
PL 99841.07 68491.9 -31349.17
RU 772254 1374802.8 602548.8
SE 50100.53 33757.9 -16342.63

 

 

Table 2. Yearly energy deficit/surplus in the Baltic Sea region (2010-2012 average, in ktoe)

Country In per cent of national consumption In per cent of regional deficit In per cent of regional surplus
(-273670.87 ktoe) (773865.73 ktoe)
DE -61.37 -72.38
DK +9.02 0.2
EE -18.37 -0.41
FI -52.15 -6.84
LI -81.24 -2.07
LV -52.82 -0.87
NO +558.92 21.9
PL -31.4 -11.45
RU +78.02 77.9
SE -32.62 -5.97
]]> http://en.abfund.org/?feed=rss2&p=1105 0 The global gas market: An international perspective http://en.abfund.org/?p=1099 http://en.abfund.org/?p=1099#comments Sat, 19 Sep 2015 14:27:17 +0000 http://en.abfund.org/?p=1099
Mr. Pål Rasmussen is the Secretary General of the International Gas Union (IGU) and has 25 years of experience form the gas industry. Rasmussen holds a master degree in economics and management. Executive summary Natural gas has become fundamental part of the global energy mix. The increasing reserve base and well developed technical and commercial infrastructure place natural gas in an excellent position to be part of the long-term solution in meeting the global energy challenges. Benefits of using natural gas range from improved air quality in towns and cities, improved working conditions, a cleaner and more efficient local economy, more competitive energy supplies with better security and the prospect of prosperity for all. From an international perspective, we see the global gas ‘revolution’ as an ongoing dynamic and evolutionary process in which natural gas technology, investment and trade continue to develop and spread throughout the world. In this article, we will review some of the step changes in economics and politics that have created challenges or stimulated the global gas market since the start of this millennium, and discuss the implications for key regional energy markets, such as the Baltic Sea region. We should also remind ourselves of the ‘gas chain’ that has been the fundamental basis for long-term natural gas investment and expansion. We are now entering a new era, in which shorter-term and smaller scale investment is equally important, and this has fundamental implications for new markets and new uses of gas in all its forms. IGU has no doubt that minimising pollution and mitigating climate change must be central features of sustainable energy policy, both locally and globally. But policy makers must not forget the important role that natural gas already plays in helping us achieve a low-carbon future. Not only is natural gas the perfect partner for intermittent renewable energy sources, switching to natural gas now, instead of using more polluting fuels, is often the most efficient and timely solution. Finally, we will look briefly at how companies are adapting to the continuously changing international energy business. There are exciting developments taking place in the Baltic Sea region. Although the gas market here is small-scale by global standards, the Baltic Sea region is at the cutting edge of technology and is developing a gas industry with potentially wide impact.

Events that have influenced recent gas market development Fifteen years ago, at the be- ginning of the millennium, the world had experienced a decade of economic growth built in part on increased international trade and supported by greater free- dom in global capital markets.
The current drive for a low-car- bon energy solution had its roots in this period too, with the 1992 UN Framework Convention on Climate Change, which commit- ted National signatories to reduce their emissions of Greenhouse Gases. This led to the adoption of the Kyoto Protocol in December 1997, which entered into force in February 2005. This was also the decade of new developments in information technology and web- based communication that were to survive the ‘.com bubble’1 and become the mainstay of many ac- tivities in the world today. During the 1990’s, the gas in- dustry continued to invest for the longer-term, and as we entered the 2000’s gas market growth, which had averaged 2.1% rate over the previous ten years, was set to increase to an average of 2.8%. People active in the gas industry could see the benefits of natural gas and there were optimistic fore- casts about even stronger growth of global and regional gas markets.
An important political event in the Baltic region took place in June 2004, when Estonia, Latvia, Lithua- nia, and Poland joined the European Union along with the Czech Repub- lic, Cyprus, Hungary, Malta, Slo- vakia and Slovenia. This profound enlargement of the European Union has brought further challenges and opportunities for the integration of the ‘Internal Energy Market’, not least for investment in natural gas infrastructure and diversity of im- ported gas supplies for Europe. But, let’s fast-forward a few years to 2007, when a financial crisis was starting to cause some of the world’s largest banks to fall into administration. At the same time commodity prices, including energy, were rising: the follow- ing year, oil peaked at over $140/ barrel (bbl) during the summer. Despite this, as seen in Figure 1, 2008 was the year that global gas demand reached 3000 bcm for the first time. But then, the effects of the global economic downturn started to bite and demand in sev- eral markets collapsed with severe
effects on manufacturing industry and on energy demand, notably in some developed economies. Furthermore, 2009 began in Europe with a disruption of Rus- sian gas supplies through Ukraine. Although this was resolved more quickly than the similar contrac- tual dispute in 2006, the disrup- tion led to concerns about supply security and a renewed interest in geopolitics and the need for energy diversity. Globally, the economic squeeze reduced energy demand even with oil prices tumbling to be- low $40/bbl and natural gas prices falling too. For the first time in re- cent history, annual global gas de- mand decreased significantly (by 2.3% in 2009 compared with 2008). The long-term outlook for the gas industry seemed very chal- lenging, particularly in Europe. Overall, however, the IGU 2030 Gas Industry Study, presented at the World Gas Conference in Bue- nos Aires, looked forward to natu- ral gas increasing its market share from 22% to 25% of global energy consumption, and an even higher percentage if Governments would properly recognise the environ- mental benefits of natural gas. The new decade started opti- mistically, but April 2010 was to be a month of disruption and disasters; Volcanic ash from the eruption of Eyjafjallajökull in Iceland led to the closure of airspace over most of Eu- rope and a few days later the Deep-water Horizon drilling rig explosion killed 11 people, caused the rig to sink and oil discharge in the Gulf of Mexico. The year overall saw a re- surgence of natural gas across the world, while in the US natural gas prices stayed low and production increased to over 600 bcm, support- ed by the increasingly successful exploitation of shale gas onshore.
On 11 March 2011, a 9.0 magnitude earthquake caused a tsunami wave, which severely damaged the Fukushima Daiichi nuclear power plant. There were almost immediate political reac- tions across the world, including a decision by Germany to perma- nently close all its nuclear capac- ity by 2022. Separately, on a socio- political front, popular uprisings and demonstrations spread across much of North Africa and the Mid- dle East in a phenomenon that be- came known as ‘the Arab Spring’. 2011 was the year that the Inter- national Energy Agency (IEA) asked the question “Are we enter- ing the golden age of gas?”. Cer- tainly this seemed to be the case for the global LNG market, which expanded by 10%. The shale gas ‘revolution’ was progressing rap- idly in the USA. With self- suf- ficiency of natural gas in North America established, instead of importing LNG the industry was now signing the first export deals for future US LNG exports broadly priced at ‘Henry Hub plus’.
By May 2012, Japan itself had shut down all its nuclear reactors, but thanks to LNG imports it was able to use natural gas to make up much of the 30% loss of power generation capability. Globally however, international gas trade changed little year-on-year and surprisingly LNG trade actually decreased. Whilst the global gas market had become better connected than ever before the high spot price for LNG and fierce com- petition with coal for power gen- eration was having a dramatic ef- fect. 2013 saw a return to modest gas demand growth of 1.4% in the global energy market. During 2014, probably the most significant event was the de- cline in oil prices from well over $100/bbl to a range of $50-60/bbl by the end of the year. This has profound implications for the nat- ural gas industry and we will look at natural gas price movements late in this article. At the time of writing, authoritative global de- mand data for 2014 is not yet published, but indications are that the gas market has continued to expand, despite a further squeeze in Europe caused by slow economic growth, highly-subsidised renew- able energy and warmer than av- erage temperatures that reduced demand for space heating. Natural gas consumption in the European Union actually decreased by 11% to 409 bcm in 2014, and the industry is seriously considering strategic adjustments for the future.
Throughout all this, the natu- ral gas industry has developed and adapted to change. As the gas busi- ness has grown globally the interac- tions across the world have become increasingly significant, in particu- lar with many more countries in- volved in LNG trade. International relationships and trade in natural gas will be even more important in the future. This is particularly the case in Europe, where the decline in indigenous gas production seems inevitable. Reshaping the gas mar- ket in Europe to be ready for future challenges may well need to take a new course. There will still be ‘mega projects’ in other parts of the world, and there may well still be signifi- cant natural gas resources to be found and developed in some locations in Europe, but we are already seeing a new approach to the gas value chain developing. So that we can explore this phenomenon, I would like to de- scribe briefly the traditional gas business, including some basic technical information, so that we can understand better the invest- ments throughout the gas business and how they have been linked into a value chain. This structure is now starting to behave like a global network, with new delivery routes, new market sectors and new market participants doing business in new ways.
The natural gas value chain Natural gas is a mixture of hydrocarbons, of which by far the largest component is the simplest hydrocarbon, methane (CH4). Methane is an odourless, colour- less, non-toxic gas which is lighter than air. Synthetic natural gas and bio-gas are examples of increas- ingly important components that are being integrated into natural gas systems, but conventional and unconventional natural gas pro- duction, still provides more than 99% of global gas supplies. The gas business throughout the world has involved long-term invest- ment ‘from drill bit to burner tip’ to bring natural gas to final cus- tomers. The IGU diagram (Figure 2) illustrates, in a simplified form, the main components of the tradi- tional gas value chain. Exploration, production and processing Most of the natural gas that has been discovered so far was al- most certainly formed by similar biogenic processes to those that created oil reserves. Over millions of years the residues of decom- posed organic material under in- tense pressures and temperatures, have become hydrocarbon miner- als, including natural gas. These hydrocarbon minerals can be found both in the original source rock where they were formed (including shale formations) and also in more porous reservoir rocks that are the conventional oil and gas fields.
Natural gas also includes some heavier hydrocarbons, such as ethane (C2H6), propane (C3H8), butane (C4H10), and there can be a wide range of different non-hy- drocarbon gases that also occur in the mixture in the reservoir rocks. Indeed, gas production has often been a by-product of oil produc- tion and is then termed ‘associated gas’. Three different types of natu- ral gas production can broadly be categorise by the type of reservoir.

  • ‘Dry gas fields’ requiring very little processing of the reservoir fluids needed to achieve
  • pipeline quality gas;
  • ‘Condensate gas fields’ in which the heavier natural gas hydrocarbons can be separated as
  • natural gas liquids (NGLs); and
  • Oil fields with ‘associated gas’, sometimes with a natural gas
cap that can be produced sepa- rately or temporarily re-injected to enhance oil production. Development plans and in- vestment decisions depend on the expected relative revenue streams from the gas and liquid hydrocar- bons, but even for dry gas fields the reservoirs themselves can vary in fundamental characteristics like the permeability of the reservoir rock. Extremely tight formations (for example shale gas reservoirs) require stimulation to enable the natural gas to be produced. Natural gas is abundant, but the reservoirs that are simple in struc- ture and closest to markets tend to be developed first. This means that investors may face a choice between developing remote conventional gas reserves or more difficult unconven- tional gas that is closer to the market and requires use of new technology. In practice both types of investment has occurred; as new technology is developed and proven the tech- niques can be applied more widely and the global economic reserve base increases.
Natural gas occurs in other forms, most notably as methane hydrate crystals. This is potentially a vast future source of natural gas, but for which at present production technology has not yet found an economically viable solution. Once produced the natural gas is likely to need some processing. If it is dry gas with very few impurities then it might be sufficient to check the gas quality and make sure that it is adjusted to the correct pressure and temperature for the next stage of its journey. More likely, however, is that it will also be necessary to treat the ‘wet’ gas that has come from the upstream reservoir to deal with one or more components that need to be removed to satisfy the gas quality requirements for on- ward transportation. International and national high pressure pipelines The locations of natural gas reserves are more diverse than for oil, but even so a large proportion of natural gas needs to be transported from the producing countries and regions with more gas than is need- ed internally like Norway, Russia, Qatar, the Caspian area and North Africa to the consuming countries and regions with demand that can- not be satisfied by indigenous gas
supplies, such as Japan, China and the European Union. International high pressure pipelines provide direct links from producers to consumers. Good relationships with any transit country (through which the pipe- line passes) are essential to main- tain high reliability of gas supply. Technically, these high pressure pipelines are immense feats of en- gineering that continue to be the main way by which vast interna- tional flows of gas are transported. Because the pipeline usually locks the gas producer into a particu- lar route to a certain market, the commercial and political condi- tions both in the transit countries and in the downstream market are crucial. This leads investors to fa- vour projects that are backed by long-term contracts in which one party has a strong market position midstream or downstream. Globally, however, there is, in total, far greater investment in gas transmission pipelines tak- ing place within individual coun- tries, for example in the USA and in China. The shale gas revolution in North America changed indig- enous supply patterns and led to many new onshore pipeline pro- jects to enable higher levels of gas production to be brought to mar- ket. In the USA, however, several of the main shale gas formations are relatively well positioned, ei- ther with good proximity to the final market or in economic reach of existing infrastructure. In con- trast, the geographical challenge to deliver indigenous natural gas to the main consuming areas has been far more demanding in Chi- na. The final length of the second West-East Pipeline linking gas production in the west to con- suming areas in the east was over 8,700 kilometres, including both east and west sections and eight branches, making it probably the world’s longest natural gas pipe- line. Construction of a third West- East Pipeline, to bring additional supplies from Turkmenistan as demand for natural gas in China continues to grow, is scheduled for completion before the end of 2015.
Liquefaction, LNG shipping and regasification Gas liquefaction, so that nat- ural gas can be more easily trans- ported by ship (or occasionally by road tanker) to the market where it is then regasified, has become almost as important as pipelines as a means of international deliv- ery of natural gas. Liquefaction involves pre-treatment to remove oil condensates, purify the natural gas from pollutants like sulphur or carbon dioxide, remove any traces of heavy metals and control the moisture level. Then the processed natural gas is refrigerated to reach a temperature down to approxi- mately minus 161 degrees Celsius.
This refrigeration process involves compression, condensation and expansion of refrigerants that ex- change heat with the natural gas until it becomes a liquefied natural gas (LNG) occupying 1/600th of the volume. A large enough LNG fleet of ships (or road tankers) is essential to prevent bottlenecks developing in the supply chain. Since January 1959 when the Methane Pioneer set off for Europe with its modest cargo of liquefied natural gas from the Louisiana Gulf coast of the USA, international LNG trade has developed a global fleet that now amounts to over 380 active ships, the largest carrying up to 266,000 m3 of LNG. Annual worldwide de- liveries are equivalent to well over 300 bcm of natural gas, about 10% of global consumption. Some countries have long been reliant on LNG, and like Japan and Korea have based successful downstream markets on a range of LNG supplies, but with the growth of international gas trade many more countries now have LNG re- ception terminals and there is a flourishing market in LNG deliver- ies and diversions to the markets with highest value. This flexibil- ity is of course only possible when there are sufficient ships available (a diversion may well result in a longer route) and sufficient capac- ity in the regasification terminals to where a ship might be diverted.
The capacity in the regasification terminal comprises not only the delivery slot to enable the ship to be unloaded, but also short-term storage of the unloaded LNG and regasification (in which LNG is warmed up) before compressing the natural gas into a national or local transmission pipeline. LNG is set to be an exciting growth area, with bold and inno- vative solutions being applied both upstream and downstream. An example of upstream innovation is the Shell operated Prelude gas field development off the NW coast of Australia. Rather than pipe the produced gas to the shore, the pro- ject involves a very large liquefac- tion ship that will float above the gas field and load LNG into con- ventional LNG carriers for onward delivery to market. Downstream, there are many more innovations in the LNG market, as illustrated in Figure 3, which is taken from the IGU 2015 LNG Review. The ‘re-export’ market from receiving terminals is evolving to distribute LNG as a fuel to further downstream mar- kets. Thus supplying off-grid net- works with gas and fueling the heavy trucking business (e.g. in China, the USA and Europe) and bunker business for barges notably in Europe. In the not too distant future we might also see the deep sea shipping fleet becoming an im- portant market for LNG.
Storage The ability to liquefy natural gas means that it can be stored and made available at very high delivery rates, but the process of liquefaction and storing LNG is often expensive. In many parts of the world gas demand is very sea- sonal and the storage of very large volumes of gas that are needed (for example for residential space heat- ing in northern hemisphere win- ters) is best achieved underground in natural geological formations, particularly if such structures can be found near the local pipeline grid that serves the centres of gas demand. Most of these structures used to be oil or gas reservoirs, which benefit from unproduced ‘cushion’ gas as well as confidence that the natural integrity has been proven for containing reservoir fluids at high pressures. Occa- sionally the geological conditions are right for gas storage in highly permeable rock that benefits from a hermetically sealed cap, like the sandstone formation in Latvia that allowed the development of the 4.4 bcm (2.3 bcm working volume) Inčukalns Underground Gas Stor- age (UGS) Facility, one of the largest in Europe. In all forms of UGS an im- portant component of the storage facility is the ‘cushion’ gas that remains in the store so that a rea- sonable withdrawal rate can be achieved. The ‘working gas’ in the store is injected (compressed) into the UGS on top of the cushion gas and it is this working volume that is taken out for the heating season or for other commercial reasons during the storage cycle.
Another form of UGS, which offers potentially higher delivery rates albeit sustainable perhaps over a number of weeks rather than throughout the winter months, is salt cavities. Here, the storage cavities of the optimum shape and size are leached out from the un- derground salt formation. The ability of storage facilities to add flexibility to the gas net- work and to help balance the in- puts and off-takes of gas suppliers is extremely important. Increased
use of intermittent renewable en- ergy sources creates more stress on energy grids. The ability of fast- response gas storage to respond to within-day fluctuations is allowing new dynamic ways to use storage, particularly for portfolio optimisa- tion and improvements in overall efficiency in liberalised markets. In comparison with the dif- ficulties of storing electricity or stockpiling coal, natural gas pro- vides very efficient and highly ef- fective ways of storing potentially vast amounts of energy with mini- mal impact on the environment and with the ability for rapid re- sponse through already connected networks. In aggregate this may also provide sufficient flexibility for national or regional ‘strategic’ purposes.
Local transmission and distribution The energy carried though a typical gas transmission pipe is far more than can be transmitted through the biggest high voltage electricity cables. Gas in the trans- mission system is at high pressure (typically 50-80 bar) and, depend- ing on the final use, may pass through a series of pressure reduc- tions, metering and quality checks leading to low pressure distribu- tion pipeline systems with their own pressure and flow controls and final metering at the supply point of the end consumer. Technology is enabling gas operations and gas markets to develop in ways that should lead to further efficiency improvements in grid operation and utilisation. Smart grid tech- nology as well as Smart metering still have a long way to go but have already demonstrated significant fuel savings through grid optimi- sation at Transmission level. The regulatory focus in com- petitive supply markets tends to be on the pipeline systems, with regional groupings of energy regu- lators aiming to enable third party access (TPA). In Europe, of course, we have ACER, the Agency for the Cooperation of Energy Regulators, which is instrumental in encour- aging a consistent approach to all
the gas transmission grids in the EU. Other regional regulatory ini- tiatives aim to foster competition and introduce incentives particu- larly for the interconnection or expansion of gas infrastructure in less developed markets. Whilst transmission and dis- tribution pipelines can become relatively safe cash-generating as- sets in a mature market, the ini- tial investment typically requires large capital input for a low-mar- gin business that is not provid- ing an economic return until the market has grown, and may take decades to reach payback. Initial downstream investment is often at least partially in public ownership, with the distribution (pipeline) ac- tivity in the same company as the local monopoly gas retail business. Clarity about government policies for public and private ownership is essential to avoid problems for po- tential investors. The regulatory regime must also be clear, so that the access conditions are under- stood and the tariff structure does not distort the market. LNG provides an alternative approach to the local distribu- tion of natural gas, by LNG road tanker (sometimes referred to as a virtual pipeline). As the markets expand for natural gas as a land vehicle fuel, either as LNG or CNG (Compressed Natural Gas), as well as fuel for ships, the use of these ‘virtual pipeline’ routes could add greater flexibility and security to the energy system as well as ena- bling locations to be serviced that might otherwise be sub-economic.
Utilisation The economic availability of natural gas combined with its quali- ties of efficiency, quality, reliability, convenience and responsiveness to the consumers’ needs make it an ideal choice for a wide range of uses in many part of the world. High efficiency gas boilers are the mainstream residential gas appliance in many countries. Commercial customers also pre- fer natural gas for space heating, either directly or as the fuel for a Combined Heat and Power system. Gas is also an ideal fuel for district heating systems and makes an excellent partner with intermit- tent renewable energy sources like wind and solar power. Industrial gas demand requires a more competitive offering in rela- tion to other fuels, but the proven high efficiency appliances that al- ready exist for natural gas could be a springboard for further growth in the manufacturing sector. Natural gas is also a useful feedstock for the petrochemical industry, and there are indica- tions that this use is developing in some producing nations as an alternative to exporting LNG or constructing a new international pipeline.
Whilst at a relatively low level, the use of natural gas as a trans- port fuel is possibly the most rapid- ly growing sector across the world. There are encouraging signs both onshore, with compressed natural gas fuelling millions more cars, trucks, busses and lorries, and off- shore with LNG-fuelled ships be- ing favoured over more polluting rivals in environmentally sensitive areas like here in the Baltic Sea re- gion. The Gas Target Model for Eu- rope, published by the Agency for Cooperation of Energy Regulators in January 2015, includes projec- tions of new uses of gas in the EU across four main areas, which are closely linked either with renew- able energy or LNG: • Natural Gas Vehicles (NGVs) using CNG or LNG; • Water transportation; • Power to Gas (P2G) technologies, using surplus renewable energy; and • Virtual Pipelines (Truck loading of LNG). With the right political support and economic stimulus, Fig- ure 5 shows that the contribution from these sectors could be very significant on a European scale within just five years. Globally, however, the use of natural gas for high efficiency, low-emission power generation re- mains the largest and most impor- tant growth sector, but the pros- pects vary across different regions of the world. How much and how rapidly the global gas market will grow is dependent on fundamen- tal economics, which in turn are influenced by political attitudes to energy and to climate change.
Wholesale gas prices and how they are formed? Natural gas prices, and how they are formed, influence the economic viability of investment and market development. One as- pect of the IGU Committee work over the last ten years has been to monitor wholesale gas price trends. There are several aspects to this work, which are described in detail in the 2015 Report by the IGU Strategy Committee. Whilst the global energy markets are better connected than ever before, the average wholesale natural gas prices at the beginning of this year at Henry Hub in the USA were under $3/million British thermal units (mmBtu), Europe was around $7-8/mmBtu and Japa- nese LNG over $15/mmBtu.
Figure 6 shows how natural gas prices rose in these three mar- kets during 2007 and 2008, and then collapsed following the oil price fall in summer 2008. Whole- sale gas prices are formed in dif- ferent ways throughout the world. Where price formation is based on traded gas markets, as in the USA and the United Kingdom, an adjustment to the perception of available supply and demand for natural gas is quickly reflected in the wholesale price. Price forma- tion that contractually links the natural gas price to an index of a competing fuel (e.g. crude oil as in many Japanese LNG purchase con- tracts, or oil products as in many Russian international sales con- tracts) both delay and dampen the changes. By the summer of 2009 natural gas wholesale prices across the world had ‘bottomed- out’, but with the oil-indexed prices re- maining significantly higher than the traded gas market prices.
Then, in 2010 divergence into three clear pricing areas occurred, with the US shale gas surplus keeping Henry Hub prices low and, with no physical ability to export the surplus gas (instead the USA exported some displaced indig- enous coal) while the gas prices in Europe and Asia were pulled up
by the higher oil price and the in- creased gas demand. IGU has carried out several sur- veys to determine how the methods of gas price formation have changed over the last decade. During this time there has been a slow move- ment away from ‘oil’- indexation and an increase in gas market based pricing where this is technically pos- sible. Regulatory and government determinations of wholesale gas prices still remain important, par- ticularly in less developed markets, but the types of regulatory controls are themselves changing to more cost- reflective methods. The trend towards wholesale natural gas prices being based on the prices in traded gas markets has been driven by the expansion of gas-on-gas competitive markets in which consumers have been able to seek suppliers with the lowest price offerings. At the same time, the contractual linkage of the nat- ural gas price to relatively high- priced oil products has placed the agreements with traditional large gas supplying countries like Russia under considerable pressure. With the fall in oil prices the differen- tial between oil-indexed and gas hub traded prices is now changing. But already in Europe2 overall, as shown in Figure 8 there has been sufficient confidence in the traded gas markets to link more than 60% of the physical wholesale gas sales to the prices at gas hubs in com- petitive markets.
A partnership with renewable energy There is a growing realisa- tion that natural gas can be a per- fect partner for renewable energy. There are, however, difficult chal- lenges in making investment deci-
sions in capital intensive projects when the plant is not expected to operate most of the time. Some bespoke projects already successfully combine gas and re- newable energy because of the lo- cal circumstances, but in general an energy market design is needed to ensure that there can be widespread and large-scale implementation. The way natural gas is priced can also influence whether the best environmental choice are made, and this can work both ways. Where the wholesale natural gas price is too high then efficient low emission gas-fired CCGTs can- not compete with cheap coal-fired plant, whereas if the gas price were unusually low (as occurs in parts of the Middle East, for example) then worthwhile renewable energy pro- jects face undue economic barriers. Governments or their agen- cies have an important role to help the market achieve the best eco- nomic solutions for sustainable and secure development of the energy system. Among the things that IGU has recommended are:
  • to encourage investment in re-search and technology to deliv-er their political objectives;
  • to avoid picking winners and losers, but rather to incentivise those industries that deliver re- sults (e.g. better to have a ‘cost for carbon’ than ongoing sub- sidy of a particular source ofenerg y);
  • to ensure that there are no un-due subsidies or taxes that dis-tort the market; and
  • to see first if the removal ofexisting incentives or obliga- tions would be a more efficient solution than adding a new in- centive or obligation on energy companies.There are already signs that, with such good practice, the world might be turning a corner and get- ting CO2 emissions on a downward trend. In March 2015, the IEA an-
nounced that global anthropogenic CO2 emissions had stabilised in 2014 while world GDP increased (by 3%). This was the first time in 40 years that the global economy grew without increasing emissions, and was attributed to changes in ener- gy consumption patterns in China and OECD countries. Increased use of solar and wind energy no doubt contributed to this success, but the continuing shale gas revolution in North America combined with the expansion of the Chinese natural gas market were probably decisive factors that have enabled CO2 re- ductions from the world’s two dom- inant energy consumers. Adapting gas business models to the changing energy world Investor groups associate companies with a particular part of the natural gas value chain be- cause the risks, required skill sets, and critical success factors vary considerably. Often there are dif- ferent laws and fiscal systems gov- erning the upstream, midstream and downstream components. To manage the commercial risks, however, companies have often sought to integrate along the value chain, particularly if there are is no developed trading hub availa- ble to enable them to manage price and volume risks.
Throughout the gas chain the investor assesses and manages the risks in the hope of achiev- ing a return on their investment. Commercial risk relates primarily to the investment and operating costs and the volumes and prices of gas. Political and regulatory un- certainties can be the determin- ing factor as to whether or not the commercial risk is acceptable.
Whatever the prevailing ide- ology and legislative systems, suc- cessful natural gas development and continued industry growth needs to be based on co-operation and mutual commercial prosperity all along the value chain. Business models, however, continue to change. Physically, the gas industry still relies on large infrastructure to create the back- bone of the business, but increas- ingly there are many smaller pro- jects that, joined together, create an even stronger market. We can image this as a large single chain being slowly replaced by a woven mesh that is both more flexible and more resilient for the benefit of the final customers. Within this mesh there should be room for local en- ergy sources, whether synthetic natural gas, bio-methane or shale gas, as well as a diversity of tradi- tional and conventional deliveries of LNG and pipeline gas.
In conclusion: the Baltic Sea re- gional gas market in focus The gas market in the Baltic Sea region is quite diverse internally, but until re- cently it was characterised by a lack of connectivity with the rest of Europe and a lack of supply diversity in most countries. There have already been some investments made to address these issues, notably with the LNG reception terminal at Świnoujście in Poland and the Klaipėda floating LNG storage and regasification facil- ity in Lithuania. Since 2010 Finland has had an LNG production facility in operation at Porvoo in the South of the country. Plans for LNG terminals at the port of Turku and at Tornio in BSR Policy Briefing 1 / 2015 the North aim to bring LNG directly to Finland, making the gas and fuel markets more versatile and supplying LNG for vessels operating on the Baltic Sea. There are several other LNG im- port, storage or redistribution pro- jects under consideration, including a large-scale terminal at Inkoo near the landing point of a proposed Bal- tic Interconnector offshore pipeline linking the Estonian and Finnish gas markets. A further dimension would be a St Petersburg LNG facility. This idea was re-launched last year as a project in which the plant’s output would be supplied to the Kaliningrad area and also used for bunkering and
small LNG cargoes in the Baltic Sea region. Encouraged by the new SECA (Sulphur Emission Control Areas) rules, ferries are changing fuel to LNG. In Sweden (Gotenburg), fer- ries have already switched to LNG as bunker fuel, being much more environmentally friendly than the Marine Fuel Oil that was previously used In addition to the well-known Nord Stream offshore pipeline de- velopment, there have also been enhancements to the onshore pipe- line systems to allow reverse flow from Germany to Poland, and to in- crease the capacity to Denmark and Sweden. Plans for further intercon- nection seem limited because of un- certainty about future gas demand growth in the region. Transporting gas as LNG may well allow better economic options in such cases. In Poland, where natural gas is recognised as an environmentally advantageous replacement for coal- fired power generation and where indigenous shale gas production remains a real possibility, the na- tional demand for natural gas is ex- pected to rise significantly. In some countries in the Baltic Sea region however, the national energy plans suggest that natural gas consump- tion is expected to be displaced by renewable energy. Each country may well have a different optimum balance, but we can learn two les- sons from what is happening in the rest of Europe and indeed through-out the world. Firstly, gas markets that are better connected can sup- port each other at times of stress or disruption of the energy markets, and secondly the increase in the use of intermittent renewable energy sources requires a reliable low-car- bon partner such as natural gas. For a sustainable future it is important to retain, and better to grow, the share of gas in the energy mix.
Technology continues to de- velop and to provide solutions for the variety of energy challenges faced in the region. Here you are at the cutting edge, breaking new ground with the Klaipėda floating LNG terminal in Lithuania, exploit- ing bio-gas potential for vehicle transport in Sweden and creating Synthetic Natural Gas from wood in Finland. Developments in the fuel and bunker market already make this the primary local growth area Notes:
for LNG. Further developments in utilisation of gas in all its forms will help to expand the global market and establish natural gas new sec- tors with overall benefits for energy efficiency and the environment. We live in a complex world of change, with wide ranging risks that are faced by countries and com- panies. Here in the Baltic Sea re- gion, as in the rest of the world, we need to strive for closer cooperation and to improve our shared commer- cial and technical understanding of what is needed to facilitate invest- ment in the gas market. This will help to deliver a secure low-carbon energy future for us all. Let the dynamic evolution continue! Published in BSR Policy Briefing 1 / 2015, Centrum Balticum, www.centrumbalticum.org 
]]> http://en.abfund.org/?feed=rss2&p=1099 0 Features of innovation policy in developed countries of the Baltic region http://en.abfund.org/?p=1089 http://en.abfund.org/?p=1089#comments Mon, 29 Jun 2015 19:59:11 +0000 http://en.abfund.org/?p=1089

Mikhaylova Anna Alekseyevna – Ph.D. student, analyst of Marketing and Analytics Division, Office of Development and Strategic Planning, Immanuel Kant Baltic Federal University, Russia 

The study examines the characteristics of the formation and implementation of national and regional innovation policies in the developed countries of the Baltic region: Denmark, Finland, Germany, Norway, and Sweden. Building on in-depth case studies of the given countries, the author has conducted retrospective analyses of the processes of formation of the innovation policy, which is treated as a result of combining the individual instruments and mechanisms of the scientific and technological, educational, industrial and regional policies in a single set of influence on the innovation system. The article assesses the innovation development of Denmark, Finland, Germany, Norway, and Sweden; it presents the current scheme of their national innovation systems with a special emphasis on the most significant actors. The author highlighted the key trends and characteristics of the innovation policies of the given countries at the present stage with a focus on the tools used in five thematic areas: education, basic science, applied science and entrepreneurship, regional development, internationalization. Additionally the paper highlights the issue of regional participation in the process of strategy elaboration and subsequent implementation of the chosen course of innovative development.

 

Introduction

The interest in innovation as a source of economic development and welfare of the society began to form in the beginning of the twentieth century under the influence of scientific ideas developed by A. Marshall, JA Schumpeter, ND Kondratyev, P. Sorokin, S. Kuznets and other outstanding scientists of that time. Addressing the multi-faceted innovative economy, complex in its multidimensional image, researchers throughout the twentieth century set themselves the task not only to grasp the essence of the phenomenon of innovation and scientific category, but to identify a set of spacial-temporal, institutional, social, cognitive and other regularities of innovative processes and its impact on the development of territorial socio-economic systems of different level and scale. The fundamentals of the innovation theory evolved in close connection with the development of theories and concepts focus on the cyclical nature of the processes in the economy, specific placement of productive forces, international division of labour and competitiveness, internationalization, regionalization and territorial capital.

Since the end of the twentieth century there is a growing need for applied research that can create and enrich the knowledge base for political decision-making in the field of science and technology, and also innovations. There was a number of scientific concepts, that to some extent were reflected in the strategic and program documents, securing the long-term objectives and priorities for national and regional innovation development, that acted as a basis for the development of mechanisms and tools of the innovation policy. The most common were concept of clusters, national and regional innovation systems, triple spiral, networking, open innovations, regional knowledge, innovation environment, knowledge triangle, entrepreneurial university, global challenges, service innovations, social innovations and innovations in the public sector, live labs, technopolis, competence centers and others.

Empirical studies are also in demand, whose task is to study and analyze the experience of different countries and regions of the world in solving important and essential problems in the innovation. As a rule, such research is thematic and narrowly focused, with a strong territorial binding, but as a whole it allows to catch and to generalize current development trends of the global innovation system and is often the basis for new up-to-date concepts or the improvement and adaptation of existing ones, taking into account changes of contextual factors and conditions.

This article is the result of such study, when the author tries to reveal the features of the innovative policies of developed European countries, based on the comparative assessment of innovation systems of five Baltic countries: Sweden, Denmark, Norway, Finland and Germany. It should be specified, that under the innovation one means a comprehensive view of the state policy, which is a formation of scientific, technological and industrial policies implemented at national and regional levels.

Characteristics of innovation development of the Baltic region

The choice of the countries for the study is not accidental and is due to the innovative nature of sustainable development for a long period, what to some extent can be considered as an indication of the effectiveness of innovation policy, implemented at the state level. The results of a comparative evaluation of scientific and technical potential of the Baltic region [1, 3, 8] and the analysis of a series of periodic international rankings, dedicated to innovation and competitiveness, demonstrate consistently high positions of Sweden, Norway, Denmark, Finland and Germany not only compared to the Baltic countries, Poland and Russia, but also among the countries of the European Union and the world, which allows to assign them to a group of “global innovation leaders” (Table 1).

Table 1

Level of innovation development of the countries in the Baltic region, 2014

Country Index
globalinnovative globalcompetitivity Innovation panel of EU Economy of knowledge* knowledge*
value rank value rank value rank value rank value rank
world BR world BR ЕC28 BR world BR world BR
Sweden 62,29 3 1 5,41 10 3 0,75 1 1 9,43 1 1 9,38 1 1
Finland 60,67 4 2 5,50 4 1 0,68 4 4 9,33 2 2 9,22 2 2
Denmark 57,52 8 3 5,29 13 5 0,73 2 2 9,16 3 3 9,00 5 3
Germany 56,02 13 4 5,49 5 2 0,71 3 3 8,90 8 5 8,83 10 5
Norway 55,59 14 5 5,35 11 4 0,48 - 6 9,11 5 4 8,99 6 4
Estonia 51,54 24 6 4,71 29 6 0,50 13 5 8,40 19 6 8,26 21 6
Latvia 44,81 34 7 4,50 42 8 0,22 27 9 7,41 32 8 7,15 33 8
Lithuania 41,00 39 8 4,51 41 7 0,29 24 7 7,80 37 7 7,68 40 7
Poland 40,64 45 9 4,48 43 9 0,28 25 8 7,41 38 9 7,20 39 9
Russia 39,14 49 10 4,37 53 10 -  - - 5,78 55 10 6,96 43 10

Remark: * on data of 2012; BR – Baltic region

Source: [14, 15, 18, 19]

 

Table 2 contains statistic indicators of innovation system development in these countries at present. In general, it is characterized by significant accumulation of human resources, what is due to priority of national authorities to support the education system and focus on the flow-in of skilled workers. More than 30% of the population in Finland, Norway and Sweden have higher education, slightly less in Denmark – 27%, and 24.1% in Germany. For comparison, in Russia, according to the census 2010, the share of the population with higher education was 23.4% [6], which can be comparable with Germany, however, is significantly lower than in the Nordic countries. On average, about 39% of the total economically active population in Sweden, Denmark, Germany, Finland and Norway are engaged in the field of science and technology, accounting for nearly 27% of the total population. The leaders in terms of the concentration of human resources in science and technology sector are Denmark (40.5%) and Sweden (39.3%). Another characteristic of innovation systems in these countries is the level of employment in high-tech industry (3.9%), which is higher than the EU average both in production sector and service.

Table 2

Indicators of innovation development of developed countries of the Baltic region, 2013

Indicator Sweden Denmark Germany Finland Norway
Share of population with higher education, % 30,3 27,0 24,1 32,1 32,4
Engaged in science and technology to economically active population, % 39,3 40,5 36,4 38,4 38,7
Engaged in high-tech spheres of industry and service to economically active population, % 4,9 5,5 4,1 5,7 3,6
Volume of venture investments to GDP, % 0,4 0,6 0,2 0,3 0,2
Export of high-tech products as a share of all export, % 13,0 9,3 14,2 6,2 …
Share of innovative products in full turnover *, % 6,1 13,9 13,0 11,1 5,2
Expenses for research and development, %
To country’s GDP 3,3 3,1 2,9 3,3 1,7
From general expenses of state budget 1,6 1,8 2,0 1,7 1,8
Expenses structure on research and development on source of funding, %
Business 61,0 59,8 66,1* 60,8 43,1
State 28,2 29,3 29,2* 26,0 45,8
High education 1,0 0,0 0,0* 0,2 0,5
Non commercial companies 3,1 3,8 0,4* 1,4 1,0
Foreign sources 6,8 7,2 4,3* 11,5 9,5
Applications for patents in the European Patent Office *, pcs
For mln citizens 289,9 223,2 278,2 270,6 111,7
For bln EUR of internal expenses on research and development 197,9 164,3 287,8 213,9 86,6

Remark: * data of 2012

Source: compiled based on data of Eurostat [11]

 

One of the most important indicators of the dynamics of the innovation system includes the volume of financing research and development activities (R & D). In Sweden, Finland, Denmark and Germany the ratio of expenditure on research and development to gross domestic product (GDP) is well ahead of the average for the EU (2%) and Baltic region (1.95%). Sweden and Finland show solvent high levels of funding in the long run. Since 2000 the share of R & D expenditures in the GDP of these countries did not fall below 3.2%. However, one should note the tendency for decrease of the level of funding of scientific and technical sphere in Sweden, due to lower expenditures for the development of technologies for defense.

Denmark and Germany on the contrary show a significant increase in the share of research and development expenditures in the said period. If in the early 2000s the ratio of R & D spending to GDP was slightly more than 2%, in 2013 it amounted to 3% with a positive dynamics. It should be noted that these high rates are due to structure of R & D funding,prevailing in these countries, where the main role belongs to business sector (60%). The exception is Norway, where the contribution of the state and business in the research and development is nearly equivalent: 45.8 and 43.1% respectively in 2013. As shown in Table 2, lack of high interest from Norwegian business in investments in R & D, even with share of budgetary allocationscomparable with other countries in the Baltic region, has a negative impact on the total value of the financing of the innovation system of Norway. During 2000 – 2013 the share of expenditure on research and development in the country’s GDP fluctuated around 1.6%, without reaching the EU average.

An essential role in encouraging innovation is played by high-risk investments in companies that are engaged in development of new products and / or technologies, but not listed on the stock market. The need for its finance is formed in early stages of development (seed and start-up), and later (growth and expansion). The highest level of venture capital investment to GDP is in Denmark and Sweden: 0.6 and 0.4% respectively. This indicator is higher than in other EU countries and Baltic region, but the dynamics of such investments is unstable and still below the real needs (Pic. 1).

Pic. 1 –  Dynamics of volume of venture investments to GDP of Denmark, Sweden, Germany, Finland, Norway, %

Source: compiled based on data of Eurostat [11]

 

As the result of innovation Table 2 indicates the share of innovative products in total trade, exports of high technology products and patents. Germany shows the highest return on investment in research and development. Bearing in mind 2.9% expenses on R & D of GDP, Germany shows the highest performance in turnover and export of high-tech products, as well as higher patent activity in terms of unit costs, compared with other developed countries of the Baltic region.

Innovation policy in Sweden

The innovation system in Sweden evolved throughout the twentieth century with limited natural resources and domestic market, which was the main driving factor for the development of technology and export industry with high added value. The need to enter international markets and compete led to the formation of several large transnational companies that currently are the main investors in research and development. The participation of small and medium-sized companies (SMEs) in the innovation process is relatively small, so the state is forced to use various motivating mechanisms for their involvement in R & D. In order to overcome the negative effects of industrial policy of 1980 – 90 and stimulate economical growth Sweden developed a long-term strategy of innovative development «Innovative Sweden», which presented a nationwide vision of Sweden as a competitive, dynamic and knowledge-based economy, attractive for investments of large and small high-tech companies.

In 2012 Sweden adopted a new long-term innovation strategy «The road to a world-class innovation climate 2020», which became a continuation of the ideas of pan-European growth strategy «Europe 2020». The strategy is aimed at improving the quality of life and sustainable development through the maintenance of competitiveness and job creation in the global knowledge-driven economy. The main principles of its implementation are the creation of favourable conditions for innovation; support of people, business and organizations that are systematically engaged in innovation; implementation of a holistic approach based on a common vision. The structure of the modern national innovation system of Sweden is shown in Picture 2.

Picture 2 – National innovation system of Sweden

Source: compiled based on [13, 16]

 

The Government of Sweden is responsible for the development of innovation policy at the national level. The main role in this process is assigned to the Ministry of Education and Science and the Ministry of entrepreneurship and innovation. In 2001 their department established two major agencies: Swedish Research Council and Swedish governmental agency for Innovation Systems (VINNOVA), whose tasks included the implementation of the main directions of the state innovation policy. The activity of Swedish Research Council focuses on the support and development of basic scientific research. VINNOVA is strengthening cooperation between all actors of the innovation system, co-financing of research initiatives with further monitoring and control of its implementation, as well as support of international collaboration. In addition, support functions and the financing of industrial R & D were split between several dozens of specialized state research councils and agencies that focus on meeting the needs in knowledge of the society in individual spheres. An alternative to government agencies and large industrial companies in funding R & D is various para-public and private research funds, which have their own budgets. For example, Swedish Foundation for Strategic Research (SSF), Knowledge Foundation (KKS), Foundation for Strategic Environmental Research (MISTRA), Swedish Foundation for International Cooperation in Research and Higher Education (STINT), Swedish Foundation for health care sciences and allergy research (Vårdal), Knut and Alice Wallenberg Foundation, Swedish Cancer Society, and others.

A characteristic feature of the innovation system of Sweden is a relatively small number of research institutes established in the second half of the twentieth century and united in holding «RISE group» in order to improve the efficiency of use of financial, material and human resources and enhance its expertise and complementarity. The consequence of a lack of research institutions engaged in applied research and development has become the laying of their functions to universities with the increase in financial support of the latter. According to the Parliament decision dd. 1979 [17] University in Sweden combines three missions: education, basic research, interaction with business, being transformed from a classic structure in the enterprise.

One of the most urgent problems of the Swedish innovation system is the lack of commercialization of university research. It reflects the emergence of the concept of «the Swedish paradox» [7, 13], when a large amount of expenses for research and development and education shows a disproportionately low return of innovation. In many respects it is a consequence of the negative impact of legislation («teacher’s correction», laws on the public domain and state acquisition and others [5, 9]) and insufficiency of venture capital on initial stages.

Overcoming the effect of «the Swedish paradox» is done through the implementation of the state policy of promoting the commercialization and innovation in the framework of realization of strategic ideas of national «knowledge triangle», what brings together education, research and innovation. The main efforts of the government in this area are aimed at increasing the efficiency of the implementation capacity of universities by strengthening and deepening cooperation with other actors of the innovation system. Swedish universities dispose a developed network of incubators and science parks, as of 2010 they have created Bureau of innovative interaction – contact interuniversity platforms to improve the efficiency of R & D and stimulate innovation.

It should be noted that such measures of stimulating innovative economy as tax incentives and credits for businesses carrying out R & D did not gain widespread in Sweden. The most widely used tools are venture capital financing; subsidized loans for small and medium-sized business; state guarantees; grant support on a competitive basis (at the individual, institutional level) in the framework of national programs; advisory services; assistance in the training of personnel; creation of special areas for cooperation of participants of actors «triple spiral», etc. In recent years, active work has been carried in order to liberalize the law on state acquisition in order to use it as a driver for innovation in social sectors: infrastructure, health and welfare, environment. Particular attention is paid to support of small and medium-sized businesses, including issues related to the expansion of the participation in research and development and implementation of international activities (program «Explore and grow» and «VINN NU»). A number of organizations of supporting infrastructure were created: investment companies («ALMI Invest», Industrial Development Fund and others), technology transfer centers (Swedish organization to support innovation and technology transfer (SNITTS) and others), agency for attracting investment («Business Sweden» and others), network organizations, bringing together participants of «triple spiral» (Swedish Entrepreneurial Forum and others).

Important areas of ​​modern innovation policy of Sweden are regional development and support of the creation of innovation clusters. As of 2001 has been launched a national flagship initiative «Vinnväxt – Regional growth through dynamic innovation systems», whose aim is to promote sustainable regional growth by developing internationally competitive innovations in priority areas. In 2007 the idea of ​​a differentiated approach to regional development and growth gained formal acknowledgement in the «National strategy for regional competitiveness, entrepreneurship and employment in 2007-2013»; expanded long-term strategy «National strategy for regional growth and attractiveness 2014-2020» , whose base was cross-sectoral approach, multi-level control mechanism for dialogue between participants and collective training, as well as clear focus on results, entered into force in 2014.

In recent years, the authority of the regions of Sweden to participate in the development of regional policy has greatly increased. Currently each region is obliged to form and implement its own development strategy, including vision, goals and long-term priorities, taking into account regional characteristics and competitive advantages. Regional development strategy should contribute to the coordination of initiatives in the field of regional development, held at different levels. It should be noted that we mean regions of level NUTS 3, i.e. län or regions in which the responsibility for the implementation of national policies is traditionally divided between the county administrative boards (länsstyrelsen) – representatives of the national government at the regional level and regional district councils (landsting). By 2015 each of the 21 regions of Sweden has already formed its own regional development strategy with a planning horizon until 2020, maximum until 2025 or 2030. A number of them have also developed a strategy of innovative development, for example, the regions of Skåne and Blekinge, focusing on strengthening of its competitive advantage through the development of cooperation and the formation of clusters and internationalization.

Innovation policy of Denmark

Denmark as well as Sweden shows high level of innovation development among the world, Europe and Baltic region. Historically, the Danish economy is based on traditional sectors: agriculture, fishery, manufacturing. At the beginning of the twentieth century the country was highly competitive in agricultural production, which allowed it to consolidate its status as one of the world’s leading exporters of meat and dairy products. The logical consequence of active development of the agricultural sector which even at present forms the demand for qualified personnel and new technologies, was the establishment of the educational and research system of the country. Its basis was established in 1769 with the formation of the Royal Danish Agricultural Society, under whose support later were established various schools, colleges and universities that are still operating. A strong manufacturing sector of Denmark is the result of industrial and technological policy in 1960 – 1970es. Currently, the country was able to implement the industrial potential in sectors such as engineering and metalworking, food processing, chemical industry and oil refining, pharmaceuticals and medical equipment, electronic and electrical industries.

Danish modern economy is export-oriented with a growing share of service export (about 39% in 2013 with a positive trend in the long run [4]). On one hand, it is based on the success achieved in the traditional industries, and on the other hand – it demonstrates the commitment to the development of new high-tech sectors (ICT, biotechnology, alternative energy, bioeconomy, medical technology and others). The employment of the majority of the working population is provided by SMEs. Large businesses cover a major share of Danish exports, as well as a considerable amount of investment in research and development. It should be noted that the Danish economic model developed in a relatively low domestic resource capacity and low capacity of the national market that unites it with the Swedish, is characterized by a strong dependence on the situation on the international markets. It most strongly appeared during the economic crisis of 2008-2009. Maintaining the effectiveness of such model requires government’s continuous work to improve the investment and business climate, improve the system of science and education, improve the overall competitiveness of the economy, creation of favourable innovation environment.

The answer to the current challenges of the world economy was the development in 2010 of the national strategy «Denmark 2020: knowledge – growth – prosperity – welfare», which was based on the principle of more effective use of internal resources due to the consolidation of public finances, increasing productivity, increasing commercialization of R & D results by universities and public research organizations, introduction of new technologies (especially with a positive environmental impact), development of health care, reduction of bureaucracy level, strengthening of the competitive environment, greater involvement of the country and its regions in the process of internationalization and international cooperation (incl. scientific sphere). Innovation policy in this context is one of the key tools in achieving the strategic objectives of a long-term development of the country.

In 2012 it adopted a long-term national innovation strategy «Denmark – country of decisions. Strengthening cooperation and improving the innovation systems on enterprises», considerable attention in it is paid to the formation of an effective mechanism for the transformation of budgetary allocations for science and education to economic development, employment growth and improvement of social welfare. Key issues to be addressed in 2020 are associated with slow economic growth, insufficient level of productivity, need to shift from European markets to the world ones, weak position of SMEs in niche markets, imbalance in support of thematic research and development towards the dominance of certain sectors (pharmaceuticals, biotechnology, energy). The strategy developed a set of 27 tools in three areas of the innovation policy:

1. «Innovations in solving social problems»: optimization of the national innovation system through restructuring a number of government research councils, agencies and foundations; increasing transparency and easier access to government programs of innovation support; Danish participation in the expansion of EU initiatives on the principles of co-financing; issue of the catalog «INNO +», that identified key strategic areas of investment in innovation (transport, environment, urban development, food and bioeconomy, health, ICT, energy, innovative production); launch of initiatives to create social innovation and pilot partnerships in regions with strong scientific and business positions;

2. «The transformation of knowledge into innovation»: support of clusters and networks; involvement of SMEs in innovative activity (the program «Industrial PhD», «Promotion of Innovation», «Startups graduates», system of innovation vouchers (small lines of credit to finance R & D expenses), development of Danish network of international innovation centers); optimization of the number of incubators by increasing critical mass of residents; facilitating the exchange of knowledge between research and business sector by increasing public funding of joint projects, expansion of the target audience of Danish science e-library, document flow, creation of additional jobs for researchers;

3. «Strengthening the innovation potential through education»: increase in the practice at all levels of education; support innovation in education, including new forms and methods of training; systematic support of young talents; development of innovative and entrepreneurial skills of students; strengthening cooperation between business and educational institutions.

Picture 3 shows present structure of the national innovation system in Denmark after the optimization carried out at the level of institutions, which formed and implemented innovation policy, and at the level of direct participants of the innovation process (for example, by consolidating universities).

Pic. 3 – National innovation system of Denmark

 

The document dd. 2008 «Research 2015», identifying priority areas for research and development, was replaced by a new one in 2012 – «Research 2020». The current index, which was a result of joint work of universities, research organizations, ministries and research councils, represented a common vision of Sweden as a healthy, high-tech, competitive, inclusive society, developing «green» economy with a powerful innovative potential, strengths and competencies and high quality of life. According to this document, by 2020 Denmark should be among the top five OECD countries among the share of innovative SMEs, the level of private investment in R & D relative to GDP and the share of employees with higher education in the commercial sector.

Among the most important instruments of national innovation policy, in addition to the above, one should note personal tax credits for foreign researchers and other high skilled employees in Danish companies and research institutions, in force as of 1992; tax credits for income tax for the companies involved in R & D spending; framework and project grants provided by national programs supporting research and innovation; loans and loan guarantees provided by the Danish SME Development Fund; investment in large-scale infrastructure in the framework of the Roadmap for the development of research infrastructures (2011) and others.

Regional level of innovation policy is implemented through regional forums of economic growth, in force since 2006 in five regions of Denmark (Capital Region, North and Central Jutland, South Denmark, Zealand) and, separately, on the island of Bornholm. It is advisory bodies to the regional councils that do not have their own fund and are re-elected every 4 years. Among their main functions one can note development of regional business strategy, monitoring of trends in regional and local economies, development of recommendations for co-financing of regional measures to support entrepreneurship and innovation. All regional forums for economic growth closely cooperate with the Danish Board of economic growth in order to coordinate national and regional innovation policy. From 2007 to 2012 regional forums of economic growth were responsible for the preparation of medium-term or long-term development strategies for each region, taking into account its specific character, strengths and weaknesses, as well as national priorities. Despite the significant differentiation in the level of economic and innovative development of the regions, common to all strategies were emphasis on public education, training and attracting skilled labour, support for entrepreneurship, new technologies and innovations. Among the main measures of regional innovation policy one should mention public-private partnerships, cluster policy, open innovations, government acquisitions and innovation in the public sector, support of start-ups and innovative SMEs, promoting the exchange of knowledge, development of intellectual demand and innovation in the service sector. An important mechanism to support Danish regions is the EU framework program, funding of which is used also on creation of cross-border clusters (the most successful – «Medicon Valley») [2].

Innovation policy in Germany

In accordance with the principle of the federal government, enshrined in the German constitution, the responsibility for the formation of innovation policy is divided between the federal authorities and the authorities of 16 states with the release of exclusive questions and sharing knowledge. At the federal level, a significant role is played by two ministries: Education, Economy and Energy. Other ministries are involved in the development of research programs and support research within its field of competence, including the establishment of research institutes. All government institutions under the jurisdiction of the federal ministries are united in the association «Working Group of department research institutions». State authorities and management in Germany have a number of advisory bodies that assess the overall dynamics of the innovation system of the country and develop recommendations to strengthen it. The most significant and oldest is the German Council of Applied Sciences and Arts, established in 1957 by an administrative agreement between the Federal Government and the states. In addition to consulting services on higher education and scientific research, the Council carries out accreditation of non-state universities and severally liable with the German Research Foundation for funding the advanced university research within the framework of a comprehensive program «Excellence initiative».

The basis of innovation policy at the federal level is stated in a number of strategic and program documents, the most important of which is a comprehensive strategy in research and innovation «Strategy of high technology». It was launched in 2006 and combined a wide range of government initiatives and programs. In 2010 the country adopted an updated version of the document till 2020, where it fixed the key areas of development of promising markets and technologies (biotechnology, nanotechnology, micro-optical systems, new materials and production technology, aeronautical engineering and ICT); increased cooperation between science and business; coordination of political initiatives on both federal and regional levels. Also appeared separate national strategies on building research infrastructure, including international importance («National roadmap for research infrastructures», 2013); development of bioeconomy as an alternative to non-renewable energy sources («National research strategy bioeconomy 2030», 2013); internationalization of research activities («Strengthening of the role of Germany in the global scientific society», 2008); support for higher education and growing need for highly qualified professionals («Higher education pact 2020», 2007) and a number of others which form the basis for regional initiatives.

Federal states possess broad authority to develop and implement research and educational policies. Each land forms its own legal framework in this area and the budget to finance public higher education institutions and non-university research organizations and institutions. Some of the most innovative active regions developed comprehensive development strategy (North Rhine-Westphalia, Berlin, Brandenburg, and others) and issued series of program documents (Bavaria, Hesse, and others). The centerpiece of the current regional innovation policy in Germany is concluded in the idea of ​​smart specialization, based on the existing regional differences in the innovative development of land; support for SMEs, whose activities are focused on innovation; formation of strong regional clusters. A joint scientific conference, whose members are the Ministers of relevant ministries, was established in 2007 to coordinate the activity of the Federal Government and state governments in research policy. The range of issues within the conference is quite broad and incorporates financial, strategic and international areas of focus.

Funding of research and innovation in Germany is implemented through a wide range of government (federal, regional and joint), semi-public and private non-profit foundations, which include scientific and academic, party, church, industrial and other types. Basic tools of stock support are focused on three areas: research projects, promising young personnel, innovative SMEs. The Association of German research funds is designed to assist in overcoming disunity between funds in the implementation of its programs.

Research and development sector of the country is represented by a wide variety of participants, some of which trace their history from the beginning of the twentieth century and earlier: public and private universities, academia, public research organizations and institutions of basic and applied research, scientific research centers, companies with R & D divisions, etc. The major research associations in Germany are four non-university public research organizations: Fraunhofer Society, Helmholtz Association of Research Centres, Leibniz Association, Max Planck Society, who has its own research funds. It should be noted that, traditionally, German research organizations and industry are characterized by close cooperation ties and, as a consequence, persistently high level of funding of science and research business, which is largely a result of strong government technology policy of the second half of the twentieth century. Modern innovation system of the country is represented in Picture 4.

Pic. 4 – National innovation system of Germany

 

One of the main tools of the innovation policy in Germany is the development and financing of programs to support research and development projects: a) private or thematic, which are based on long-term frameworks in specific areas of technology (biotechnology, nanotechnology, ICT, medicine and health, environmental protection, space etc); b) open, which support more versatile research and are not intended to thematic restrictions. By the beginning of 2013 the total number of programs was 242, of which 92 were federal (including 20 – open) and 150 – regional (incl. 115 – open) [10]. In order to improve the efficiency of research activities, most of the thematic programs are focused on the use of public-private partnership. Table 3 shows the major government initiatives to support research and innovation in Germany.

Table 3

Main initiatives on support of science research and innovations in Germany

Program Main lines and tools
Initiatives to support innovative SMEs and start-ups
«Innovative SMEs», «Central innovation program for SMEs», «Program Venture Capital», «EXIST Program», «Industrial collective research», «SIGNO», «Go-Inno» and others. facilitating the access to finance research activities of SMEs; increasing transparency and reducing costs for SMEs, including the purchase of R & D and specialized services, management of innovation networks, staff; financing of start-ups (direct equity investments in the seed stage, co-financing of private investment in the early stages, repeated investment and the provision of state. guarantees in the later stages, preferential loans with below-market rate%); improving the framework conditions for the development of entrepreneurship in universities (grant support start-ups and spin-offs created by academics); facilitating access to the results of research and development for SMEs; grant support for the formation of self-organizing research associations; co-financing the costs of patenting; consulting services
Initiatives to improve the system of higher education
«Initiative: Qualification for Germany», «Promotion through education: open universities» and others. improving the quality of higher education in order to create a pool of qualified professionals; funding on a competitive basis, and initiatives to improve the integration of university curriculum
Initiatives in the field of regional development and the creation of innovation clusters
«innovative concept», «innovative regional growth centers»,  «potential growth centers», «Center of Innovation Competence», «Innovation Forum», «InnoProfile», «ForMaT», «Twenty 20 – Partnership for Innovation», «Competition of advanced clusters»  «Innovative alliances» (subsequently merged into «Entrepreneurial regions») and others. strengthening of smart specialization through the creation of innovation clusters; stimulating creative thinking and the development of competencies; support for cooperation of large industrial conglomerates and government organizations of R & D to develop innovations that require long-term studies; funding of innovation in the priority areas; systematic support of the regions in East Germany; reimbursement of labour costs, establishment and development of infrastructure, equipment and staff training, purchase of consulting and research services; grants, tax breaks (including by reducing social security contributions)
Initiatives to support young talents
«Initiative of excellence», «Germany sholarship», «Joint Initiative for Research and Innovation», «Qualification initiative», «Increasing scholarship» joint programs with various foundations and others. postgraduate funding of young scientists; long-term contracts with young researchers in universities; grants, student loans, scholarships to young talents; support of non-traditional research approaches; increased scholarships for students; supporting women researchers; funding for joint research projects and the participation of German researchers in international conferences

 

In addition to the above initiatives, Germany used a number of additional tools and mechanisms, such as fiscal incentives for the creation of a more favorable environment for financing start-ups and innovative SMEs at the early stages (new laws on venture capital and equity participation, 2008); the mechanism of state acquisition of innovative products (a joint initiative of six federal ministries «Decision to step up innovation-oriented state acquisition», 2007; Act, encourage competition, 2009); liberalization of immigration laws in order to increase the flow-in of highly skilled experts and scientists (German Immigration Act, 2005; «Labour migration helps to ensure a sufficient number of skilled workers in Germany», 2008; «The recognition of foreign skills», 2012); creating a legal framework to ensure the continued co-funding of universities by the Federal Government and the states (federal law to provide assistance in training, German Basic Law (Art. 91b) in ed. 2014) and others.

Innovation policy in Norway

A switch to innovation policy in Norway is due to the desire of national authorities to restructure the economy in order to reduce dependence on traditional industries, which became very crucial in the second half of the twentieth century as a result of an open and active development of oil and gas. At present, products of oil and gas sector is the basis of the country’s export, and major oil companies («Statoil», «Norsk-Hydro» and others) are the main investors in research and development. One of the mechanisms linking actors of industrial and research sphere is an instrument of «goodwill agreement», involving the provision of benefits to companies for the acquisition of exploration rights in return for the purchase of specialized R & D and services produced in the country. It should be noted that despite the high profitability, such model of economy is quite vulnerable to fluctuations in world oil prices, and its vital resource is limited by proven hydrocarbon reserves. The maintaining of the existing system of connections increases the risk of a sharp collapse of investment in research and development as a result of negative trends in the commodity sector.

The desire to achieve greater stability and balanced development of the country prompted the national authorities for increased support of alternative sectors of the economy, such as biotechnology and bioeconomy, ICT, new materials, aquaculture and others and transfer their experience in innovation, known in traditional sectors: mining, agriculture, navigation and fishing. Because of the limited number of large national companies focused on R & D, priority is given to the development of small and medium-sized businesses, capable of forming strong competitive clusters in the regions (especially agricultural and peripherals). The main tool to stimulate innovation in Norway is a tax credit system to support «Skattefunn», introduced in 2002 for SMEs, and since 2003 spread to all enterprises subject to taxation within the country. Ten years’ experience of this system proved its high efficiency, including comparison with other innovation policy instruments (grants, subsidies, etc), which has pushed the government to significantly increase the size of tax deductions in 2014.

In the field of science and education in connection with the new national development priorities one can outline a number of trends: firstly, decentralization and focus on support for innovation, resulting from the research activities of the regional universities and colleges; secondly, creation and implementation of social and environmental innovation. The result of the reorganization of the leading organizations and institutions of the institutional infrastructure, done in the 2000s, was the formation of the modern structure of the innovation system in Norway, shown on Picture 5.

Pic. 5 – National innovation system of Norway

 

The Parliament and the Government of Norway are responsible for the course of the innovation policy of the country. A key role in this process is assigned to the Ministry of Education and Science, which is responsible for coordinating the overall efforts of other ministries and is the main source of financing educational and research spheres. Other ministries are involved in supporting R & D within the framework of its specialization. Some of the largest budgets for research are granted by the Ministry of Health and Social Welfare and the Ministry of Commerce, Industry and Fisheries. The fundamental document for the development of science, education and innovation are the white book «Innovative and Sustainable Norway» (2009), «The long-term plan for research and higher education in 2015 – 2024» (2014), «The strategy of cooperation in research field with Europe» (2014). To support the priority technology areas and industries Norway also developed a number of thematic research and innovation strategies, including bioprospecting (2009), environment, biotechnology (2011), nanotechnology (2012), ICT (2013).

In 1993, as a result of the merger of five research councils in the innovation sector of the country appeared a large state player – The Research Council of Norway (RCN), which received the right to participate in the development of science and technology policy, to fund research and act as a communication platform for «triple spiral». RCN accumulates funds of all ministries. The level of funding from each ministry is different and depends on the tasks facing it. Currently RCN uses four groups of instruments for financing research activities [12]: a) «research programs» (support on a grant basis of collective, strategic and targeted research initiatives, promote the commercialization of innovations in a certain subject area); b) «independent projects» (funding of individual projects in the field of basic science, which are not linked to specific research programs); c) «infrastructure and institutional arrangements» (creation of the innovation infrastructure, various research institutions, purchase of scientific equipment, databases / collections); d) «network partnership event» (strategic initiative to create partnerships between actors within the country and international cooperation).

In 2003 it created a government agency – «Innovation Norway», whose tasks included the simplification of the formation and development of innovation and supporting infrastructure; strengthening of relations between regional development, innovation and internationalization; representation of national interests in the sphere of trade abroad. At the moment, «Innovation Norway» is acting as the center of the support for Norwegian business and innovation at all levels of management with a wide range of tools: high- and low-risk loans, grants, venture capital, consulting and advertising services, development of business networks and clusters. Also, the Agency is implementing main directions of the state regional policy: a) regional innovation clusters (strengthening and revitalization of the cluster cooperation, increase of innovation and competitiveness of regional businesses); b) business network (support of SMEs in the value chain, forming strategic partnership); c) development of competencies (improving the availability of new knowledge for regional business community through collaboration with universities and university colleges); d) program of regional development (expertise of regional programs for restructuring, management and control of its implementation).

Another important actor in the innovation system of Norway is the state company «Industrial Development Corporation of Norway» (SIVA). Being established in 1968 in the department of the Ministry of Commerce, Industry and Fisheries, by 1990 – 2000 it has expanded its role in stimulating innovation development at national level through the creation and support of innovation infrastructure (business incubators, business – «gardens», science parks in the community colleges, regional venture capital and seed funds), investment in commercial real estate and consulting services. In the 2000s, RCN, SIVA and «Innovation Norway» formed the Triple Alliance, which aim is to provide a complete package of services and public funding for science and innovation. Significant joint initiative of the Union was to launch three cluster programs that involve long-term financial, technical and consulting support on a competitive basis: «Arena» in 2003, «Norwegian competence centers» (NCE) in 2006 and «Global competence centers» (GCE) in 2014. Currently, they are combined into a single integrated multi-level program «Innovation clusters of Norway».

There is a relatively little number of funding sources for R & D sector, that are independent from the triple alliance. Among them are some large industrial companies and organizations in the service sector, private foundations, funding specialized studies (Norwegian Cancer Society (NCS), National Public Health Association (NAPH) and others) and individuals. The EU Framework programmes are an important source of foreign funding.

Describing the participation of regional authorities, represented by the districts (fylkeskommuner) and the municipalities of the third level, in the formation of innovation policy, one should note the tendency to expand the area of ​​its responsibility for the selection of priority areas of development, management, coordination and co-financing activities in the area of ​​innovation. The main mechanisms to involve regions in the government initiatives to support the competitive regional innovation systems is the «regional program of research, development and innovation» (2007), including complex financial instruments, notably the creation of regional research funds.

Research and development works in Norway are carried out by universities, specialized and regional university colleges, research institutes of two types («research» and «with research») and R & D divisions of large Norwegian companies. In 2000 as a result of merging of Norwegian Council of Universities and Norwegian Council of University Colleges was formed the Norwegian Association of higher educational institutions (UHR), which serves as a coordinating body between universities and university colleges and represent it on key issues in education and science questions in cooperation with public authorities. Since the beginning of the 2000s higher education has become actively involved in the creation of technology transfer centers, science parks and incubators. The cooperation on a contractual basis between universities and research institutes was enhanced, what established a separate joint research organizations to conduct case studies.

Innovation policy in Finland

Finland is one of the first countries that adopted the concept of national innovation system as a fundamental idea of ​​the strategic development of the state and the basis for the formation of innovation policy. Its innovation system has evolved over a long period and can be considered as the oldest in the Baltic region. A critical factor for changing the Finnish industrial and technological policy of the second half of the twentieth century and its subsequent transition to a comprehensive innovation policy, was the need to maintain national competitiveness through gradual restructuring: from a traditional resource-based model of industrial growth in the economy, and subsequently innovation. The process of formation of the Finnish national innovation system includes four significant periods: a) «institutionalized» (1960 – 1970es), which can be characterized by the creation of the institutional framework of the system (key institutions and links between them), development of a conceptual framework, principles and mechanisms for scientific and technical policy, implementation of measures to promote education and support industrial R & D; b) «target orientation» (1980es), associated with the beginning of the implementation of national technology programs and a set of measures for the commercialization of research results (also through the creation of science parks, competence centers, etc.); c) «systemic innovation» (1990es), uniting four basic ideas of new economy, «knowledge», «education», «innovation environment» and «internationalization» as the strategic guidelines for national development, maintained by the appropriate level of public financing; d) «optimization» (2000es), characterized by enlargement of main institutions of the innovation system of the country and the consolidation of their resources, structural reforms aimed at strengthening the interdisciplinary and social significance of the research activities, deepening of international cooperation, development of innovative services, improving the effectiveness of existing mechanisms for attracting foreign direct investment.

Current structure of Finnish innovation system has some similarities with the innovation systems in Sweden and Norway (see Pic. 6). Among its important characteristics one should note system integrity; high institutionality and significant role of state support; focus on applied research and commercialization of R & D; strong educational component; accumulated social capital and, as a consequence, development of network connections based on trust; high degree of integration of business and science in the international context. Key themes of the innovative development are bioeconomy, alternative energy, information and communications technology and health care. Also, considerable attention of Finnish government is paid to the area of ​​innovative services and creative industries.

Pic. 6 – National innovation system of Finland

 

Implementation of the basic principles of national innovation policies is carried out through a set of tools, including tax incentives (tax credits for tax on personal income for invited foreign experts and researchers and on income tax for companies in terms of labour expenses for personnel engaged in R & D; the postponement of the payment of capital gains tax for business angels, who provide venture capital to SMEs, tax credit for SMEs engaged in research activities, accelerated depreciation, etc.); the mechanism of state acquisition of innovation, aimed at promoting advanced energy and environmental solutions (such as «green» technologies), increase of the participation of SMEs in innovative activity, increase in the number of new small innovative companies; venture capital financing; long-term investment loans, grants, provided on a competitive basis through various support programs, including public and semi-public funds; targeted subsidies, etc.

Regional innovation policy in Finland is formed mainly at the national and pan-European (through structural programs EU) levels. Its main purpose is to increase the competitiveness, sustainable development and the creation of a balanced regional structure. The main instrument of innovation development of Finnish regions for nearly 20 years has been the program «Centres of excellence», transformed as of 2014 into the program «Innovative City». Events of old and new programs are focused on strengthening strategic competencies of regions and creation of competitive innovation centers (clusters). The participation of regional and municipal authorities (councils) in the formation of regional innovation policy is limited. The regional councils are responsible for the overall development of regions, forming the regional plan and a strategic program based on targets of regional development, developed at other levels, including the sphere of innovation (Pic. 7). Municipal councils are involved in supporting the system of universities of applied sciences (polytechnics otherwise) and participate in the creation of campuses.

Pic. 7 – Formation and implementation of regional development policy in Finland

 

Conclusion

According to the analysis the innovation policy in the developed countries of the Baltic region is being held since the late 1990s, but its basis was laid much earlier – in the middle of the twentieth century in the framework of industrial, scientific, educational and technological policies that were formed in parallel and in conjunction with the formation of key institutions, that subsequently formed the core of national innovation systems. Features of modern innovation policy of Sweden, Denmark, Norway, Finland and Germany are largely a consequence of the tasks facing their governments throughout the twentieth century to restructure national economies in order to increase competitiveness in the international arena. Context conditions that accompanied the transition to the development of high-tech activities in these countries, as a rule, advocated a small domestic market capacity, resource constraints (human resources, investment, natural resource, etc.), high dependence on the international situation, increasing negative impact on the ecology. Common to the developed countries of the Baltic region at the current stage is the pursuit of sustainable and dynamic development by improving productivity, ensuring high standards of living, overcoming imbalances in territorial development and deepening integration into the global community. Innovation policy in this context is the main instrument for achieving the strategic guidelines.

The common features of national innovation policies are systematicity, integrity, continuity, result-orientedness, goal orientation and a high degree of institutionalization. Note that the process of formation and implementation of innovation policy in Sweden, Denmark, Norway, Finland and Germany simultaneously affects several hierarchical levels: pan-European, national, regional and local, but in different degree. Because of the involvement of regional authorities in the development of innovative policy we have identified three country groups: those with a strong position of the regions (Germany), moderate (Denmark, Sweden, Norway) and weak (Finland). Developed countries of the Baltic region, as well as others, that implement an innovative model of the economy, still see relevance of issues related to lack of venture capital, need to attract highly qualified specialists, weak involvement of SMEs in research activities, mismatch of volume of commercialized R & D results to state investments in the research sector, strong differentiation of regions in terms of innovation, lack of patent activity, etc. Each of the countries, taking into account the general line of the European Union, is developing its range of innovation policy tools aimed at addressing these problems, but in general, there are five clusters of influence: education, basic science, applied science and entrepreneurship, regional development, internationalization. Among the most striking trends in innovation policy of the countries in question until 2020 we marked interdisciplinarity and intersector approach, focus on consolidation of internal resources and improve of the efficiency of its use, development of ideas for smart specialization of regions, increased attention to the social and environmental importance of innovations, more active support of the internationalization of SMEs, implementation of the concept of open innovation, strong educational component, associated with the support of talented youth.

 

List of references

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]]> http://en.abfund.org/?feed=rss2&p=1089 0 Arctic dimension of German politics: National approach and aspects of international cooperation http://en.abfund.org/?p=1079 http://en.abfund.org/?p=1079#comments Mon, 29 Jun 2015 19:54:20 +0000 http://en.abfund.org/?p=1079

Vyatkin Kirill Sergeyevich — Ph.D., Amber Bridge Fund, Head of the Berlin office. 

Recently Germany has been more clearly indicating growing interest towards the Arctic region. It is determined by a number of political and economic processes in the modern world, occurring against lack of study of the dynamics of climate changes on the planet. The article analyzes the most important factors specifying the interests of Germany in the Arctic; it examines the potential opportunities and a set of tools at the disposal of German policy to achieve its goals; it assesses the nature and degree of involvement of Germany in the process of international cooperation in the Arctic area. Special attention is given to forecasts of further development of Germany in the Arctic project, including international development.

 

As it is known, Germany is among the countries that do not have direct access to the coast of the Arctic Ocean and, therefore, does not have legal rights to the independent development of the Arctic shelf. Its location is not close to the Arctic Circle and doesn’t have sovereign territories in the Arctic[1].

However, in November 2013, Federal Republic of Germany adopted a document entitled “Guidelines for German policy in the Arctic” [4], which largely explains the renewed interest of Germany to the region.

ARCTIC “MAGNIT” OR GERMAN INTERESTS IN THE ARCTIC

First of all, like most other countries outside the region, the Arctic attracts Germany with its immense hydrocarbon reserves. According to some foreign estimates (which, however, generally refer to the US Geological Survey data [6]), it may contain about a quarter of undiscovered deposits of hydrocarbons in the world. While the proportion of the Arctic in global oil resources is relatively small (less than 7 percent), the amount of gas resources is considered to be much more significant – about 25 percent or more[2].

As an alternative to nuclear power (and the trip of the last reactor is scheduled to 2022) Germany today is focusing on priority development of the so-called “renewable” energy sources – solar, wind, biological and so on. So far, however, even optimistic adherents of “green energy” provide long-term forecasts. So it seems clear that in the short and medium term Germany is likely to increase the consumption of traditional energy resources – oil, gas and coal. Therefore no wonder that the Arctic hydrocarbon reserves and the ways of its transportation are in the center of attention of political Berlin.

Secondly, the Arctic region possesses (again, mostly presumably) considerable reserves of rare metals, minerals, ores and other raw materials of strategic importance. This category, in particular, includes estimated deposit apatite, nickel, cobalt, copper, tungsten, titanium, chromium, manganese, platinum group metals, tin, mercury, gold, silver, diamond and so on. An important feature of a number of known nickel deposits is integrated ore composition, allowing – in the presence of appropriate technology, that Germany has – simultaneously remove additional amount of copper, platinum group of metals, gold, silver, selenium and tellurium. It dramatically increases the value of the ore, despite the high cost of extraction and production in the Arctic Circle [1, Volume 1, p. 126].

Thirdly, the Arctic attracts Germany, as well as other European countries, with its biological resources. The Arctic Ocean is the habitat to more than four hundred unique species of fish and animals. It is home of important species for European fisheries, namely, herring, cod, salmon, flatfish and others.

Fourthly, the Arctic is the area of ​​emerging international transport corridors. In case positive forecasts are right (what happens sometimes), one can expect a lot of new opportunities for further development. When it comes to sea routes, one obviously means the Northern Sea Route (NSR), which runs near the Arctic coast of Russia, and the so-called Northwest Passage, located along the northern coast of Canada. Assuming the continuation of melting ice NSR is likely to become a major transport artery of world importance that will significantly reduce the shipping routes between Europe and Asia-Pacific region[3].

Finally, fifthly, Germany, and many other countries of the world are concerned about global climate change, which is believed to have a direct impact on the environment, economic activities, public health. That is why the monitoring of the climatic situation in the Arctic is of primary importance for the scientific community of Germany. For these purposes the country has already created and successfully launched a number of institutions involved in research in polar regions, including environmental monitoring in the Arctic and Antarctica.

INSTITUTIONAL ARRANGEMENTS

The mechanism of the formation and implementation of the Arctic policy in Germany is quite efficient. Traditionally, the main coordinating role in this important political direction is done by the Office of the Federal Chancellor. Four departments – Ministry of Foreign Affairs, Ministry of Defense, Ministry of Education and Research and Ministry of Economy and Energy are responsible for practical implementation of the basic provisions of the above-mentioned political strategy.

The lead operator for the preparation and conduct of research studies in various regions, including the Arctic region, is the Federal Agency for Geosciences and Mineral Resources (BGR), which is subordinated to the Ministry of Economy and Energy.

One of the main activities of the agency in the Arctic is the study of geodynamic processes in the coastal regions of the Arctic water areas. In this regard, since 1992 the agency has been implementing a multi-year international program CASE (Circum-Arctic Structural Events) [7]. During the reporting period over 15 major research (with a focus on geological and geophysical surveys) expeditions to Svalbard, northern Greenland, the Canadian Arctic and polar regions of Siberia were organized within the program[4].

Since all lands in the Arctic area (ie located to the north of the 66th latitude), as well as adjacent offshore areas are under the territorial sovereignty of well-known five states – members of the Arctic Council, German authorities strictly and consistently adhere to the principle of prior consultation with the countries concerning their programs of scientific and practical studies, which are usually held on the terms of cooperation.

Thus, BGR works on Svalbard are conducted in cooperation with the Norwegian Polar Institute. With respect to Greenland, which is under the sovereignty of Denmark, BGR cooperates with the Geological Service of Greenland in Copenhagen. Project in Canada is implemented within a multi-year program of scientific and technical cooperation (WTZ) between two countries. The main partners from the Canadian side are the Geological Service of Canada and the University of Laval / Quebec. The partners of BGR in the Urals in the frame of the same program[5]are institutes of the Russian Academy of Sciences in Moscow and Syktyvkar (Komi Republic).

“Siberian” part of the project is a priority for BGR. Among its most important exploratory tasks in the Arctic region, in particular, are:

-              a range of issues related to the possible continental extension and access mid-ocean ridge of the Arctic Ocean on the mainland of Siberia;

-              potential of Laptev Sea bed in terms of mineral (especially hydrocarbon) resources;

-              potential of polar Urals in terms of chromite and platinum group elements[6];

-              the phenomenon of permafrost and its resource potential; dynamics in this sector and its impact on the processes of climate change on the planet[7].

Thus, in 2001-2003 in the framework of the aforementioned program for scientific and technical cooperation (WTZ) with Russian Federation BGR implemented the project PURE (Polar Urals Expedition), by carrying out three geological expeditions to polar Urals. Long-awaited expedition to New Siberian islands[8] organized in 2011 as part of the program CASE-13 was considered a great success of BGR. The first phase associated with marine geophysical work in Laptev Sea, was finished in the mid-1990s (in cooperation with Murmansk Institute Sevmorneftegeofizika).

The next stage (project CASE-3, 1998), aimed at carrying out complementary geological studies on land, ended in a relative failure. It is essential that the year of default was not the best for polar research in Russia. Extremely unfavorable weather conditions in that year, huge problems in logistics, supply and financial support caused the premature cessation of work.

The subsequent adjustment of the political and economic course of our country, fundamental change in approach towards the Arctic allowed to provide favorable conditions for mutually beneficial international cooperation. The result of intensive and fruitful cooperation between BGR and a number of Russian institutions (the main partner – A.P. Karpinsky Russian Geological Research Institute in St. Petersburg) was the success of obtaining unique scientific data during the international expedition CASE-13 in 2011. Scientists not only from Russia and Germany, but also from France, Britain, Italy and Sweden took part in that project.

Starting from 2015 German Ministry for Education and Research is implementing the third framework program “Research for Sustainable Development» (FONA-3). The Arctic region is one of the key regions of the studies held in the framework of this program. Annually the Ministry allocates an average of about 20 million euros to support research projects in the Arctic. In general, Germany invests around 200 million euros per year in polar and marine research [8].

Among the research institutions of Germany dealing with Arctic issues, the main is undoubtedly Alfred Wegener Institute for Polar and Marine Research (AWI), located in the north of Germany in Bremerhaven town. The Institute is one of 18 major research centers united in the Helmholtz Society. It has about 780 employees, including 450 scientists, employed on a permanent basis, what means a lot for the German standards. The annual budget of the institute amounts to 60 million euros. 90% of the funding comes from the Ministry of Education and Research.

AWI Institute has three departments:

-              Research Center in Potsdam

-              Biological Institute Helgoland[9]

-              Wadden Seastation Sylt [10]

In 1992 in accordance with the recommendations of the Scientific Council of the federal government, a research unit of the Institute AWI was opened in Potsdam in order to preserve the practices and scientific potential of the former GDR in geophysics and polar research. Today its main activities are focused on geophysical surveys in regions of permafrost, as well as experimental studies of atmospheric processes in the polar regions (primarily in areas of permafrost in Siberia and Svalbard). Scientists from “climate science»[11] department explore physical and chemical processes in the system “ocean – ice – atmosphere” and its importance for the development of the global climate. Working groups are engaged in studies of regional and large-scale circulation system and physical and chemical processes in the atmosphere. Current research in this area covers various topics, including influence of clouds and sea ice in the energy exchange between the ocean and the atmosphere, circulation of water masses in polar regions, study of natural climate change and modeling of atmospheric circulation in the Arctic.

A distinctive feature of the Research Center in Potsdam is a close scientific and practical cooperation with the university centers in Brandenburg state, and a number of other federal states. Well-organized system of scientific exchange and cooperation with partners in the universities of Berlin (Technical, Free, Humboldt), Potsdam (University of Brandenburg), Erlangen (Bavaria), Hamburg, Bremen, Kiel (Schleswig-Holstein), Trier (North Rhine-Westphalia) is designed to stimulate the flow of new knowledge and to ensure continuity, including personnel, in the area of ​​polar research.

The Research Center is focused also on two research areas – «Earth Science» and «Biological sciences». Within «Earth Science» scientists reconstruct changes that have taken place in the past. Scientists from Bremerhaven, Potsdam and Sylt study the effect of occurring earlier processes on the climate development. They study the structure of oceanic sediments, surface deposits, polar ice caps. In particular, they analyze composition and distribution of marine sediments, material and energy flows in areas of permafrost and changes in the structure of the crust and polar ice sheets.

«Biological sciences» (which is the main focus of research scientists from Biological Institute Helgoland) cover environmental, physiological and ecotoxicological issues. Particular attention is paid to the study of processes in offshore and coastal zone of the North Sea. Research subjects include reaction of cells, organisms, populations and communities to external influence and organization and dynamics of populations, communities and ecosystems.

Scientists from AWI Institute often conduct research in the high seas or directly in the ice of Arctic and Antarctica. They have stations AWIPEV[12]  (Svalbard, 79 ° N) and “Samoylovsky” (island Samoylovsky in the delta of the Lena River, 72 ° N).

As of 1998 island Samoylovsky locates a base for field research. In 2013 it was completely renovated to become a modern well-equipped Arctic research station. Initially the main organizers were AWI Institute from German side and Arctic and Antarctic Research Institute of Roshydromet (at the federal level) and Melnikov Permafrost Institute of the Siberian Branch of Russian Academy of Sciences (at regional level) from Russian side. Currently the station is on the balance of the Institute of Petroleum-Gas Geology and Geophysics of the Siberian Branch of the RAS (Novosibirsk) and is a part of the Arctic Centre, specially created in the institute. It should be emphasized that the whole station was built and equipped with Russian assets, the German side only finances the work of their representatives.

«Experimental Station on island Samoylovsky» is one of three projects (two others – «Global change in the seas of Eurasian Arctic shelf: frontal zones and polynyas in the Laptev Sea» and «Otto Schmidt Laboratory for Polar and Marine Research (OSHL)»), which are part of a large-scale Russian-German program «Laptev Sea System». In turn, the project «Laptev Sea System» is a branch of the Russian-German program «Trans-system of the Arctic Ocean» (Transdrift) and can rightly be regarded as «longevity» and one of the most successful ventures in the history of Russian-German joint research in high latitudes of Arctic.

In addition, Institute AWI incorporates year-round functioning German station Neumayer-3 (71 ° S) as well as Kohnen Station (75 ° S) and laboratory Dallman (68 ° S) in Antarctica. The stations in Arctic and Antarctic carry out meteorological and geophysical measurements all year round.

The main mobile research platform is icebreaker «Polarstern» («Polar Star», in fact being the only icebreaker in Germany)[13]. At the same time it carries out a close international cooperation – about a quarter of the members of the expedition on «Polarstern» are traditionally foreign researchers. In addition, the Institute operates five research vessels to work in temperate latitudes, and two polar aircrafts Polar 5 and Polar 6.

In addition to fundamental and applied scientific research institute AWI also provides coordination and advisory services. Particular attention is paid to biological monitoring, science and technology, infrastructure and logistics support for polar research in Germany, as well as advising the Government of Germany.

In April 2015 a delegation of German politicians and scientists led by the Minister for Education and Research Johanna Vank visited Svalbard. The program of the visit included a visit of a number of German and international research centers.

One of the aims of the visit was a visit to the Norwegian settlement of Ny-Alesund, which is the world’s most northern permanent public settlement. Here is located the world’s most northern permanent civil research station. Researchers from Norway (who has administrative control over then territory), Germany, France and China permanently work there. On a temporary basis the station is visited by scientists from Italy, Britain, Netherlands and Japan. In addition, the politicians got acquainted with the activities of the research station of the Institute AWI, which now operates in a joint German-French-format (AWIPEV).

In general we can say that polar research in Germany is based on an extensive network of public and private institutions that coordinate financial, scientific and practical activities in this area. Ministry of Economy and Energy and Ministry of Education and Research provide primarily institutional support. In addition, Ministry of Education and Research conducts targeted support of research projects in the Arctic.

Since the beginning of the 1990s the German Research Foundation (DFG)[14]actively supports polar research. In 1992 the Presidium of the company established the Special Committee SCAR / IASC (Scientific Committee on Antarctic Research / International Arctic Science Committee), whose tasks include planning and coordination of scientific and practical activities of German universities and university centers with institute AWI and relevant government departments in the field of polar research. Currently, with the support of DFG on the basis of a number of German universities functions an interdisciplinary program of comparative research in Antarctica and Arctic (in 2012 the program has been extended until 2018).

Some more specialized projects for the Arctic are conducted with the participation of the institutions of Max Planck Society, Leibniz Association. Finally, the most important instrument in terms of interdisciplinary coordination and cooperation is the German Society of Polar Research (DGP) that brings together representatives of various scientific disciplines.

POLITICAL ORIENTATION

Obviously, in the foreseeable future Germany will continue the policy of further strengthening of “indirect voting rights” in its Arctic affairs, primarily relying on their undoubted achievements in the field of research and scientific practice. With good expertise in qualified scientific works, as well as solid financial, technical and technological potential for further development, Germany intends to use expert assessments to influence political decision-making, relating to the Arctic.

In this regard, Germany, for example, appreciates the opportunities for cooperation in the framework of the International Arctic Science Committee (IASC). Secretariat of the Committee is based in the branch of the Institute AWI in Potsdam, and the Executive Secretary of it is the authoritative German expert on Arctic F. Rahold. IASC members are national scientific organizations. Germany is represented by the aforementioned German Research Foundation DFG.

Executive Director of the International Association on permafrost (IPA) is held by a German (an employee of the Institute AWI K. Schollen). At the same time, Germany has been active in the European Polar Board (European Polar Board). As a division of the European Science Foundation (European Science Foundation, ESF), it is an important platform for the coordination of polar research between interested countries – EU members. The German experience in the field of polar research has formed the basis of the relevant areas within the next 8-th EU program for research, covering the period 2014-2020.[15]

The specificity of the German Arctic strategy lies in the emphasis on the environmental consequences of industrial development in the Arctic. If desired, one can discern the intention of the international community to form a negative attitude towards any attempt to operate Arctic resources without the use of special “green” technologies. In an effort to ensure high standards of environmental safety as international standards, Berlin, obviously is trying to secure for its own (and European) companies more favorable conditions for the promotion to the Arctic.

At the same time it should be noted, that Germany is quite realistic regarding its competitive opportunities in several areas. For example, Germany so far has only one relatively large oil and gas company operating on an international scale – Wintershall. Concerning the Arctic, its strategic focus is the development of offshore fields in Norway.

However, the company has been recently gradually consolidating its position as one of the largest producers of gas on the Norwegian continental shelf. A subsidiary of the BASF concern has successfully established itself as an integrated enterprise in the field of exploration and production. One of the backgrounds of its growth is its rich portfolio of licenses. Wintershall is one of the largest license holders on the Norwegian continental shelf: it has about 50 licenses, over half of which endows it with the rights of the operator works. Most recently, in January 2015, the Ministry of Petroleum and Energy of Norway issued the company 8 new licenses, giving great prospects. Yet it must be acknowledged that the scope of its activities is not up to a level comparable with world known giants of oil and gas industry.

Obviously, in the foreseeable future Germany will stop its Arctic ambitions by concentrating on production of renewable resources (fish and seafood) as well as on the exploitation of the Northern Sea Route[16]. In this regard, it would be appropriate to recall that Germany has the largest fleet of containerships in the world, therefore it should be interested in the development of new transport communications. Besides, it is an additional opportunity for the development of the national shipbuilding industry. Thus, in December 2012, the Federal Agency of Sea and River Transport of Russia and the German company «Nordic Yards» signed a state contract for the construction of two multipurpose salvage vessels with capacity of 7 MW, designed to work in the Russian Arctic. The total amount of orders amounted to 150 mln Eur. The ships were transferred to the Russian side in time and became part of its fleet at the beginning of the year[17].

Germany is likely to leave the development of the access to the region’s energy resources to its partners – Norway and Russia. Berlin is satisfied with the role of the distributor of Russian raw materials on the world market.

Most of German experts are rather skeptic regarding the thesis that the “Arctic is growing potential conflict,” and that predicted by some researchers conflicts in the Arctic will be conflicts over access to hydrocarbon resources. [2] The extent of the reserves in the region, mostly widespread in pseudo-scientific circles, is greatly exaggerated. German experts (in particular, from BGR) are more careful about such estimations. According to them, data on stocks, which are now provided by different sources, are very approximate – primarily due to poor knowledge of the region. For the time being it’s mostly forecasts. Proved reserves are significantly low[18].

It is also noted that in order to assess the potential for conflict in the northern polar regions it is important, that almost all estimated hydrocarbon reserves of the Arctic are concentrated in the exclusive economic zones of coastal States, ie within their undisputed jurisdiction. The central part of the Arctic Ocean, which could theoretically meet claims of coastal states over the continental shelf, is of little promise in search for hydrocarbon resources[19].

In other words, there is simply no reason for the emergence of a new «arms race» in the region[20]. It is significant that the participants of the last annual Security Conference in Munich (February 2015) did not discuss the current situation and its development in the Arctic – apparently due to lack of reasonable forecast expectations for the foreseeable future acute conflict situations in the region.

It entirely corresponds to the estimates from defense authorities of Germany. For example, published in July 2014 analytical study «Climate Change and Security in the Arctic after 2014″ prepared by planning department of Bundeswehr concludes that a widespread and military interstate conflict in the Far North is unlikely to happen. Even in the context of the ongoing melting of ice the Arctic will remain quite stable region for Germany, having nevertheless increasing economic and environmental value. In light of this, German security policy will primarily face the task of a comprehensive and long-term-oriented monitoring of the situation in the region [3, S.24]. For the process to be monitored and analysed one can attribute, for example, political dynamics associated with the autonomy of Greenland (which, in turn, could lead to the transformation of the «Arctic» status of Denmark), or increased political activity in the Arctic Council of «observers» among Asian countries (mainly China and Japan).

Sharing the opinion of the majority of Russian, Norwegian, Canadian experts, German experts say that today the military are able to fully ensure the safety and protection for civilian use such a wayward region as Arctic. However, they note that there is currently no need for additional support of Arctic forces of German partners in NATO with forces and means of Bundeswehr. Improving capacity and operational capabilities of German armed forces in Arctic is neither today nor in foreseeable future a priority of the development [3, S.25].

 

 

List of References

  1. Аrkticheskij region: problemy mezhdunarodnogo sotrudnichestva. Khrestomatiya v 3-х tt. Izdatelstvo RSMD. М., 2013.
  2. Corinna Röver, Katrin Ridder-Strolis, «Nachhaltigkeit in der Arktis: Prämissen, Probleme und Potentiale». Länderberichte der Konrad-Adenauer-Stiftung e.V. Oktober 2014.
  3. Klimawandel und Sicherheit in der Arktis nach 2014. Hat die friedliche und kooperative internationale Arktispolitik eine langfristige Zukunft? Planungsamt der Bundeswehr, Dezernat Zukunftsanalyse. Juli 2014.
  4. Leitlinien deutscher Arktispolitik. Verantwortung übernehmen, Chancen nutzen. Auswärtiges Amt, November 2013.
  5. Nichtstaatliche Konflikte in Räumen begrenzter Staatlichkeit. Planungsamt der Bundeswehr, Dezernat Zukunftsanalyse. Future Study 2012.
  6. United States Geological Survey. URL: http://www.usgs.gov/newsroom/article.asp?ID=1980#.VWRhOEa8xip
  7. Bundesanstalt für Geowissenschaften und Rohstoffe. URL: http://www.bgr.bund.de/DE/Themen/Polarforschung/Arktis/Expeditionen/expeditionen_node.html

Bundesministerium für Bildung und Forschung. URL: http://www.bmbf.de/de/26677.php

 

[1] Perhaps Svalbard archipelago may be a specific exception, the territory of which is under sovereignty of Norway. Since 1925 Germany is a party to the Paris Treaty on Spitsbergen of 1920, which provides that parties equal rights to exploit natural resources of Svalbard and its territorial waters

[2]See f.e.: http://polpred.com/?ns=1&ns_id=1159650&searchtext= or

http://www.zeit.de/wissen/2015-05/arktis-klimawandel-erderwaermung-eisschmelze-rohstoffe

 

[3] With a relatively favorable ice and weather conditions taking NSR from the German Hamburg to Japanese Yokohama could make only about 6,600 nautical miles, while through Suez Canal – 11 400 miles. Accordingly, the transportation time of cargo could be reduced to 40%. [5,S.26].

[4] Indeed, regions (and hence organizations) of United States are not present in this list.

[5] It is based on an agreement on scientific and technical cooperation (WTZ), which was signed by Germany and Soviet Union in 1987, subsequently was subject to repeated amendments and additions, in particular, during German-Russian intergovernmental consultations in July 2009.

[6] This area is of particular interest to Russia because after the collapse of the Soviet Union, it lost access to the largest in the USSR deposits of chrome ore in Kazakhstan.

[7] In this case, the Germans seem to be “engaged” in a very promising process. The fact is that as long as the Americans are developing shale gas, the world begins to develop a much more substantial reserves of “blue fuel”, which, in compressed form – so-called gas hydrates – are stored in the permafrost on the seabed and on land. According to the Russian Ministry of Energy (2013), reserves of gas hydrates are more than twice of the total reserves of shale and conventional natural gas. Russia has large deposits of natural hydrates found in areas of permafrost in Yakutia and West Siberia. Large reserves are discovered on the Sakhalin shelf in the Okhotskoye Sea (in particular in the area of ​​the east coast), and the Kuril Islands (which, by the way, is so eager to get Japan).

[8] New Siberian Islands – Russian archipelago in the Arctic Ocean, located between the Laptev Sea and East Siberian Sea.

[9] Helgoland – German-owned archipelago located in the Bay of Heligoland in the south-east of the North Sea.

[10] Sylt – Germany’s largest island in the North Sea, which is part of the waters of the Wadden Sea; since 1927 the island connected to the mainland by a causeway.

[11] This area is part of one of the six areas of basic research, on which Helmholtz Societyis concentrated: Energy, Earth and Environment, Health, Aeronautics, Space and Transport, Key Technologies, Structure of Matter.

[12] The base is named after Carl Koldewey, in honour of the head of the first German polar expedition in 1868. It was founded in Germany in August 1991 as a base of the Alfred Wegener Institute (AWI), and in 2003 it merged with the base of the French Institute Paul Emile Victor (IPEV).

[13]The construction of the new multi-polar vessel, which should replace the current ship carrying “scientific watch” since 1983 is planned by the end of 2019.

[14] The Foundation is the central organization for promotion of research in Germany. It operates on the principles of self-government and is organized on the basis of civil law. Its main task is research funding of universities and public research institutions of Germany. The Foundation itself is financed mainly at the expense of federal and state governments.

[15]http://www3.uni-bonn.de/forschung/euroconsult/8.-frp

[16] It should, however, added that in these areas Germany prefers cautious forecasts. For example, regarding the NSR it is noted that severe weather conditions and unpredictable ice conditions will remain for the foreseeable future dependence of marine transportation vessels of icebreakers and, most importantly, trained personnel, what in financial terms largely eliminates the possible gains from reducing the distance and travel time. Therefore transarctic container transport (especially those which are carried out on an urgent basis “just-in-time”) are not a short thing of the future.

Equally uncertain (and in fact, simply unexplored) remain assessments as to whether the result of the temporary exemption of ocean space from ice is to expand commercial fish habitat and thus will lead to an increase in their populations.

[17]Being a class of Icebreaker 6, the vessels may conduct rescue operations in difficult conditions. They can be used for icebreaking operations in port and at sea in the thickness of the ice up to 1 meter, extinguish fires on floating objects and coastal oil spill.

[18]F.e., opinion of expert of BGRG.Elsner in: http://www.zeit.de/wissen/2015-05/arktis-klimawandel-erderwaermung-eisschmelze-rohstoffe/seite-2

[19]Expert BGRK. Reihert, the same source.

[20] In particular, experts of authoritative German Foundation for Science and Policy, acting as a leading consulting center for the government of Germany, followed in their assessments this line. See: http://www.swp-berlin.org/publikationen/kurz-gesagt/arktische-kooperation-trotz-europaeischen-frosts.html

]]> http://en.abfund.org/?feed=rss2&p=1079 0 Germany’s trade with the Baltic countries http://en.abfund.org/?p=1069 http://en.abfund.org/?p=1069#comments Mon, 29 Jun 2015 19:31:39 +0000 http://en.abfund.org/?p=1069

Maria Vladimirovna Gracheva — Ph.D. in Economics, leading researcher of Institute of World Economy and International Relations, Russian Academy of Sciences, Moscow. 

The article of Maria Gracheva examines the characteristics of Germany’s trade with the countries that along with the FRG are the members of the Council of the Baltic Sea states. The analysis is based on the statistics of German federal statistical office (Statistisches Bundesamt) in the period of 1992-2014. The author considers such indicators as the share of Baltic states in the German foreign trade turnover, the volumes of Germany’s trade with the particular countries, the trade’s breakdown into the commodity groups. The main Germany’s trade partner countries and the key trade growth/downturn drivers among Baltic countries are identified. Special attention is paid to the peculiarities of the commodity structure of the Germany’s trade with the particular countries, including their comparison with the relevant indicators of the total German foreign trade. The main commodities of the Germany’s export/import to/from Baltic countries by the three-digit classification are analysed as well as the roles of the particular countries as the German buyers and suppliers. Some important facts of the period of 2008-2014 are registered, such as the decline of the oil/gas import from Norway and Russia and the growth of the oil products’ import from Russia. The data of German- Baltic trade’s reduction in the first quarter of 2015 are presented and explained chiefly by the negative dynamics of the Russian import due to the termination of the compensation by means of the oil products. The author comes to the conclusion, that in two-three years already Russia can come down to the Germany’s second-class trade partners, and within the Baltic region the main beneficiaries thereon will be Poland, Sweden and Norway. 

The Baltic States are important trade partners of Germany: in 2014 their share in the foreign trade turnover of Germany amounted to 13.3%, including 12.2% in exports from Germany and 14.6% in imports into the Federal Republic of Germany (the rest of European countries accounted for 56.0% of the German turnover, including 55.8% of exports and 56.4% of imports)[1].

 

Pic. 1. Role of the Baltic States in the foreign trade of Germany

 

(Share of import from the Baltic States in the cumulative import to Germany

Share of export to the Baltic States in the cumulative export from Germany)

 

In 1992-2008 indicators of the Baltic countries showed a relatively constant growth: from 8.8 to 14.2% of turnover, including a growth from 8.1 to 13.4% of exports from Germany and a growth from 9.6 to 15.0% of imports into Germany (see. Fig. 1), while the share of the rest of European countries declined (turnover – from 66.1 to 58.5%, exports from Germany – from 68.9 to 61.1%, and imports into Germany – from 63.1 to 55.4%). Since 2009, there has been a downward trend in the role of both the Baltic States and other European countries in the foreign trade of Germany (the importance of the countries of Asia – primarily China, by contrast, has increased). Information on the volumes of German trade with individual countries of the Baltic region is presented in Tables 1 and 2.

 

Table 1. Trade between Germany and the Baltic States in 1992-2014.

Country/
group of countries		 1992-2014
Turnover, Germany Export from Germany Import into Germany Balance for Germany
Bln euro % position Bln euro % position Bln euro % position Bln euro %
Poland 919,9 3,07 1 518,2 3,18 1 401,7 2,95 2 116,5
Russia 855,2 2,86 2 387,8 2,38 2 467,4 3,43 1 -79,6
Sweden 580,3 1,94 3 342,2 2,10 3 238,1 1,75 4 104,1
Denmark 472,7 1,58 4 260,7 1,60 4 212,0 1,56 5 48,7
Norway 431,0 1,44 5 125,1 0,77 6 305,9 2,25 3 -180,9
Finland 280,7 0,94 6 150,1 0,92 5 130,6 0,96 6 19,5
Lithuania 51,9 0,17 7 32,3 0,20 7 19,6 0,14 7 12,6
Latvia 29,2 0,10 8 19,6 0,12 8 9,6 0,07 8 10,0
Estonia 26,2 0,09 9 18,8 0,12 9 7,4 0,05 10 11,4
Iceland 16,0 0,05 10 6,7 0,04 10 9,3 0,07 9 -2,6
Total Baltic States 3.663,1 12,24 1.861,4 11,41 1.801,7 13,23 59,7 2,22
 
Whole world 29.926,6 100,00 16.307,5 100,00 13.619,1 100,00 2.688,4 100,00

Note: The Baltic States are presented in descending order of their turnover with Germany in 1992-2014.

 

Table 2. Main partner countries of Germany in its trade with the Baltic States in 1992 and in 2014.

Indicator Country 1992 Indicator Country 2014
Bln euro % Bln euro %
Turnover
Germany – Baltic States 		Sweden 14,7 24,9 Turnover
Germany – Baltic States		 Poland 87,5 32,1
Denmark 14,0 23,7
Russia 67,7 24,8
Poland 8,4 14,3
3 main countries, total 37,1 62,9 2 main countries, total 155,0 56,9
Turnover Germany – Baltic States, total 59,0 100,0 Turnover Germany – Baltic States, total 272,8 100,0
Export
from Germany to the Baltic States 		Sweden 7,5 26,9 Export
from Germany to the Baltic States		 Poland 47,7 34,4
Denmark 6,6 23,8 Russia 29,3 21,1
2 main countries, total 14,1 50,8 2 main countries, total 77,1 55,5
Export from Germany to the Baltic States, total 27,8 100,0 Export from Germany to the Baltic States, total 138,9 100,0
Import
from the Baltic States to Germany 		Denmark 7,3 23,5 Import
from the Baltic States to Germany		 Poland 39,8 29,7
Sweden 7,2 23,1
Russia 38,4 28,7
Norway 4,7 14,9
3 main countries, total 19,2 61,6 2 main countries, total 78,2 58,4
Import from the Baltic States to Germany, total 31,2 100,0 Import from the Baltic States to Germany, total 133,8 100,0
Balance for Germany – cumulative surplus Sweden 0,3 90,0 Balance for Germany – cumulative surplus Poland 8,0 32,0
Sweden 7,4 29,6
1 main country, total 0,3 90,0 2 main countries, total 15,4 61,7
Cumulative surplus for Germany, total 0,3 100,0 Cumulative surplus for Germany, total 25,0 100,0
Balance for Germany – combined deficit Norway -1,8 47,6 Balance for Germany – combined deficit Norway -10,7 53,7
Denmark -0,7 19,2
2 main countries, total -2,5 66,8 One main country, total -10,7 53,7
Combined deficit for Germany, total -3,7 100,0 Combined deficit for Germany, total -20,0 100,0

Note. The main partners are listed as countries in descending order with the largest volume of trade, export, import and balance, which together accounted for more than 50% of the respective indicators in 1992 and 2014.

 

Within the whole period of 1992-2014, Germany’s main partners among the ten Baltic States were the following four countries – Poland, Russia, Sweden and Norway, including:

- Poland, Russia, Sweden – in turnover and exports from Germany,

- Russia, Poland, Norway – in imports to Germany,

- Poland and Sweden – in surplus for Germany,

- Norway – in deficit for Germany.

 

For more than twenty years there have occurred major shifts: in 1992, the most important contractors were Sweden, Denmark, Norway and Poland; now Denmark is not among them, and Sweden and Norway have been overshadowed by Poland and Russia.

In 1992-2014 Germany formed a surplus in trade with the Baltic countries totaling 60 billion euros, but its share in the German foreign trade surplus as a whole (2.7 trillion euros) was only 2.2% – much lower than the corresponding figures of turnover (12.2 %), exports from Germany (11.4%) and imports to Germany (13.2%). This situation is due to the sustained deficit in German trade with Norway and Russia (these countries are on the second and third places after the Netherlands in terms of the German trade deficit). In 1992-2003 the German-Baltic trade balance was variable with a predominance of the negative balance for Germany. Since 2004 it has become steadily positive for Germany (mainly due to a rapid increase of surplus in the trade with Poland).

Key countries to determine the dynamics of the German trade with the Baltic States are shown in Tables 4 and 5. The most powerful driving forces in general over the last 22 years were Poland and Russia (they were the main factors of growth both in exports from Germany, as well as in imports into Germany, and in 1992-2014 provided respectively 37 and 28% of growth of the German-Baltic turnover). Sweden and Norway took the second place (with growth of 10% and 9%).

 

Table 4. Key forces – countries of the German – Baltic trade in 1992-2014, 1992-2000 and in 2000-2008.

Country/group of countries Total change 2014/1992 Change 2000/1992 Change 2008/2000
Export from Germany Import into Germany Export from Germany Import into Germany Export from Germany Import into Germany
Growth Growth share Growth Growth share Growth Growth share Growth Growth share Growth Growth share Growth Growth share
Bln euro % Bln euro % Bln euro % Bln euro % Bln euro % Bln euro %
Poland +43,5 +39,2 +35,5 +34,6 +10,3 +34,3 +7,7 +23,5 +26,2 +35,3 +13,9 +24,3
Russia +26,1 +23,5 +34,5 +33,6 +10,8 +33,1 +25,7 +34,5 +22,4 +39,1
Sweden +6,0 +20,1
Growth in the Baltic countries +111,1 +100,0 +102,7 +100,0 +30,1 +100,0 +32,7 +100,0 +74,3 +100,0 +57,3 100,0

 

Table 5. Key forces – countries of the German – Baltic trade in 2008-2014 and 2012-2014.

Country/group of countries Change 2014/2008 Change 2014/2012
Export from Germany Import into Germany Export from Germany Import into Germany
Growth Decline Growth share Decline share Growth Decline Growth share Decline share Growth Decline Growth share Decline share Growth Decline Growth share Decline share
Bln euro % Bln euro % Bln euro % Bln euro %
Poland +7,0 +65,4 +13,9 +85,2 +5,9 +62,1 +6,7 +77,7
Russia -3,0 -76,4 -8,8 -99,5
Norway -3,1 -82,0 -7,0 -59,7
Growth in the Baltic States +10,7 +100,0 +16,3 +100,0 +9,5 +100,0 +8,7 +100,0
Decline in the Baltic States -3,9 -100,0 -3,8 -100,0 -8,8 -100,0 -11,8 -100,0

Note. The main factors are countries listed in descending order with the largest increase/reduction of export/import, which total share in the growth/decline of the corresponding indicators was more than 50%.

 

In certain periods the following countries were the main trade partners:

- In 1992-2000: for exports from Germany – Poland and Sweden (growth factors), for imports into Germany – Russia and Poland (growth factors);

- In 2000-2008: for exports from Germany – Poland and Russia (growth factors), for imports into Germany – Russia and Poland (growth factors);

- In 2008-2014 years in general and in 2012-2014 in particular: for exports from Germany – Poland (growth factor) and Russia (recession factor), for imports into Germany – Poland (growth factor), and Norway (recession factor).

Poland would return as a source of positive pulses after each case of decrease of the indicators of its trade with Germany in 1992-2014. Russia, too, managed to do this for 20 years, but in the last two years it has dramatically changed its role, becoming the brake of the German-Baltic trade instead of its accelerator. The share of Poland in the foreign trade turnover of Germany rose from 1.3% in 1992 to 4.3% in 2014, the corresponding indicator for Russia rose from 1.1 to 3.3% (maximum – 4.0% – was achieved in 2012).

As for the remaining six of the Baltic countries, among them are two larger counterparts of Germany – Denmark and Finland, and four smaller – three post-Soviet states (Lithuania, Latvia, Estonia) and Iceland. Both in 1992-2000 and in 2000-2008, all six countries were factors of growth for the trade between Germany and the Baltic States (being inferior to a group of four countries mentioned above). But in 2008-2014 only the new European trio played a positive role, while the “old Europeans” generated negative pulses (Finland and Iceland – in both directions of trade, Denmark – for imports to Germany). As a result, the total share of Lithuania, Latvia and Estonia in the foreign trade turnover of Germany rose from 0.1% in 1992 to 0.4% in 2014, thus indicating that the growth rate of Germany’s trade with these countries turned out to be the highest within the Baltic region.

Distribution of the indicators of the German trade with the Baltic countries and the whole world for four product groups, that are classified in accordance with the increase in the degree of processing of the goods (and, consequently, increase of the share of value added in the value of goods), is presented in Tables 6 and 7.

 

Table 6. Structure of the goods of the German – Baltic trade in 2014, % of turnover between Germany and the Baltic States

Indicator/goods group (code, name) Poland Russia Sweden Norway Denmark Finland Lithuania Estonia Latvia Iceland Turnover Germany – Baltic States, total
Export from Germany 1-4 Food 1,5 0,4 0,5 0,2 1,0 0,3 0,1 0,0 0,1 0,0 4,2
5 Raw materials 0,2 0,0 0,1 0,0 0,3 0,0 0,0 0,0 0,0 0,0 0,6
6 Semi-processed goods 1,6 0,2 0,3 0,1 0,3 0,2 0,0 0,1 0,0 0,0 2,8
7-8 Finished products 14,1 10,4 7,0 2,9 4,5 2,8 0,8 0,5 0,5 0,1 43,6
Import into Germany 1-4 Food 1,7 0,1 0,1 0,2 1,2 0,0 0,1 0,0 0,0 0,0 3,5
5 Raw materials 0,3 10,2 0,3 6,1 0,3 0,0 0,0 0,0 0,0 0,0 17,3
6 Semi-processed goods 1,2 3,7 0,8 0,6 0,2 0,6 0,1 0,0 0,0 0,1 7,3
7-8 Finished products 10,8 0,7 3,8 0,4 2,3 2,0 0,3 0,1 0,1 0,0 20,7
Turnover Germany – Baltic States, total* 31,4 25,7 12,9 10,5 10,2 5,9 1,5 0,8 0,8 0,3 100,0

* excluding returned, replaced and not allocated by commodity groups goods.

Note. The Baltic countries are presented in descending order of their turnover with Germany in 2014.

 

Table  7. Structure of the goods of the German – Baltic trade and the overall German foreign trade in 2014, % of export/import/turnover of certain countries, Baltic States and the whole world.

Indicator/goods group (code, name) Poland Russia Sweden Norway Denmark Finland Lithuania Estonia Latvia Iceland Baltic States, total Whole world
Export from Germany 1-4 Food 8,4 4,0 6,8 7,4 16,4 8,4 11,6 7,7 10,2 12,1 8,2 6,0
5 Raw materials 1,2 0,3 0,9 0,4 4,4 0,4 0,4 0,5 0,9 0,2 1,2 1,6
6 Semi-processed goods 9,0 1,7 4,4 3,2 5,1 6,1 3,5 10,1 4,3 2,3 5,5 5,6
7-8 Finished products 81,4 94,0 88,0 89,1 74,1 85,1 84,5 81,7 84,6 85,4 85,1 86,9
Export from Germany, total 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0
Import into Germany 1-4 Food 11,9 0,6 2,8 2,8 28,6 1,1 21,2 6,0 14,8 17,2 7,1 8,5
5 Raw materials 2,4 69,6 5,8 83,6 7,7 0,6 2,5 9,8 9,1 2,7 35,6 11,6
6 Semi-processed goods 8,7 25,2 16,0 7,8 5,9 21,0 16,1 14,0 11,0 68,4 15,1 8,7
7-8 Finished products 77,0 4,6 75,4 5,8 57,8 77,3 60,2 70,2 65,1 11,7 42,2 71,2
Import to Germany, total 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0
Turnover of Germany 1-4 Food 10,0 2,0 5,3 4,2 21,2 5,1 15,1 7,4 11,5 15,2 7,6 7,1
5 Raw materials 1,7 39,7 2,8 58,1 5,7 0,5 1,1 2,5 3,2 1,7 18,0 6,0
6 Semi-processed goods 8,9 15,1 8,8 6,4 5,4 12,8 8,1 11,0 6,2 42,4 10,2 7,0
7-8 Finished products 79,4 43,2 83,1 31,3 67,6 81,6 75,6 79,1 79,1 40,8 64,2 79,9
Turnover Germany – Baltic States, total* 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0

* excluding returned, replaced and not allocated by commodity groups goods.

Note. The Baltic countries are presented in descending order of their turnover with Germany in 2014.

 

The main part of the German-Baltic trade (52.6% of the turnover) is in:

- German exports of finished products into Poland (14.1%), Russia (10.4%) and Sweden (7.0%),

- Import of finished products from Poland (10.8%) and raw materials from Russia (10.2%).

 

A substantial component is also import of raw materials from Norway (6.1%). In other cases, the share of product groups by country does not exceed 5%. Germany has a positive balance in the German-Baltic trade of food and finished products, and a negative balance – in the trade in raw materials and semi-processed goods. The total surplus for Germany consists mainly of excess surplus in finished products (Poland and Sweden) over the deficit of raw material (Norway and Russia).

The structure of German exports to the Baltic States and the overall German exports are very similar: the maximum difference (the share of food) is only slightly more than two percentage points. German imports from the Baltic States, by contrast, strongly deviates from the overall German import: on the one hand, by the shares of raw materials and semi-finished goods (the German import from the Baltic States has, respectively, 24 and 6 percentage points more than the overall German import); on the other hand, by the share of finished products (the German import from the Baltic States has 29 percentage points less than the overall German import). As a result, the basis of turnover of Germany with the world and with the Baltic States is the same – products with a higher degree of processing, namely finished products (64 and 80%, respectively), but the value of the goods with a low and medium degree of processing – raw materials and semi-finished products – in the German – Baltic trade is much larger (28%) than in the foreign trade of Germany as a whole (13%).

The structure of German exports in each of the Baltic countries is characterized by a common main feature – a strong dominance of finished products (ranging from 74.1% in Denmark to 94.0% in Russia; average Baltic and average world indicators are, respectively, 85.1 and 86.9%). At the same time, six countries have an additional focus: on food – Denmark (16.4%), Iceland (12.1%), Lithuania (11.6%), Latvia (10.2%) with the average Baltic and average world level of, respectively, 8.2 and 6.0%; semi-processed goods – Estonia (10.1%) and Poland (9.0%) with the average Baltic and average world level of, respectively, 5.5 and 5.6%. In four countries (Norway, Sweden, Finland, Russia) there are no such focuses.

As sources of the German import certain Baltic countries show considerable specificity. The most striking peculiarity is that of these three importers with an extremely low share of finished products (Russia – 4.6%, Norway – 5.8%, Iceland – 11.7%). For the rest of the Baltic countries this figure ranges from 57.8 to 77.3%, the average Baltic value is 42.2%, the world average is 71.2%. The above mentioned three countries are specialized in: Norway and Russia – raw materials (83.6 and 69.6%, respectively), Iceland – semi-processed goods (68.4%). Russia has an additional emphasis on semi-processed products (25.2%), Norway and Iceland do not have it. Since the absolute volume of imports of semi-processed products from Iceland is very small, the above-noted important role of the Baltic States for Germany as a source of raw materials and semi-processed products is concentrated in only two of the ten countries – Russia (raw materials and semi-processed products) and Norway (raw materials).

Among the other seven importers, who are leaders in finished products, two groups with additional focuses can be distinguished:

• focus on food – Denmark (28.6%), Lithuania (21.2%), Latvia (14.8%), Poland (11.9%) with the world average of 8.5%;

• on semi-processed products – Finland (21.0%), Lithuania (16.1%), Sweden (16.0%), Estonia (14.0%) with the world average of 8.7%.

The concretization of these features in the context of three-digit product classification is presented in Tables 8 and 9.

 

Table 8. Main goods of the German export in the Baltic States in 2014.

Country Main goods of export from Germany to a country Main goods of the additional export focus of the country
Goods (code, name) Share in the export from Germany to a country, % Share of a country in the overall German export of these goods, % Position of the country in the overall German export of the goods Goods position (code, name) Share in the export of Germany to a country, %
Norway 885. Passenger cars 19,2 1,3 18
Latvia 885. Passenger cars 12,4 0,1 48 423. Strong alcohol beverages 1,2
Sweden 885. Passenger cars 11,6 2,0 14
Iceland 885. Passenger cars 9,9 0,0 78 206. Fish, shellfish, mussels 2,1
Estonia 861. Equipment for production and distribution of electricity 9,2 0,3 44 669. Oil products 4,3
Finland 885. Passenger cars 8,4 0,6 27
Russia 884. Automobile components 8,3 3,3 10
Poland 884. Automobile components 8,2 5,1 6 669. Oil products 3,7
Denmark 861. Machinery for production and distribution of energy 5,3 1,7 18 204. Meat and meat products 3,9
Lithuania 834. Pharmaceutical products 5,0 0,2 49 395. Other foods of plant origin 1,6

Note: The Baltic countries are presented in descending order of the proportion of the main export commodity in the exports from Germany in 2014.

Table 9. Main goods of the German import from the Baltic States in 2014.

Country Main goods of the import into Germany from a country Main goods of the additional import focus
Goods (code, name) Share in the import into Germany from a country, % Share of a country in the overall German import of these goods, % Position of a country in the overall German imports of the goods Position of the goods (code, name) Share in the import into Germany from a country, %
Norway 518. Oil and natural gas 82,0 18,9 2
Russia 518. Oil and natural gas 66,6 30,8 1 669. Oil products 16,3
Iceland 645. Aluminum and aluminum alloys, including waste and scrap 64,3 5,6 8
Finland 708. Paperandcardboard 20,4 19,0 2 608. Semi-finished products of cellulose fiber 5,5
Poland 884. Automobile components 13,2 10,6 3
  1. Fish, shell fish, mussels
 2,0
Sweden 708. Paper and cardboard 12,1 21,3 1 608. Semi-finished products of cellulose fiber 4,2
Estonia 815. Items made of wood (apart from furniture) 11,6 2,2 10 607. Lumber 5,7
Lithuania 875. Furniture 10,0 1,3 18 206. Fish, shell fish, mussels 7,1
Latvia 709. Plywood and plywood sheets, chipboards 8,2 2,6 11 383. Oil cake 5,2
Denmark 834. Pharmaceutical products 6,9 2,1 11 204. Meat and meat products 6,7

Note. The Baltic countries are presented in descending order of the share of the main imported goods in the imports of Germany in 2014.

 

Passenger cars belonging to the product group “finished products” are the main commodity items of the overall German exports (0.9%), German exports to the Baltic States (6.9%) and German exports into five Baltic countries (Norway, Latvia, Sweden, Iceland , Finland). “Automotive components”, which are close to the group of passenger cars, are the leader in exports from Germany to Russia and Poland. Only in three cases, the leading role is played by other products, also belonging to the group of “finished products”- equipment for the production and distribution of electricity (Estonia and Denmark) and pharmaceutical products (Lithuania). Five countries (Poland, Russia, Sweden, Norway, Denmark) are in the top twenty of the German consumers for the corresponding main goods, with the highest position – the sixth in export of automobile components from Germany –is held by Poland. Two countries (Estonia and Poland) have the same additional export emphasis on semi-finished products (oil products), and there is no unity for countries with a focus on food.

Oil and natural gas belonging to the commodity group “raw material” are the main position of the overall German imports (9.5%), German imports from the Baltic States (32.9%) and German imports from Norway and Russia. Imports from Iceland to Germany are focused on aluminum (group “semi-finished products”). Specialization on the group “finished products” is characteristic of German imports from the other seven Baltic countries, including: specialization on products related to the processing of wood – from Finland, Sweden (paper and cardboard), Estonia (wood products except furniture), Lithuania (furniture), Latvia (plywood); on automotive components – from Poland, for pharmaceutical products – from Denmark. All Baltic countries are in the top twenty of the German suppliers of the relevant main products, with the highest – the first – positions held by Russia (oil/gas) and Sweden (paper/cardboard). Semi-finished products as an additional import emphasis are closely related to the main item: in Russia – oil products (to oil/gas), in Finland and Sweden – semi-finished products made of cellulose (paper/cardboard), Estonia – lumber (with woodwork).

Norway offers the highest shares in the main goods both in the export from Germany, and in the imports to Germany, but if for passenger cars, the figure is 19.2% of German exports, for oil/gas it is extremely high – 82.0% of German imports. Concentration of German imports on a single goods group is also characteristic of Russia (oil/gas – 66.6%) and Iceland (aluminum/aluminum alloys – 64.3%), while in other countries the figure is in the range of 6, 9 to 20.4%. In fact, German import from Norway, Russia and Iceland is monocultural, and monocultural are items of low-grade processing. Before the crisis, which began in autumn 2008, this one-sidedness did not prevent active growth of imports from these countries, but in 2008-2014 the cumulative decline in German imports from the Baltic States in the context of the four commodity groups appeared to be by about 3/5 due to the reduction of imports of oil/gas from Norway and Russia: Norway had more than ⅓, and Russia – about ¼ of this recession. As a result, imports from Norway in 2008-2014 decreased by 13.8%, while imports from Russia increased by 3.5%. However, this happened only because reduction of Russian imports of oil/gas was more than offset by a rise in imports of Russian oil products.

In the first quarter of 2015 this compensation was no longer valid. Trade turnover between Germany and Russia showed the most negative dynamics among the Baltic countries. Changes in the German-Baltic trade in the first quarter of 2015 compared to the same period in 2014 are presented in Tables 10 and 11.

 

 

 

 

Table  10. Trade between Germany and Baltic States in 2014-2015.

Country/Group of countries Turnover Export from Germany Import into Germany Balance for Germany
January – March  2014 January – March 2015 Change, 2015/2014 January – March, 2014 January – March, 2015 Change, 2015/2014 January – March 2014 January – March 2015 Change, 2015/2014 January – March,  2014 January – March  2015
Bln euros % Bln euros % Bln euros % Bln euros
Poland 20,9 23,3 111,2 11,4 12,4 109,5 9,6 10,8 113,2 1,8 1,6
Russia 18,1 12,4 68,4 7,5 5,0 66,1 10,5 7,4 70,1 -3,0 -2,4
Sweden 8,9 9,1 101,8 5,3 5,6 105,4 3,6 3,4 96,5 1,8 2,2
Denmark 7,1 7,1 99,8 4,0 4,4 108,5 3,0 2,7 88,3 1,0 1,7
Norway 7,3 6,5 89,7 1,9 2,1 106,5 5,3 4,4 83,5 -3,4 -2,4
Finland 3,9 4,2 107,5 2,2 2,3 101,1 1,7 2,0 116,0 0,5 0,3
Lithuania 1,0 1,0 104,7 0,6 0,6 104,9 0,4 0,4 104,3 0,2 0,2
Estonia 0,6 0,5 85,8 0,5 0,4 81,0 0,1 0,1 103,6 0,3 0,2
Latvia 0,5 0,5 94,0 0,4 0,3 92,5 0,2 0,1 97,7 0,2 0,2
Iceland 0,2 0,2 100,3 0,1 0,1 126,4 0,2 0,1 88,2 -0,1 0,0
Baltic countries, total 68,5 64,8 94,6 34,0 33,2 97,7 34,5 31,6 91,4 -0,6 1,6
 
World, total 508,9 528,1 103,8 278,3 293,3 105,4 230,6 234,8 101,8 47,6 58,5

 

Table 11. Factors of growth/recession in trade between Germany and the Baltic States in 2014-2015.

Country/group of countries Turnover Germany – Baltic States, 2015/2014 Export from Germany into the Baltic States, 2015/2014 Import into Germany from the Baltic States, 2015/2014
Growth Recession Share in growth Share in recession Growth Recession Share in growth Share in recession Growth Recession Share in growth Share in recession
Bln euros % Bln euros % Bln euros %
Poland +2,3 +82,3 +1,1 +56,6 +1,3 +81,2
Russia -5,7 -86,7 -2,6 -95,7 -3,1 -69,5
Sweden +0,2 +5,7 +0,3 +15,0 -0,1 -2,8
Denmark -0,0 -0,2 +0,3 +18,0 -0,4 -7,9
Norway -0,8 -11,4 +0,1 +6,7 -0,9 -19,4
Finland +0,3 +10,4 +0,0 +1,3 +0,3 +17,4
Lithuania +0,0 +1,6 +0,0 +1,5 +0,0 +1,1
Estonia -0,1 -1,3 -0,1 -3,3 +0,0 +0,3
Latvia -0,0 -0,5 -0,0 -1,0 -0,0 -0,1
Iceland +0,0 +0,0 +0,0 +1,0 -0,0 -0,4
Baltic countries, total +2,8 -6,6 +100,0 -100,0 +1,9 -2,7 100,0 -100,0 +1,6 -4,5 +100,0 -100,0

Note. The Baltic countries are presented in Tables 10 and 11 in descending order of their turnover with Germany in January-March 2015.

 

Russia accounted for more than 80% of decline of the German-Baltic trade, including more than 90% reduction in German exports and almost 70% reduction in German imports. The extent of the fall was 31.6% of turnover (including 33.9% for exports from Germany and 29.9% for imports into Germany). Noticeable, but not as dramatic, contraction of trade with Germany happened also in Estonia (-14.2% in turnover due to the decrease of exports from Germany by 19.0%) and in Norway (-10.3% in turnover due to 16.5% decline of imports in Germany). Two other countries – Denmark and Latvia – showed a moderate reduction in trade with Germany. The other five countries had a positive balance, with the biggest step forward made by Poland (it provided more than 80% of the growth of the German-Baltic turnover, including more than 50% of the growth of German exports and over 80% in increase in German imports). As a result, Poland, that was lagging behind Russia in turnover with Germany by 7.4% in 2012, surpassed Russia two-fold on this indicator in the first quarter of 2015.

The main products that led to a sharp collapse of the German-Russian trade:

  • for exports from Germany – eight positions from the commodity group “finished products” (50.1% decline in the context of three-digit classification), namely: automotive components (13.7%), passenger cars (9.3%), aerial vehicles (6.8%), trucks (4.9%), machines without sectoral specialization (4.0%), office and computing equipment (3.9%), pharmaceutical products (3.8%), machinery for mining and construction (3.6%);
  • for imports into Germany – one position from the commodity group “raw material”, namely: oil/gas (84.4% decline in the context of three-digit classification); the negative trend was reinforced by reduction of imports of semi-finished products, namely oil products (10.7%), which is Russia’s second most important import goods, that previously performed the role of a shock absorber.

The value of Russia as a trading company for Germany decreased markedly. The share of Russia in the export of goods from Germany declined from 2.6% in 2014 to 1.7% in 2015 (only three years ago, in 2012, it was 3.5%). As a German consumer the Russian Federation moved from the 12th place in 2014 to the 15th place in 2015. Russia’s best result was the 11th place in 2011-2012, and the worst – the 20th place in 1999. Russian automotive components descended from the 10th place in 2014 to the 18th place in 2015; Russia’s passenger cars – from the 15th to the 17th. If this trend persists, Russia can find itself already in two years in the third ten export partners of Germany, as it will cease to represent any serious business interest for Germany.

The share of Russia in the import of goods to Germany fell from 4.2% in 2014 to 3.1% in 2015 (the highest level of this indicator was recorded in 2012 – 4.7%). As a German supplier, Russia dropped from the 10th place in 2014 to the 12th place in 2015. In 2011-2013, the country kept the 7th place, in 1999 it was on the 16th place. In 2015, the Russian Federation retained the 1st place for the group “oil/gas” (its share in German imports amounted to 29.1%), but in the context of four-digit classification it kept the championship only for oil with a share of 28.2%, whereas for gas it moved to the 2nd place (with a share of 30.0%), losing to Norway (34.2%). Russia’s role in the import of oil/gas in Germany peaked in 2011 (36.8%); since then it has been steadily weakening, and since 2015 this trend has not been blocked, as before, by the increasing role of Russia in the German imports of oil products (2010 – 10.0%, 2014 – 23.3%, 2015 – 18.9%), and the other Russian products are not comparable with those main products in terms of imports in Germany. In the second ten import partners of Germany Russia will stay longer than in the same weight category for exports from Germany, but the probability of a significant reduction in the influence of Russian business on the German market is very high.

International trade, as well as the nature, abhors a vacuum. Collapsing trade relations with Russia will strengthen Germany’s orientation to other counterparties. Regarding the Baltic States, this would be beneficial, first of all, for Poland, Sweden and Norway: Poland will strengthen its leadership, Sweden will push Russia to the third place in terms of turnover, Norway will close the gap from Russia in terms of imports into Germany.

List of references

Statistisches Bundesamt. Genesis-Online Datenbank. Statistik 51000. Außenhandel. URL: https://www-genesis.destatis.de/genesis/online

 

 

[1] Here and elsewhere – calculated according to the Federal Statistical Office of Germany (Statistisches Bundesamt. Genesis-Online Datenbank. Statistik 51000. Außenhandel. URL: https://www-genesis.destatis.de/genesis/online). Dataareperiodicallyupdated. The Baltic countries are understood as countries that along with Germany are included in the Council of the Baltic Sea States (Denmark, Iceland, Latvia, Lithuania, Norway, Poland, Russia, Finland, Sweden, Estonia).

]]> http://en.abfund.org/?feed=rss2&p=1069 0 How changing consumer habits disrupt the media landscape http://en.abfund.org/?p=1117 http://en.abfund.org/?p=1117#comments Wed, 24 Dec 2014 19:16:37 +0000 http://en.abfund.org/?p=1117

Dr Christian Graggaber — Chief Digital Officer, Hubert Burda Media Russia, Russia. 

The past years have seen a global shift in the media landscape which can be broken down into three major changes.  Consumers are moving from print to digital, they are switching from fixed to mobile driven consumption and the growth in the East is exceeding the growth in the West. In addition consumers are empowered through internet, advertisers have more innovative ways for promoting their products and business in general is transforming to digital.

The article desribes the current market situation by comparing Germany and other developed countries with the development in Russia, outlines the challenges that media houses are facing and gives examples of success stories. Main conclusion is that media houses are competing today with a new generation of content providers. To attract lasting attention they have to reinvent the way they do business. 

 

Few industries have been changed more by the arrival of broadband Internet and widespread ownership of mobile phones than the content creating industry. The media world or rather the consumption of content is undergoing rapid change; the most fundamental change in its history. The new market environment requires traditional content creators and publishers to diverge from their habitual way of doing business, to take risks and to innovate in order to define a sustainably successful path for the future. In fact it is more than innovation, which is required. It is a transformation.

Print publishers now need to adapt to an environment where their customers have started to consume content on other devices, such as on their PCs and mobile phones and in other environments, for example while on the go. Publishers of today need to be able to provide multiple consumer touch points for their content on all available devices and allow for their content to not only be passively consumed but to be actively interacted with. Customers do not even stay only customers but they have become suppliers of content and the Internet has turned the girl or boy next door with a blog into an online sensation with literally thousands, sometimes even millions of avid followers. This drastic change of consumer preferences and habits is forcing well established publishers to completely reinvent themselves.

In most developed countries, the Internet already represents the main motor of economic growth. The online world accounts for up to thirteen per cent of economic output and is driving the creation of new companies, new jobs and new opportunities.[1] It allows, with a few clicks of a mouse, for a Russian citizen to read a German newspaper or for a Polish fashion designer to reach a global marketplace. The Internet is breaking down language barriers and geographic barriers, changing global society forever. The Internet now accounts for 25 per cent of the increase in German exports in the last decade. For example between 2007 and 2011 nearly 30.000 small companies were founded in Germany using Google products. These companies now represent EUR 8+ billion in annual revenues and have created 100.000+ new jobs[2]. This development is visible in Russia as well, where the Internet turned into a profitable business worth up to 8.5% of GDP according to estimations of the Russian Government.

No wonder that media companies in general are taking on the challenge and seizing the opportunity to adapt their organisations. Well established players like global media group Hubert Burda Media (www.burda.com) already generate more than 50% of its revenues from digital ventures. Other media houses have chosen an even more radical and thus risky path to pursue a digital-only strategy. But we do not only see the well-established media houses changing. We also see new players coming into the market. In fact players that did not even exist ten or fifteen years ago are now dominating the market. One of the biggest such players is Google. In just a few years, starting in 1998, Google has grown to employ almost 50.000 people worldwide and it generated USD sixty Billion in revenues last year. A similar success story are Yandex in all Russian speaking territories and other emerging market heroes.

As consumers are inundated with daily offers of media, the greatest challenge is relevancy.

In today’s world it is no longer enough to create content and deliver it to an audience. The challenge is to create relevant content and deliver it to the relevant audience on the right device and at the right time. Moreover, consumers expect more than a one-way information flow. They expect engagement and interaction. To attract lasting attention publishers must understand their customers much more intimately than before and inspire them to engage and interact with their content. Only if a media publication succeeds in doing so, it will find a permanent place in people’s lives, now and in the future – no matter via which mode of delivery, online, mobile or classic print.

Media companies need to be at the forefront of this transformation in order to not be overrun by it. They need to not only follow the changes but drive the changes. Consumers have become emancipated and loyalty to old established print brands, as evidenced by the decline in national print newspaper circulation, has evaporated. Digital only publishers, such as Mashable and The Huffington Post on the contrary have rapidly built multi-million readerships.

Also Burda successfully started to prepare itself for these challenges more than a decade ago and identified three ingredients to ensure a successful future.

  1. Understand the complexity and importance of further technological development and shape the technologies that will be preeminent to successfully run the businesses of tomorrow;
  2. Have clear knowledge about the world today’s consumers live in; and
  3. Anticipate future market trends.

In the most developed online markets the media landscape is a mix of print and online. Contrary to what some Naysayers have said, print has not died… nor will it die. Both forms of media consumption will survive in the long term and complement one another. The same customer who might read his daily news during the week on his mobile phone, might buy a weekly summary print publication or a Sunday newspaper. He might choose to get the headlines digitally but then delve into the details in print or vice versa.

Reproducing print content online without any changes does not work. Simple PDF versions of magazines are not enough any longer. Since content is consumed in a different way today it also needs to be produced in a different way: bundled in different ways for different channels, more interactive including visual elements like video or photo. Particularly in online there is no one-size-fits-all strategy. Online content needs to draw customers in and engage them much more holistically.

In consumer-oriented Internet one has to create different types of digital products tailor-made for the consumer’s needs. The media’s core mission is to relate to people and their lifestyles and take on a positive and supportive role. The media’s job is to deliver products that are informative, entertaining and helpful. This has also been the case in the past, but the online and mobile channels can facilitate this much more effectively than print was ever able to.

Most importantly, online there is no place for mediocrity. Distribution is ubiquitous and instantaneous. Anyone can create content and the public will be the judge of that content. The measure of quality is now the number of likes and shares it receives and how quickly it does so. More so than ever before every single piece of content needs to be memorable and differentiated.  Average content can no longer be hidden in between columns over columns of newspaper roll. Every article, every video needs to stand on its own. Consumers expect targeted, rich, platform-optimised user experiences. If they don’t get it, they won’t come back to the content provider no matter who it is

Consumers are looking for content providers where they can interact with the content, the content provider as well as with each other. Examples like Wikipedia or The Huffington Post that Burda has recently successfully launched in Germany are even built on the back of user-generated content.

One main trend is multi device use – the future looks “mobile”

It’s been about four years since the launch of the iPad and about seven years since the first iPhone came out – few will doubt that we are in the age of mobile. Globally, the smartphone market passed a major milestone in 2013 with 1billion devices sold during the year. Global tablet sales surged 50% in 2013 and mobile sales surpassed PC sales for the first time, at the end of 2013[3]. By 2017, it is projected that smartphone sales will hit 1.8 billion representing 82% of total mobiles phone sold[4]. So what does this mean for Russia? Already mobile phone ownership in Russia is commonplace. In fact mobiles are so popular that more than 50% of owners own more than 1[5]. This leads many to believe that content consumption might skip the PC and laptops and go straight to mobile and tablet devices.

The increasing penetration of smartphones and tablets is already having an impact on magazines, with some publishers seeing huge jumps in mobile traffic. In the US, some magazines are getting up to 50 per cent of its traffic from mobile. Not so long ago, only in 2011, 86 per cent of Conde’ Nast UK’s traffic came from PCs. With less than 1 per cent via tablet and 14 per cent from mobile. Just two years later, desktop traffic had fallen to 58 per cent, while mobile had more than doubled to 30 per cent and tablets rose from 1 per cent to 12 per cent. Similar tendencies can be seen in German-speaking countries as well.

This required another wave of innovation whereby content owners and publishers needed to adapt their content again to another device with new dimensions and characteristics. In Germany we see for example that tablet users like the combination between mobile and print. They like to read magazines on their tablets – magazines that are originally published as print version but also made available via mobile devices. This explains that being online or being a digital native does not mean that society will become digital-only. Still consumers expect and also like to get the most out of the vast possibilities online media offers. And this is a major challenge for most media houses.

Chetan Charma, a mobile technology consultant, predicts that “we are entering the Connected Intelligence era”. These two operative words will change the industry vertical from scratch and make especially media houses look into defining new strategies on how to create and distribute content.

They are forced to change the way content sites are built and how they are monetised. Mobile is becoming the dominant platform in developed countries, still, many media houses face difficulties in finding the right way towards mobile applications. Germany is here not much ahead of Russia or other emerging countries.

Figures show for example that tablet magazine subscriptions still accounted for no more than 3 per cent of total magazine circulation in the first half of 2013, despite the growth of tablet ownership[6]. But it is expected that over the next 7 years magazines will undergo a huge change, with digital editions edging print by 2020 in major European countries like Germany and the US[7]. This development will bring one additional hurdle as there are many players in the market fighting for mobile user’s attention and time: Apps, social networks, games, etc. Content Publishers are therefore in a new way of competition with companies that have not been direct competitors previously.

In additional to a new way of competition, mobile also makes people use different applications at the same time. Thus the traditional silos of media types are disappearing.

 

 

 

Source: Barclays (2014), Russian Internet and Media

Online media requires innovative ways for generating revenues

One challenge for media houses is that online media products – no matter if mobile or desktop – often require different ways of generating revenues than traditional media where the revenues come from ad sales and print copy sales. When turning print content into online content, dollars are often turned into pennies. Reason is that online content is expected to be offered for free and revenues from online ad sales are lower than from print ad sales. Despite this the share of adspend on Internet will significantly increase over time, mainly at the expense of Print.

 

Source: ZenithOptimedia

Three main revenue drivers are currently successfully used: First, transaction-generated revenues play an increasing role when defining successful business models. This means that online offers are free of charge and the business owner only gets a cut once a consumer has decided on purchasing something online. Second, CPM (or “cost per mille” which is the cost per thousand views) models are still popular. This is the marketing measurement index and it is used to monetize content in digital media via ad sales. The third source is revenues from direct sales. Either by selling content or by online retail businesses. One sub segment of this model is subscription based e-commerce. This model is very popular because people get the subscribed service on a regular basis no matter if it is online content, print content or products (food, toys, or clothes). We see growing demand for this model in Russia, although due to the lack of reliable infrastructure it is still at an early stage.

More and more media companies use all three ways of monetisation. As a consequence traditional media houses are also becoming retail companies because they enter direct sales. It is not for example only about showing people what they may like but also about telling them where to buy. Most successful business models follow the consumers to the point of transaction – the point of sales. And the point of sales is increasingly online.

Direct sales via internet is getting more and more important in Germany. The online retail market in Germany is up to almost 50 billion euros[8]. The market is expected to grow 12 per cent per annum through 2017, faster than in any other Western European country. E-commerce accounts for 83% of all revenues made online. The estimated share of online retail in Germany in total retail is 6.6% at the moment. Germany might be the fastest growing country in Western Europe, still, Russia is growing faster. No surprise, Russia’s e-commerce market is smaller than the German market. It was EUR 10,4bln in 2013, up 27% from 2012 and the growth rate is expected to be 35% annually reaching 4.5% of total retail by the end of 2015[9]. According to other statistics, the Russian e-commerce sector could grow to EUR 35-50bln by the end of this decade and exceed EUR 75bln in ten years[10]. Comparing Russia to Germany shows the massive growth potential that Russia has. The upcoming years will bring a lot of new online businesses, the vast majority of revenues will come from direct sales and media houses will have a good chance to get a big portion of the business – as they do in Germany.

Again, mobile devices start to play a leading role when it comes to generating revenues, as the devices can be used for more than just for consuming content. Managers are nowadays more and more talking about m-commerce instead of e-commerce. M-commerce is the delivery of electronic commerce capabilities directly into the consumer’s hand via wireless technology. Usually m-commerce is created via tablets or smartphones. Publishers associate it often with items featured in editorial copies that can be directly purchased. Mobile is now the key driver behind the growth of e-commerce. Whiles sales made on desktop or laptop computers are expected to grow by 9% in the UK in 2014, they are expected to increase by 62% on mobile devices. Another statistics show that 100 per cent of year-over-year online sales growth in the UK was entirely mobile in the second quarter of 2013[11]. Desktop revenue development was flat for the first quarter.

Until recently, integrating e-commerce and m-commerce into a publication or website was not in the focus of traditional editorial teams while also being labour- and cost intensive. Historically, the editor’s opinion was nearly sacrosanct. Editors had the power to make commercial initiatives fly or die. This is not any more the case at least in the US, UK or Germany. Times have changed and the media and media consumers don’t play the same rules any more. Editors recognised that they must change with the times in order to stay in business. One way as mentioned is to make content shoppable by integrating new technology.

If an editor recommends a certain handbag and the consumer likes it then the editor should not make it too hard for them to buy it.  In Germany there is companies that handle the various technological demands of making a magazine’s site or tablet edition shoppable while producing easy-to-use elegant shopping tabs and checkout options. Shoppable content is editorial containing rich, participatory information that does not disrupt the context. These images more than complement the text.  After having made written content shoppable one of the next big trends will be shoppable video content.

The easy access to products combined with curated content done by publishers convinces consumers more and more to make a purchase There is also a solutions for readers who do not want to make an immediate purchase. As on Amazon some sites offer a sort of wish list, enriched with a technology that trigger email alerts when an item’s price drops or an out-of-stock article becomes available. The consumer can access his or her list via mobile device, enabling them to call it up when they are shopping in a store. Statistics show that more than ninety per cent of users respond to these post-discovery notifications, establishing significant ongoing engagement.[12] Today, consumers go on an online discovery journey when shopping. Twenty years ago, consumers had limited ways to discover good deals, the purchasing path was limited to offline print titles for information gathering and offline retail stores for the purchase. Today, as news, communication and entertainment shifted online, the purchasing path shifted online, as well. Auto dealer specials are checked on their websites instead of in newspapers, the yellow pages have been replaced by Google and asking friends for a recommendation before a purchase is done on Facebook. Consumers do not distinguish between editorial and advertising, both forms of content are equally valuable when looking for a product. Shoppable content is still in its early stage but it seems that when a publisher makes editorial and advertising shoppable, their readers are spending more time engaging with those ads. It reinforces the idea that a consumer is going on a discovery journey where the type of content, or medium for that matter, is irrelevant.

 

Data management will help to identify and understand trends

One of the big factors for being successful in internet and identifying future trends is the collection and management of consumer data. And this factor is equally important for any online business model.

The idea of big data is not new: George Orwell’s classic 1984 which was written in 1949 was based on a sort of big data usage. We are still far away from even theoretically being able to use data as it was used in 1984 but still data analyses is getting more and more important.

Social networks, online shops, video portals, search engines – we all leave behind a vast amount of information on the internet. While consumers sometimes feel threatened by this it’s a real boom for companies who can use this data to optimize and align their offerings to meet customer needs. But not all businesses utilize this advantage. While today collecting data is neither complicated nor expensive companies often collect too much data and then do not know how to use it in a meaningful way.

To utilize big data in a meaningful way, companies need to change their behaviour patterns. Instead of traditional databases with historical information that verifies what customers have already purchased, now they have a flood of unsorted data volumes that must be evaluated quickly and without rigid framework in order to detect trends and the resulting interests early on. This requires new IT solutions and business structures. Not only in Russia but also in Germany companies are still often at an early stage of changing their habits. In Germany they especially worry about data protection when using big data analysis. There is no faster way to lose a customer’s trust than to use data for a purpose other than the one previously announced   .

However having big data results in a competitive advantage. The e-commerce retailer Amazon.com now gathers so much data that this is comparable to a major research institute. But, just having data does not make you a winner.

Companies need to learn to interpret and take the right actions after the analysis. Having big amount of data can change the way companies compete because they simply can test upfront their decisions by analysing big data. Big data might tell companies where the consumer is moving to. As mentioned above companies have to follow the consumer to the point of transaction – the point of sale. Big data will help companies move into this direction by better satisfying consumer’s needs. An extremely loyal customer base (as we could see it in print until some years ago) is a hard thing to find nowadays. Businesses that want to succeed must respond quickly to new needs. Online retailers are now able to track the behaviour of individual customers from Internet click streams. In the future they will also be able to update their preferences and model their likely behaviour in real time.

In 2012, US retail giant Target created an algorithm to identify pregnant customers in their second trimester using purchase data (such as the buying of prenatal vitamins) and other factors, some purchased, some collected by the company itself[13].  In Retail this is quite common now. Until not so long ago publishers had to do the analysis via simple circulation numbers: up here down there…but why? Big data collections helps to look into the future and analyse trends instead of looking at static circulation numbers.

Still today most great products are a result of visionary and strong teams and not simply a result from big data analysis. Having the ability to make data-driven decisions is getting more and more important, though. It is a helpful basis for any decision taking process. Sometimes big data shows how people use a product in ways the responsible managers did not expect. It provides a good insight into how a product can be used and improved and companies can further communicate with consumers and build loyalty.

Internationally, there are already successful examples of magazines publishers using cutting edge data algorithm. The Atlantic Group for example launched a magazine that provides intelligent content customised via a given consumer’s interaction with the site[14]. Advertising blocks showing up on a chosen website or within the email interface are also a result of big data analysis. Chances are likely that the advertising seen is for a product the user searched for but did not purchase, yet.

Because of big data, media content supply could be disrupted in the same way as the music industry was disrupted about a decade ago. In the 90s and earlier people consumed curated music sold via CDs. This was later replaced by MP3s. Today individualised playlists are compiled by companies like Pandora or Spotify. The same could happen to magazines and books. In Germany and the US there are companies experimenting with robot journalism. It screens available, fresh content and tailors it for consumers by supplying the consumer only with content that is most interesting for him or her. By this, consumers can for example read an article about the results of the latest football game of the preferred team focusing on the performance of the consumer’s favourite football player instead of giving an overall general review of a game. One of the first companies offering this service is Automated Insights for Yahoo.

In other words publishers just might deliver consumers with content and see what they like. Then they can watch and analyse their reading habits and finally fine-tune the delivered content according to the consumer’s preferences. In a nutshell, data driven content and the way it is consumed by consumers are important to creating work that is engaging and has a high return on investment.

Print is reinventing itself

I previously mentioned that the future is a hybrid model between print and digital. There is not only a clear tendency of integrating print into digital but also vice versa integrating the possibilities of digital into print. Since quite some time we see a growing creativity when it comes to print publishing and especially advertising agencies play a leading role in this. FIPP – the worldwide media association – collected best practice examples for its “Innovations in Magazine Media 2014 World Report”. Some of the examples prove that publishing houses find smart ways of bringing digital into print. And if it is done in a nice way then print will have a sustainable successful future, also in Russia.

In one of the print issues of Forbes magazine, Microsoft promoted its new Office 365 software by including a small wireless Wi-Fi router[15]. The router was placed in a four page insert that ran in a number of magazines sent to business and technology professionals targeted by Microsoft. The router could connect up to five devices to the internet and lasted for two to three hours before it had to be recharged. Another example of creative print was created by Billboard Brazil using NFC. Billboard Brazil has run a test in a special edition magazine with an NFC sticker on its front cover. The sticker encouraged consumers to hold their phone on the cover in order to instantly receive a playlist of some features artists without using QR codes and without downloading anything. The campaign had the goal to increase the knowledge about NFC and to explain people how to use it. NFC devices are also used in contactless payment systems, similar to those currently used in credit cards. Most people do not know they have NFC capability and even if they know they do not know how to use it. The ad in Billboard promoted NFC by sharing a positive experience with its users. Motorola was running a print ad campaign for its Moto X cell phone where consumers had the opportunity to try different colour combinations and see all of the options right before their eyes in a print ad. The advertising was made up of four batteries, three LEDs, some Plexiglas, and a series of buttons. The ad allowed readers to customise the Moto phone in 11 different colours, by tapping different keys to try out different looks.

Technology is a critical game changer that can create new business models and make old business models obsolete. New devices and communication channels continue to change the way media is consumed and media companies in the whole world are developing new approaches in order to sustainably and successfully reach consumers. The challenge is to on the one hand digitize and on the other hand maintain traditional operations during the transformation process. Publishing houses in Russia need to put in place a dual structure to maintain their traditional business model while implementing a second structure for digital. What we have seen in Germany is valid for all countries: The media industry is going through a major structural transformation brought about by a combination of factors, including the rise of digital media and as a consequence changes in the media-consuming habits of it consumers resulting in a deterioration of its traditional economic model. As a consequence media companies must reinvent themselves by seeking out new markets, new consumers and new business models to stay successful. The good thing for society is that the war for new successful business models will result in a high consumer focus of which everyone should benefit in the long run.

 

[1]OECD (2013), The Internet Economy on the Rise: Progress since the Seoul Declaration, OECD Publishing

[2]Institut der Deutschen Wirtschaft Koeln Consult GmbH (2012), generationgoogle** Innovative Geschaeftsmodelle mit dem Internet

 

[3]IDC Corporate USA (2014), Worldwide Quarterly Mobile Phone Tracker

[4]NPD Display Search (2013), Smartphone Industry Quarterly Report

[5]Nielsen (2013), The Mobile Consumer – A Global Snapshot

[6]Alliance for Audited Media (2013), Semiannual Snapshot Report

[7]mediaIDEAS (2012), E-Reading Devices and Paginated Media Forecasts. 2011-2021: The Impact of a New Digital Content Market

[8]Ecommercenews.eu (2014), Ecommerce in Germany

[9]MorganStanley Research (2013), E-Commerce Disruption: A Global Theme – Transforming Traditional Retail          

[10]East-West Digital News (2014), E-Commerce in Russia

[11]Capgemini (2014) & IMRG (2014), IMRG Capgemini E-Retail Sales Index

[12]FIPP, “Innovations in Media 2014 World Report”

[13]FIPP, “Innovations in Media 2014 World Report”

[14]FIPP, “Innovations in Media 2014 World Report”

[15] Adweek.com (2013, David Kieferaber)

 

]]> http://en.abfund.org/?feed=rss2&p=1117 0 PILOT FINANCIAL INITIATIVE FOR BALTIC REGION ENVIRONMENT http://en.abfund.org/?p=106 http://en.abfund.org/?p=106#comments Mon, 25 Aug 2014 17:22:09 +0000 http://en.abfund.org/?p=106 Participants in intergovernmental contacts tend to sum them up in a final document “to fix positions”. These written compromises differ in form, but not in fate: they are of interest only to a narrow circle of professionals. They do not often merit the oblivion, not with so much work behind each provision, accomplished in the interests of states and ordinary citizens.

This article is a brief story of a provision of the Statement of the Conference of heads of government of the Baltic Sea region on the protection of the Baltic Sea held in St. Petersburg on April 5-6, 2013. It reads: “Participants specifically noted the Pilot Financial Initiative of the CBSS… as a new mechanism of promoting activities to protect the environment of the region”.

Annual presidency rotation in the Council of the Baltic Sea States (CBSS) offers a challenge and a test for the ability of member-states to coordinate implementation of proposed cooperation priorities in “your own” term of presidency in the organization. The universal troika mechanism comprising previous, current and future chairs of the Council allows, as a rule, to coordinate new regional projects and ensure succession in their implementation. The story of the CBSS Pilot Financial Initiative offers a vivid example of efficiency of the mechanism.

In June 2011 when Norwegian presidency was coming to an end, the 16th ministerial session of the Council adopted the Oslo Declaration. One of the agreed decisions related to the Russian-German initiative to exchange experience in Public-Private Partnership (PPP) to promote investment into the future of the region and study ways to encourage regional partnership in innovations and modernization within the CBSS framework. During subsequent German presidency in the Council (July 2011 – June 2012) the Russian foreign ministry initiated practical efforts to engage major banking institutions in cooperation along the guidelines. The result was not long in coming. On May 31, 2012 on the sidelines of the 9th meeting of the heads of government of Baltic Sea states in Stralsund (Germany), a memorandum of understanding was signed in the presence of Russian delegation chief – First Deputy Prime Minister Igor Shuvalov – between CBSS Secretariat, the German banking group KfW (state development bank), and State Corporation Bank of Development and Foreign Economic Activity (Vnesheconombank). The document was signed by Director General of CBSS Secretariat Jan Lundin, Vnesheconombank Deputy Chairman Mikhail Kopeikin, and KfW Director General Stephan Opitz.

The launched Pilot Financial Initiative (PFI) was a prelude to creating an open platform to attract partners and funds into projects aimed at sustainable economic development and cooperation in the geographic area of the CBSS, transfer of scientific and technical knowledge, increased efficiency of CBSS investment, and implementation of sub-regional programs. The initiative is open for other financial institutions operating in the Baltic Sea region.

Under the CBSS aegis in 2012-2014, Vnesheconombank and KfW expressed readiness to begin financing projects and open a credit line up to 100 million euro a year for PFI area – St. Petersburg, Kaliningrad, Pskov, Leningrad, and Novgorod regions.

Trilateral cooperation includes:

– easy-term loans to small and medium businesses in the sphere of innovations and modernization. The PFI mostly targets sustainable development of Russian northwestern regions, and

– financing of Public-Private Partnership projects as a most efficient instrument to modernize economy and intensify cooperation in the Baltic Sea region. It is focused on municipal infrastructure, climate and environment, energy efficiency, and complex development of territories.

The financing mechanism works as follows: KfW Bank provides long-term incentive loans for VEB projects which, in its turn, finances projects either directly or through its network of subsidiaries (MSP Bank, Svyaz-Bank, Globex Bank, Federal Project Financing Center, and others) or though a corresponding network of partner banks in Russia or other CBSS member-countries under the on-lending principle.

The PFI working body is the Coordinating Committee comprising six members, two from each party. Its main function is to estimate and approve project proposals offered by KfW and/ or VEB, control and assess PFI implementation, and submit reports to the CBSS Committee of Senior Officials. The founding meeting of the committee took place in the office of the Russian foreign ministry in St. Petersburg on June 7, 2012. Head of the KfW office in Russia Daniil Algulyan was elected its chairman.

The first agreement in the PFI framework was signed in Moscow on November 16, 2012. It envisages a five-year credit facility of 110 million US dollars to finance projects in St. Petersburg, Kaliningrad, Leningrad, Novgorod, and Pskov regions. According to the terms, VEB provides finances to partner banks which in turn lend them to Russian enterprises.

The second agreement was signed at the CBSS Secretariat in Stockholm on December 12, 2012. According to the loan agreement worth up to 65 million US dollars, funds will be provided in ruble equivalent at a fixed rate. They will be used by VEB to finance the project of economically and ecologically feasible treatment of mixed household waste in St. Petersburg implemented by Avtopark #1 Spetstrans Company. The agreement is valid for seven years.

The implementation of the project will dramatically decrease the amount of solid waste at dumps, extend the service life of the dumps and improve the general environmental situation in the region. Five waste-treatment enterprises will recycle up to 70-75% of paper, corrugated cardboard, offset paper, plastic bottles and solid-plastic boxes, polyethylene film, ferrous metal scrap, aluminum cans, heat-producing elements for cement industry, and biologically degradable waste. Up to 15-20 percent of recycled garbage will become environmentally safe as it will contain no biologically degradable waste. The aggregate recycling capacity will reach 900,000 tons of solid waste a year. Thus, the project will decrease greenhouse emissions in the region and eliminate harmful impact of garbage dumps on the environment.

There is enormous demand in Leningrad region for such services and waste-treatment plants are expected to have a full load. The project is being implemented with the support of the long-term regional goal-oriented investment program for treatment of solid household and industrial waste in St. Petersburg in 2012-2022. It is also backed by the government of St. Petersburg as the enterprises will be built on municipal land under a long-term (49 years) lease contract.

On November 22, 2012 Kaliningrad hosted, within the PFI framework and under the auspices of the Russian CBSS presidency, the International Conference on Support to Small and Medium Businesses in the Baltic Sea Region: Financing, Public-Private Partnership, and Innovations. The event aimed at attracting the attention of small and medium businesses, financial institutions and agencies to the problem of long-term financing and support to small and medium businesses in the sphere of innovations and modernization in the Baltic Sea region. The conference was attended by representatives of development banks and financial institutions of the Baltic Sea region, small and medium businesses, the Embassy of Germany in Russia, the government of Kaliningrad region, organizations which support small and medium businesses, and scientific and expert communities.

At present, the CBSS Secretariat is working to engage in the PFI such influential regional financial institutions, as the Nordic Environment Finance Corporation (NEFCO) and the Nordic Investment Bank (NIB), as well as development banks from other countries of the Baltic Sea region.

It is logical therefore that the PFI implementation experience was a major issue in the economic section of the address by Russian Foreign Minister Sergei Lavrov about priorities of the Russian CBSS presidency delivered at the third ministerial meeting of the Northern Dimension in Brussels on February 18, 2013. The algorithm of the PFI project as an instrument of close and mutually beneficial cooperation of well – tested business partners and the non-governmental organization can and should lose its unique status as soon as possible. The Baltic Sea region should again confirm its pioneer status in introducing new models of social and economic interaction for the benefit of its peoples. The recipe of Public- Private Partnership is available.

Heads of governments at the Baltic Sea Forum in St Petersburg on April 5-6 praised the PFI in acknowledgement of well-chosen areas of work, as well as the readiness to offer projects under implementation for the fulfillment of new tasks.

Despite the seeming triviality, the problem enormous economic and social significance. In the modern world, approaches to its solution demonstrate maturity of the state and business and their ability to create a comfortable environment for the life of the citizens.

Therefore, the problems of the “green growth”, reduced discharge volumes and rational recycling of waste also for the production of energy have fully entered the global agenda. We shall definitely discuss the issues at the G20 which Russia currently chairs.

Russia accumulates some 3.5 billion tons of waste every year. Close to a quarter, but much less in reality, is recycled. The rest is burned down or dumped at special sites. Regrettably, much waste is dumped at illegal sites whose number is constantly growing.

The volume of accumulated waste in Russia currently comprises around 90 billion tons.

The experience of many countries shows that utilization and recycling of waste is a complicated but promising type of business activity. We have to create conditions for investors and small and medium businesses to come and operate in the sphere.

Quoted from President Vladimir Putin’s speech at a meeting on April 10, 2013 devoted to incentives in household and industrial waste treatment.

Nikolai Lakhonin,

for Amber Bridge

The Amber Bridge has already covered various PFI stages. Its third issue in 2012 contained an interview with Russian Foreign Minister Sergei Lavrov headlined Synergy of Efforts – a Practical Task while issue 4 in 2012 published an article by Director General of the CBSS Secretariat Jan Lundin headlined Who We Would Like To Be With. We believe it is logical to continue covering the implementation of the successful project.

]]> http://en.abfund.org/?feed=rss2&p=106 0 GOD WAS IN AUSCHWITZ http://en.abfund.org/?p=99 http://en.abfund.org/?p=99#comments Fri, 22 Aug 2014 11:49:46 +0000 http://en.abfund.org/?p=99 German priests look for answers to difficult questions

Over 68 years have passed since Soviet troops liberated the Nazi concentration camp which even today horrifies people by its name alone – Ocwiezim or Auschwitz. Built in 1940, it developed into a full-fledged death factory by 1942. The data on Auschwitz deaths differ but the average figure is over a million dead. In 1947, former prisoners established the State Museum Auschwitz-Birkenau and became its first staffers and guides. UNESCO listed the memorial as a World Heritage Site in 1979.

German priest Manfred Dezelers has been living for over 20 years in Auschwitz at the doorstep of the former “death factory”. He welcomes guests in the Dialogue and Prayer Catholic Center and shares knowledge and considerations as the author of a thesis about God and the evil represented by Rudolf Hoess, the commandant of Auschwitz concentration camp. However he has to listen a lot as visitors to the Auschwitz-Birkenau State Museum are usually inclined to speak out. Close to a million people annually visit the museum. .

What does the Nazi concentration camp reveal? What does it offer for culture and memory – global, national and individual? Manfred Dezelers told our correspondent about it.

How did you, a German, come to Auschwitz?

I went to Auschwitz for a week as a tourist. I got questions there which I try to answer up to now. Then I was a volunteer in Israel. I met those who survived the war and escaped the Nazis in Germany and in Europe and who were inmates of the concentration camp and had their number tattooed on the hand. I realized how deep their wounds were and how important it is to promote reconciliation.

I lived for some time in my native land and studied theology. I became a cleric of a parish near Munich. The community maintained contacts with Poles and travelled to Auschwitz. (The German Confederation of Catholic Priests initiated a dialogue between Germans and victimized peoples, and in 1970 an important political act took place: German Chancellor Willy Brandt kneeled before the monument to the fighters of the Warsaw ghetto – ed.) I met a priest from Auschwitz and I still live at his place. I though it is more important to share life and promote mutual trust rather than to speak about reconciliation. I like the Polish saying “hear the voice of the land”.

In Auschwitz it is necessary not only to study history but to “read” the message of the victims and, naturally, hear the voice of your own heart. In Auschwitz your heart inevitably asks: “What would you do in such circumstances?

Does Auschwitz impress all visitors the same way?

Each person compares what he learned here with what his parents and teachers told him and with his belief. Various peoples have different perceptions. For the Germans memory about Auschwitz is memory about guilt. Not personal guilt as few people remained who were direct accomplices in the crime. The guilt means what other peoples think about us as a nation. It is senseless to say I was not personally involved in it. You have to work to promote trust.

In Auschwitz it is necessary not only to study history but to “read” the message of the victims and, naturally, hear the voice of your own heart.

Auschwitz for Jews means the collapse of the old world when they lived in Europe. They encountered manifestations of anti-Semitism but could never imagine the hatred would become overall and deadly. They could never imagine that Hitler would decide to “finally settle the Jewish issue” in Europe and that civilized and cultural Germans would begin to hunt them down and send in railway cars to death camps. Most European Jews were killed. Now Jews live mostly in the United States and Israel with fear the tragedy may reoccur. Their reaction to the challenge is the creation of their own state. All Israeli schoolchildren, police and army officers go to Auschwitz. Besides political aspect, there is also a religious one: how did God allow the extermination of Jews? It was worse than slavery in Egypt. One of the answers is that the State of Israel revived which means God did not forget his people. Another answer is that we cannot comprehend God, but only believe in him. Maybe he was crying. . .

The Polish vision of Auschwitz is unique. It is mostly related to the major role of the Catholic religion in public conscience of the people. The emergence of Poland as a state is tightly linked to its baptism. In late XVIII century the country disappeared from the map of Europe as it was divided into German, Austrian and Russian parts. Polish culture survived the hard times due to the Church. In 1918 Poland re-emerged and in 1939 was again divided. Hope for restoration of the state was defeated, but not religion. The idea of self-sacrifice for the sake of Motherland, for the preservation of religion, love and family values in the name of God strengthened in Polish Catholics who were sure it will give them their due sooner or later. The belief is still strong in Poland. St. Maximilian Kolbe, a Polish Conventual Franciscan friar who volunteered to die in place of a stranger in Auschwitz, symbolizes such an attitude to life. He personifies the victory of belief and love over evil and hatred.

It is difficult for me to speak about Russian perception of Auschwitz as I am a westerner and until recently had a vague perception of the Soviet Union and Russia, of their understanding of war in general. The Russian display in Auschwitz-Birkenau speaks about the liberation of the camp by Soviet soldiers in the context of liberation of Europe from Nazism. In late January 2013 a new Russian display opened which speaks about Soviet inmates. Poland is so engaged now in criticizing Communism that it practically says nothing about war victims from the Soviet Union and expresses little gratitude to its citizens for liberation. I believe it is painful for Russian war veterans. Poland dislikes the Soviets, although they liberated Auschwitz.

Decades have passed, but hard feelings are still there.

We everywhere touch unhealed wounds related to our identity. We should not rub salt into wounds and ask whether it is painful or not. There are doctors to heal wounds. However it does not mean that all the rest should sit idle. Relations between peoples affected by Auschwitz are still healing and we would like trust to strengthen where it was undermined.

You mentioned how Jews respond to the question about God in Auschwitz. Do Christians have their own interpretation?

There is Cross and the experience of abandonment by God in the center of our religion. Remember the sigh of crucified Jesus: My God, My God, why hast though forsaken me? It is key to my hope: God sides with victims even if they do not see or feel him. Christ went to where people most needed him. Therefore, I am convinced that God was in Auschwitz. One Polish inmate scratched a cross on the wall before death. It was a small sign that even in that hell it was possible to find God.

Every person has dignity. It is impossible to see it under a microscope as Nazis tried to do when they studied racial differences. You have to believe in it. In Christian tradition such a belief is rooted in the biblical story about the creation of man after the image and likeness of God. God lives in each of us and loves each of us. The love can be betrayed if you become a criminal. However He would not stop loving and waiting for repentance. Therefore my answer to the question “Where God was in Auschwitz?” is: “In dignity of the victims”. He addressed the conscience of criminals through it. Including merciless Auschwitz commandant Rudolf Hoess?

Yes. I traced what he felt and how he pushed the concern out of his soul. He was not born a monster of cruelty. It was an ordinary Catholic family, but there was no love in the house. The boy was afraid of his strict father and ran away at the age of 15 to become a hero soldier. Then he abandoned the Church and found the essence of life in pseudo-religion of National-Socialism. Since the First World War it was written on the belts of Wehrmacht soldiers: God is with us. When Himmler was asked whether it should be dropped he replied: “We believe in Providence and are its carriers”. The Nazis tried to establish “natural supremacy of the strong race” and “clear” themselves of everything which weakens the people beginning from mentally sick Germans who became the first victims of gas chambers and up to the influence of Judaism and Christianity with their traditions of forgiving sinful people.

By adopting the pseudo-religion Hoess abandoned human attitude to people: SS was allowed to feel only racial supremacy over inmates. Nevertheless, in his memoirs written in prison after the war there are scenes when Hoess looks at inmates like people. He stands on a platform where railway cars arrive with people doomed to death and sees a woman shouting at him and playing kids. The scenes began to reappear in his conscience at meetings with his own wife and children. To get rid of them he walked for long in the neighborhood and rode a horse. Actually, it was existence, not life. He killed his own humanness. God was in Auschwitz – in glances of victims at the camp commandant. He knocked on the heart of Hoess with a mute pang. But the man closed himself. By killing inmates he killed God in himself. This hardness is the nature of evil.

German philosopher Theodor Adorno is believed to have said: “You cannot write poems after Auschwitz”. Do you believe there are impossible things after such a horrifying experience?

As for poems… People who survived in the camp wrote verses for memory to acquire a form. Let’s take Paul Tselan, for example. If you surround a problem with silence it will once develop into emptiness. Auschwitz cannot be forgotten. The issue is in comprehending out responsibility and its scope. I am deeply convinced we cannot allow Hitler to “win posthumous victory”, as philosopher Emil Fackenheim said. He said: if after Auschwitz there is no sense to be a Jew, then the Jewish issue has been finally settled. Those people were doomed but they survived and have to go on. They were denied a place on earth, but now they have a whole state. Nazis wanted to eliminate their religion. It means it is specifically important to preserve Judaism. They wanted to bury them in oblivion – we have to remember them. They wanted to kill dignity in people – now they have to be full of it. I believe memory of Auschwitz should not kill belief in good. People should not come back home from a visit to Auschwitz in a suppressed mood with a feeling of evil and hostile world. Former inmates confirm that it would benefit nobody. The meaning of a visit to the memorial is to comprehend your responsibility for a better future world.

The Polish vision of Auschwitz is unique. It is mostly related to the major role of the Catholic religion in public conscience of the people.

There is a display of human hair of inmates in the museum. Sacks with cutoff hair were found after the liberation of the camp. There were many disputes whether to display them or bury. It was finally decided that hair is not a part of the body. The “exhibits” symbolize the attitude to people as material. The Nazis used both the physical force of inmates and their belongings, including golden teeth and even ashes from burnt corpses. When I look at the display of hair I always cry inside me: “You cannot treat people like that!”

Why do you think that despite numerous facts about Nazi atrocities the ideology still finds supporters also in countries that suffered in World War Two?

I believe Nazism is based, inter alia, on a strong human temptation: “I want to conquer the world, possess everything and have nothing in common with other people. If they are in my way I will eliminate them”. This temptation – in a reduced form – is known to everyone. It did not disappear with the collapse of the Nazi state. Therefore, it is very important to have a public system based on respect to dignity of any handicapped person regardless of whether he agrees or disagrees with me. It is easy to do it in theory in the form of a general declaration on human rights. In reality people quickly forget declarations. If mutual respect becomes possible for a narrow circle of people they will be able to bring other people into their space. It is better to ask: “What do I have to do?” Otherwise all the talk about general issues allows each of us to idle.

Tatyana Tkacheva,

Rossiyskaya Gazeta – Amber Bridge

]]> http://en.abfund.org/?feed=rss2&p=99 0 RUSSIA’S INTERNATIONAL DIALOGUES http://en.abfund.org/?p=60 http://en.abfund.org/?p=60#comments Fri, 22 Aug 2014 09:47:14 +0000 http://en.abfund.org/?p=60 Visit to Germany

On April 7-8 Vladimir Putin made a working visit to Germany. The Russian president participated in the opening ceremony of the annual industrial fair in Hannover of which Russia was the main country-partner this year. The president said in his address that in conditions of continuing economic volatility “mutual trust and coordination of economic activities of various countries and enhanced dialogue between business circles were in high demand as never before. It is encouraging that Russia and Germany acted according to the partnership logic in these years.”

On the second day of the visit Vladimir Putin and Angela Merkel laid a wreath to the memorial to Soviet inmates of the Alem concentration camp who died there during the last days of World War II. Later the Russian president and the German chancellor opened the Russian pavilion at the International industrial fair Hannover-2013 and viewed the displays of leading Russian and German companies. The visit ended with a joint press conference by Vladimir Putin and Angela Merkel.

Vladimir Putin’s interview with ARD TV and radio company

On April 2 the Russian president gave an interview to the ARD TV and radio company on the eve of his working visit to Germany.

In response to the voiced concern over the situation with non-governmental organizations in Russia Vladimir Putin said “there are 654 operating non-governmental organizations in the Russian Federation which, as it became clear now, are financed from abroad.” At the same time “no activity, including domestic political activity, is banned for foreign-financed organizations. We simply want to know who receives the money and how it is spent.”

Asked whether he still trusts the euro the Russian president said: “We trust the euro, we trust the economic policy of great European powers and mostly the economic policy of the leadership of Germany.

We were right to keep a big volume of our gold and hard currency reserves and our reserves in general in the European currency.”

The interview was published on April 5.

Baltic Sea Forum

On April 5 Dmitry Medvedev participated in the Conference of the heads of state of the Baltic Sea region devoted to environmental protection (Baltic Sea Forum) held in St. Petersburg in the framework of the Russian presidency of the Council of the Baltic Sea States. On the same day major publications in Denmark, Iceland, Latvia, Norway, Poland, Finland, and Estonia carried his article The Baltics in the XXI Century: Environment is Priority”.

On the sidelines of the forum Dmitry Medvedev met Norwegian Prime Minister Jens Stoltenberg, Finnish Prime Minister Jyrki Katainen, Latvian Prime Minister Valdis Dombrovskis, Lithuanian Prime Minister Algirdas Butkevicius, and Estonian Prime Minister Andrus Ansip.

The Russian prime minister held a press conference on forum results. Asked about prospects of improving bilateral relations between Russia and Baltic countries Dmitry Medvedev said: “If we exit from the framework of certain schemes which are sometimes ideological in bilateral relations we can give a good impulse to the development of economic cooperation and people-to-people contacts.

I hope it will happen.”

Russian Government – European Commission

On March 22 the Russian Government – European Commission meeting was held in Moscow.

A number of documents were signed after the meeting, including a roadmap for energy cooperation between Russia and the EU up to 2050. A day earlier Dmitry Medvedev participated in the international conference Russia – European Union: Partnership Prospects which was also held in Moscow. The conference began with speeches by Dmitry Medvedev and European Commission President Jose Manuel Barroso. Medvedev stressed that for Russia the development of relations with the European Union was a long-term priority. It is important to design a stable basis for interaction. It is inappropriate and dangerous to delay the work, Medvedev said.

Vladimir Putin meets Jose Manuel Barroso

On March 21 the Russian president met the European Commission president in Moscow. They discussed one-on-one prospects for economic cooperation between Russia and the European Union and preparations for the G20 summit in St. Petersburg, as well as the Cyprus problem.

 

]]> http://en.abfund.org/?feed=rss2&p=60 0 SILENT BATTLES OF THE LOUD WAR http://en.abfund.org/?p=93 http://en.abfund.org/?p=93#comments Fri, 22 Aug 2014 09:12:47 +0000 http://en.abfund.org/?p=93 Victory in Europe Day, or VE Day is celebrated in many European countries, though not necessarily as a state holiday. There is practically no family in Europe that did not suffer from Nazi vandalism.

In Germany for example, the population traditionally marks the anniversary of liberation of the country from Nazism. Poland which suffered major losses in World War II, holds mass events devoted to the great victory. Elsewhere in Europe VE Day is not forgotten either, even in the states that took no military action against Nazi Germany. The military history of North European countries says there was everyday passive resistance to Nazi terror in Denmark and Norway during the occupation by Hitler’s troops.

According to an official historical concept, World War Two victimized many countries as they were dragged into the merciless mayhem against their will. How could small countries resist the overwhelming might of superpowers? They would have been crushed had they attempted. . .

However history proved that military intervention can be resisted not only by armed heroes, but also by each resident through his personal refusal to participate in the developments. We asked Professor Vadim Roginsky, PhD History and leading fellow of the General History Institute at the Russian Academy of Sciences, to tell how it happened in Scandinavia.

– It is important to remember that Scandinavian peoples occupied a high position in the “new order” hierarchy of the Nazi regime. Hitler did not plan to exterminate them. On the contrary, he wanted the relationship between new authorities and the people in occupied territories serve as an example for others. Therefore, regimes in Scandinavian countries were tolerant to local population. Still the Nazis enjoyed no gratitude from residents of the countries as collaboration with the occupants was inadmissible for most of them.

Denmark: leaflets were printed right under Nazi nose

It is clear that Denmark had no chance to defeat the overwhelming hostile forces. The official military doctrine of the country during the First and Second World Wars rejected military resistance in case of aggression. Although the potential adversary was not named it was clear the talk was about Germany. When on April 9, 1940 Nazi Germany invaded Denmark under the pretext of protection from Great Britain the armed forces of the country were ordered to capitulate. The seizure of Copenhagen in April 1940 was routine: several companies of Nazi soldiers marched in the central Lange Street of the capital city. Residents went to work and astonishingly looked at the march while policemen reacted professionally and began to regulate traffic. German units reached the palace and an officer began to open the doors. A shot was fired and one guard was killed. Brief negotiations agreed that weapons will no longer be used. Relations with England were banned. Danish banks were ordered to subsidize German economy. However the government refused to accept a completely puppet governance of the country and justice system similar to other occupied nations. The Danes stubbornly pushed their own policy up to August 29, 1943 when Gestapo units were sent to the country. The Germans wanted the Danes to “resolve the Jewish issue”. However the Jewish community in Denmark which included refugees from other countries escaped persecutions and reprisals which occurred in other occupied territories. King Christian X of Denmark visited a synagogue in 1942 and defended Jews in his speech. He promised, in particular , that if Jews are forced to wear a yellow star both he and the whole Royal Family will also wear it. Denmark remained the only country under Nazi control where the yellow star w as abandoned. In 1943 the Nazis began to prepare their own massacre of Jews. However there were people in German headquarters who warned would-be victims of upcoming deportation and on day X none of the listed Jews was at home. Danish resistance members helped 7200 out of 7800 Jews escape to neutral Sweden. Local residents sheltered nearly 500 people in their homes. 99 percent of Jews were saved.

An exciting example of solidarity of the people was the operation of an underground printing shop right under the very nose of the Germans in central Lange Street in Copenhagen. To silence the noise of the print several sewing machines operated on the ground floor. Practically the whole city knew where leaflets were printed but it remained a secret for the occupants. Underground committees met nearly openly but the Germans failed to arrest anyone for anti-Nazi propaganda. Any suspect was warned in advance and had time to escape. It is clear that such actions would be impossible without cooperation with the Danish police. The Germans realized that police were double agents and disbanded the force on September 19, 1944 and arrested many officers.

Such indirect resistance baffled the Nazis. To neutralize dissent they resorted to a tactic which was not used in other countries – secret killings of suspected anti- Nazi activists.

Norway: gold reserve and government in exile

The Oslo fjord cuts deep into the land and the Royal Palace and Norwegian parliament are located on its shores. The Nazis sent a warship to seize two strategic objects. The garrison opened fire at the enemy and succeeded to sink the Blucher cruiser with close to a thousand troops. The planned assault on the Norwegian capital was disrupted. The Germans had to change the plan and land their troops at an airfield.

The seizure of Copenhagen in April 1940 was routine: several companies of Nazi soldiers marched in the central Lange Street of the capital city.

The Norwegians won time, just several hours which were enough for the government and the Royal Family to flee from Oslo to Elverum locality. Lawmakers gathered for a session in a forest school and decided not to surrender until a single German soldier remained on the Norwegian territory. The government was vested with extraordinary powers for the whole period of war, but had to emigrate to England. The national gold reserve was also moved there in several train cars. The funds greatly helped Norwegians during the war.

The Nazis several times tried to convene Norwegian Storting (parliament) to resolve the main issue of legitimizing their authority. However there was no quorum as one or another lawmaker was absent for reasonable excuse of illness or travel.

Most Norwegians like Danes rendered considerable although unarmed resistance to Germans. The actions of occupation authorities were targeted at. . . emptiness. Teachers massively rejected the “honor” of joining the Nazi party. The occupants wanted to span bridges with genetically close people and organized sport competitions. However the integration effort failed. Photos of a football match between Norwegian and German teams clearly show an empty stadium.

The Nazis told local priests to pray for the glory of German arms and churches were immediately abandoned by parishioners. Cinemas had to show newsreels about victorious Third Reich army before movies and the art of cinematography immediately lost its popularity .

The Nazis were instructed to be extremely polite and ceded their seats to females in public transport. However women refused to take the seats and many passengers left the vehicle if there were Nazis in it.

There were camps for prisoners of war on the Norwegian territory. Any communication with the POWs was banned under the threat of execution. The Norwegians found a way out and send their children to give bread, fish, potatoes to the prisoners. The Nazis did not touch the kids as it would mean “aggravation” of relations which they were ordered to avoid. However, naturally there was a risk. . .

If POWs succeeded to escape the locals never let them down and helped them hide and then move to Sweden. Their solidarity made the escapees invisible although a huge Nazi army of 400 thousand men w as deployed in Norway.

In 1944 the Nazis prepared mobilization to the East front and suddenly all files of recruits were destroyed by fire. They had to begin listing them anew but had no time to complete the task. The mobilization failed.

Most Norwegians like Danes rendered considerable although unarmed resistance to Germans.

The Scandinavian experience shows you do not always have to risk your life if you refuse to collaborate with occupants. Sometimes you simply don’t have to hurry and show great zeal in fulfilling instructions. It’s better to keep mum…

Ksenia Zagorovskaya,

for Amber Bridge

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