Joule of denial: Russia’s energy games

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Hello, and welcome to the Intelligence from the Economist. In New York, I'm John Fassman. Every weekday we provide a fresh perspective on the events shaping your world. Before Russia's invasion, Ukraine was the surrogacy capital of the world, with favorable laws and plenty of willing surrogates. The war disrupted that industry, but didn't end it. Some women who fled Ukraine have returned to give birth. And birdsong can define a place just as specifically as topography or a skyline. In much of Britain, the songs have changed as once ubiquitous birds grow less common and long rare species return to the skies. But first, Since February, Russia has been waging war on Ukraine. It has also been waging an energy war across Europe. The bills for that energy have been rising ever since the European Union imposed sanctions on Russia over its invasion. Russia responded by throttling supplies of gas. Vladimir Putin, Russia's president, has now threatened to freeze Europe this winter if it caps the price it will pay for Russian gas. Several European countries have so far unveiled measures to help people through winter. Germany's Chancellor, Olaf Scholz borrowed the words of a famous football anthem to promise citizens that nobody would be left on their own.

You'll never walk alone.

Different European countries seem to have been taking different approaches to this problem. But a more coordinated response appears to be on the way.

Europe has spent the last few months scrambling to make sure that it has enough gas to get through the winter.

Matt Steinglass is our Deputy Europe editor.

Europe is very reliant on Russian supplies. Germany, for example, normally gets 40% of its gas from Russia. They need this gas both for home heating and for electricity generation, and they're trying to make sure they have enough stockpiled. Looks like they've met their targets to do that. But prices for energy are skyrocketing. So EU countries have been unveiling package after package to try to help out citizens who are paying huge energy bills. A series of measures at the EU level will hopefully be more effective in countering this problem than doing it at a country by country level would be.

This is a long standing problem, and it's one that I assume most European leaders would have foreseen. Russia using energy as a weapon in. You say they've built up these stocks of gas. Why is the high price still a concern? Are these stocks insufficient?

No one knows how much gas they're going to need to get through the winter. And that unpredictability means that they need to keep on buying guaranteed contracts for gas and power generation. There's a tremendous competition at this stage to get that last bit of power guaranteed. On September 2, the G7, which is this group of very large economies, announced that they were going to cap the price of Russian oil. In retaliation for that, Russia announced that they were keeping the Nord Stream. One gas pipeline, which is the most important gas pipeline between Germany and Russia, closed indefinitely, supposedly because of maintenance issues. But everybody sees it as retaliation for the G7 decision. That has sent prices even higher.

So how are European governments trying to tackle that cost problem, especially for consumers?

There are a number of ways that you can handle this. One is simply to spend a lot of money subsidizing energy. And governments have been doing that to some extent. Another is to let prices rise, but hand out a lot of money to your citizens, especially those who are most vulnerable and least able to bear the increased costs. And governments have been doing that as well. Another approach is to try to cap prices, which also requires subsidies. Usually the governments have been taking each of these projects in different measures. Germany has spent the most so far. They've passed packages that amount to 95 billion euros worth of intervention. They include topping up child benefits, giving extra money to pensioners. They're also putting a brake on the price of electricity. For the basic minimum amount of electricity that a household needs. France is doing similar interventions. The difference in France is that they are simply offering benefits to everybody, regardless of whether they need them or not, and then trying to cap them price hikes. They spent 64 billion euros so far. They've frozen gas prices until the end of 2022 and have capped the rise in electricity prices to about 4%. And they're subsidizing petrol at the pump.

So, Matt, it sounds like EU governments agree that they have to help their citizens, but not how. What are the risks of getting it wrong?

One of the biggest risks is that you take away the incentive that citizens have to cut back energy use. If you subsidize their use too heavily, or if you cap the prices, then citizens have no reason to stop using electricity and gas, and you're going to see prices continue to rise. And in a couple of places we've seen, they have got it wrong. In Spain, for example, they have capped the price of gas to companies that use gas to generate electricity. And as a result, those companies have used more gas to generate electricity. Their consumption has actually gone up dramatically in the first half of the year. The other big risk is that if you do these kinds of interventions country by country, you can end up bidding against each other, and you're not actually accomplishing anything for your citizens. You're just competing against each other to hand out more money to energy producers. So that's why it's so important to address this at a European level. And that's why the proposals that Ursula von der Leyen, the head of the European Commission, made a couple of days ago are so important.

So tell us about those proposals.

Ursula von de Leyen has laid out five ideas. The first is a mandatory peak that would be imposed on each country. She wants to reduce electricity use at peak times because it's that surge of electricity use that sets the price. Another idea is to cap the revenues of electricity producers who have low generating costs because they use renewables or nuclear. They are not being hit with higher fossil fuels, but because the overall electricity prices rise, they can charge more for the electricity, too. That just goes into their profits. She wants a solidarity contribution from fossil fuel generators, which is basically a windfall charge, because fossil fuel producers are making a lot of money off of this, too. A proposal to cap the price of Russian gas drew a furious response from Vladimir Putin. He said, if Europe engages in that, then we're simply going to stop all energy deliveries to Europe. It's possible that that threat is moot because Russia has already practically cut off its gas deliveries to Europe and Europe is going to stop buying Russian Oil. Anyway. There's also one more rather complicated measure. A lot of energy producers have to engage in complex financial derivatives in order to stop gas prices from fluctuating. And the EU is proposing to help them out with that. Basically.

Let's look beyond the eu. Britain also faces the prospect of astronomical energy costs. Its new Prime Minister, Liz Truss, what has her response been?

Liz Truss has announced an enormous package of intervention into the energy market. The expected cost is 150 billion pounds or more. First of all, she's going to cap the average price that households are going to be spending on Energy to 2,500 pounds, which is not too huge an increase over their normal annual spending. She's going to protect businesses as well, although they'll only get six months of guaranteed protection, whereas the protection for households will last for two years. She wants to get government to stimulate more production in Britain's domestic gas and oil industry, including fracking for shale gas. And they're also going to reform contracts for renewable energies to stimulate them to produce more electricity as well.

Let's talk about the guy on the other side of the table. It's pretty clear that Vladimir Putin sees energy as a weapon, as a way to deepen divisions within Europe. Could he be right? Do you think EU unity over Ukraine could fracture this winter?

Vladimir Putin could be right. Hungary, for example, has been pleading for months for a softening of sanctions on Russian energy exports. Bulgaria, which used to be a firm supporter of the EU and NATO consensus against Russia, has shifted in the last few months. And in the Czech Republic, you had a demonstration of 70,000 people protesting higher energy prices, asking for more help from the government and, and in some cases also asking that the government stop helping Ukraine so much and go back to the table and negotiate with Russia. Now, at this point, that kind of discontent looks like a minority view, but you could certainly see over the course of several months, as elections in Italy go forward, for example, Italy has a tradition of sympathy with Russia. It's not entirely clear whether the parties that are going to win that election are as determined on Ukraine as the previous governments have been. You could certainly see Europe's consensus to continue sanctions against Russia eventually fracturing.

All right, Matt, thanks so much for joining us today.

Thank you, John.

I've been speaking to a 31 year old woman in central Ukraine called Tamra. When Russia invaded her country, she was 30 weeks pregnant. There's sort of missiles raining down and she was put on a bus to Poland. She was fleeing for her life and for the baby inside her avantika Chilcote.

Is an international correspondent for the Economist.

And the interesting thing is that Tamara was carrying a baby that was not her own. She was carrying a baby for a British couple. She's a surrogate. And the agency that she was working with was sort of managing her evacuation. Tamra didn't really want to leave. She was put on this bus missing her own son and her husband, who she left behind. She's 30 weeks pregnant. So sitting on a bus stationary is very uncomfortable. The driver wouldn't stop every time she needed to use the loo. Her legs are swelling up. There's constant checkpoints. It's a pretty horrific experience. But Tamara was lucky. She made it to Poland. She gave birth in April, and the baby is safely with its intended parents back in the uk, and she's back home in central Ukraine. Since then, Tamara's actually been helping women who are far less lucky than she was. When war broke out in Ukraine, lots and lots of surrogacy agencies just shut shop. They stopped replying to messages. And that actually meant that for a lot of surrogate mothers, there was no way for them to get in touch with the intended parents of their children.

Tell us about the scale of surrogacy in Ukraine. How prevalent is it?

This is one thing I didn't realize before I started working on this story, John. Ukraine's the surrogacy capital of Europe. There's couples all around the world who are having children later in life. They're facing fertility issues. And about 5,000 surrogate mothers give birth in Ukraine every year, mostly for these foreign couples. The couples mostly come from Europe. A growing number are coming from China. And there's a huge industry around this. So dozens of agencies have emerged to help match international couples with local surrogates to sort of manage the process. But the war has wreaked total havoc on these operations.

Before we talk about that, I'm curious, why Ukraine? Why do all these couples choose Ukraine for surrogates?

So Ukraine, actually, until a few months ago, was a really good place to go for surrogacy. The first point is that the country's not only legalized surrogacy, but they've put in place really, really clear rules to regulate it. So if you are a heterosexual couple with fertility issues, that you can prove you can pay a woman to be a surrogate if you fall within that group, the law's on your side. So when you give birth, you have total parental rights. Your names go on the birth certificate, and that really saves couples going through this. Horrible administrative, emotional rigmarole of adopting the child, going to court and whatnot. Ukraine's really affordable, too. So I spoke to a nonprofit group called Growing Families that supports couples looking for a surrogate, and they estimate that the entire process, collecting eggs, the fertilization, the birth in Ukraine, that costs something between 35,000 and $55,000. Compare that to America, which is the other big market where this can be done legally and clearly. And it's about a third of the price if you look at other options, which are comparable price to Ukraine. So somewhere like Georgia Health Services aren't so good.

And how does it look now? How has war affected the surrogacy process in Ukraine?

Some agencies in Ukraine just stopped responding to emails and abandoned their clients. There were others which actually tried really hard to keep up with the promises that they'd made to their clients and their surrogates. And that was really difficult to do in a war zone. Essentially, agencies often tried to evacuate surrogates, taking them to nearby countries like Poland or the Czech Republic. Once they arrived, they had to find clinics there, fertility clinics, where these women could continue their processes. They could get the care they needed. They also, in some cases, had to find local staff, because these agencies are supposed to check that women live in clean homes, that these women have lots of nutritious food. It's a really big, expensive operation. And then in many cases, when the surrogates reach their due date, they're being rushed back to Ukraine so they can give birth there. If you give birth in Poland, for example, surrogacy is illegal, so the surrogate mother would have parental rights. So it's really important in some cases to transport these women back to Kiev for the birth.

It seems incredible to me that pregnant women are being rushed back into a country at war to give birth.

I was surprised by this as well. But really, for a lot of people, life in Kyiv now looks pretty much like it did before. Tamara, for example, has moved back to her village in central Ukra. A lot of people just want to be in their homes. They want to be with their families. And, you know, despite all the risks, what's really shocking in the story is that a lot of foreign couples have been starting surrogacy programs afresh in recent weeks. I spoke to agencies who had signed new contracts since the war, and that really surprised me.

So people are starting this process in the west of Ukraine, even while the war rages in the east. That just seems an incredibly daunting prospect. Is there really no better place to.

Turn to what it reflects in truth is the acute shortage of surrogacy options around the world. Demand for surrogacy is really rising. But in recent years, lots of countries like Cambodia, India, Thailand, they've banned surrogacy for non residents because the concern is that women were being exploited, uneducated women who didn't understand what they were getting themselves in. For other markets like Britain or Canada, they only allowed altruistic surrogacy where you have a surrogate mother who receives money only to cover expenses. As you can imagine, it's pretty hard to find lots and lots of women who are willing to do that.

Are those concerns well founded? Are Ukrainian women at risk of that sort of exploitation?

It's really hard to say. I mean, it seems like there's no doubt a Ukrainian woman who's lost everything in the war could be exploited. And, you know, there's lots of issues around surrogacy questions around the attachment a surrogate might form to the child, around the medical care that she receives. But one thing that struck me when I spoke to women for this story was how much surrogates who have been pregnant through the war really don't regret it. There was another woman I spoke to called Olya, who's currently carrying her third baby for a foreign couple, and she's being paid $400 per month through her pregnancy. She's due another 18,000 when she gives birth. That's a lot of money in a country where the average household income per capita is just over $2,000 a year. Ollie has always dreamed of starting her own online business, a shoe store. What she said was, you know what? This money will make that happen. She said, I'm an adult, I can make my own decisions. And she really wants policymakers to remember that.

All right, Avantika, thanks for stopping by today.

Thanks for having me. Don't.

The British care a great deal about wild birds? The Royal Society for the Protection of Birds has over a million members, more than all political parties put together. The enthusiasm stretches from the red breasted robins, whose image adorns Christmas cards.

To.

The fighter jet like swifts, whose screams herald the start of summer. But in some ways, it's a gloomy enthusiasm. The populations of many bird species, including the migratory swift and turtledove, as well as many farmland birds, have crashed over the past few decades. Yet a few startling exceptions reveal as much about Britain as the country's avian failures do.

There are a few species of birds that are doing extremely well in Britain. The biggest winners at Least in proportionate terms are all in some sense immigrants.

Joel Budd writes about Britain for the Economist.

Little egrets seem to have spread northwards from France and they've gradually spread through Britain. They're small, elegant white herons. They have beautiful feathers. Red kites used to be very, very common, but they had almost been completely exterminated. They were carefully reintroduced to southern England beginning in 1990 and these days if you look up in many parts of southern England, you will see a red kite. They're very elegant flyers and they have a sort of forked tail. Ring neck parakeets have been around for a few decades. They, they were imported as pets and they simply escaped and started breeding and they are now spreading very, very quickly across Britain. No bird enthusiast has a problem with little egrets. They're very pretty and they're quite retiring. Lots of people though do now have a problem with both red kites and ring necked parakeets.

Tell us why. Surely more birds can only be a good thing, right?

Well, you would think so. You would think that given that British people are keen on birds, they would be keen on more birds. But they have specific objections to those two types. Red kites are accused of stealing meat from people's dinner plates. It's said that if you have a picnic in certain parts of the country, a red kite is liable to come down and snatch it. Ring necked parakeets are a bit different. They're said to cause problems for other birds. So it's said that they kind of bully other birds out of nesting holes. And I think also in the case of ring necked parakeets, they're just very, very obviously foreign. It's really weird to see them and hear them because they are obviously tropical birds living in a not tropical country. They're just too bright green and too strange, I think for British people to handle.

Joel, what do you think these preferences say about humans relationship with birds?

I think one thing it says is that we often rather like birds that are new and sort of interesting, but as they become more common, we quite often turn against them. So ringlet parakeets, which are beautiful, were regarded when they first started to spread as exotic and interesting. And red kites people really loved, but as they became more common, the complaints about them started to multiply.

Do you think these preferences can have any long term effects on the species that are disliked?

Yes, they can. There have been examples in the past of birds that have become really very common and were persecuted partly as a result of their commonness. So many old people continue to really dislike starlings. So what happened to starlings is that in the early part of the 20th century, they became enormously common. They really spread through Britain and they established huge colonies, particularly in London. There was a famous one in Leicester Square. One problem with starlings is that because they're so numerous, they leave a great deal of poo around if there's a big colony of them and they make a lot of noise. They have a very complex but quite kind of raucous call. Their numbers have really declined a lot in Britain over the last few decades and are thought to be only about half now what they were in the mid-1990s. But a lot of people, especially older people, still say, oh, goodness, you know, there's too many of them. They make too much noise and so on. And red kites were also once considered much too common in the 16th and 17th centuries. And there are lots and lots of references to them in 16th and 17th century London. Shakespeare mentions them, and they would swoop down into people's courtyards and kill their chickens. And it's extremely easy to poison a red kite because they will eat anything. And so as a result, they were almost completely exterminated.

Kites have just returned to British skies, Joel, and at least some people like parakeets visiting their gardens. Do you think history will repeat itself? Are these birds facing a grim future?

I don't think it will this time. I think even though British people have decided they rather dislike some of these birds, and especially parakeets, I find it hard to believe there's going to be a sort of mass cull. The government considered doing one and it's backed away from the idea. I think perhaps it's partly that we've become more squeamish and our conservation laws are simply much stronger. And I think also perhaps it's that given the generally degraded state of British nature, I think that British people would rather hear a kind of vulgar, squawking foreign call than just have silence.

All right, Joel, thanks so much for joining us today.

Thank you.

That's all for this episode of the Intelligence. Let us know what you think of the show. You can get in touch@podcastseconomist.com and you can subscribe to the economist@economist.com intelligenceoffer the link is in the show Notes. We'll see you back here tomorrow.