E Welcome Ana Patricia!

Poland says it received sharply lower than expected supplies of Russian natural gas this week via Belarus, which made it harder to send gas back to Ukraine. Russia cut supplies to Ukraine as part of its program to back separatists in the east of the country. Poland consumes about 16 billion cubic meters of gas each year, mostly in the winter.

Poland's state-owned PGNIG SA said deliveries from Gazprom were as much as 24% below contract levels early this week and as a result the Gaz System SA pipeline operator cut off all gasflows to Ukraine. Ukraine transport network firm Ukrtransgaz said yesterday the cut was a Russian move “to disrupt reverse deliveries from Poland.” PGNIG also said its storage tanks are full now and moreover it has the ability to import 7.5 bn cu m of gas from Czech or German supplies if needed.

Russia's Pres. Vladimir Putin says reverse gas shipments are “illegitimate” and it has a right to block them although countries like Poland and even Germany say their contracts don't give Russia a veto over how they use the gas they buy. Ukraine, which produces 20 bn cu m of natural gas/year, needs about 33 bn cu m to survive the winter.

This is the last time Putin can play his Siberian gas card as Poland will have built its own natural gas liquefaction port on the Baltic Sea by next autumn. This would open the markets in Poland and its neighbors to natural gas from other sources including the USA.

The ruble is weakening against the dollar while the Russian stock index, the Micex, is also weak. Tomorrow the European Union countries will either apply new tough sanctions against Russia—or not. The vote is today and depends on whether the military truce with Ukraine is being observed by Russia.

While Poland and the Baltic trio are firmly backing Ukraine (in part because they have Russian-speaking minorities like Ukraine) a weak link is Finland where the Social Democrats (in the ruling coalition) oppose sanctions.

*Emilio Botin died last night at age 79 of a heart attack. The Jesuit-educated provincial from Santander turned a small family-controlled regional bank ranked 7th in Spain into the global financial powerhouse, Banco Santander, SAN. The share fell today.

Our main interest at SAN is who will become the head of the bank from the 5thgeneration of the Botin family. Emilio Botin had 6 children and his brother's family also own shares in the family business. But while the family are in control, there are many different branches.

The board has named Ana Patricia Botin, Emilio's eldest daughter, who also was her father's choice, to succeed him as chairperson. She currently heads the key UK operations of SAN. This will have revolutionary impact in macho Spain and macho Latin America—and maybe even in the USA where SAN operates in retail and investment banking, consumer finance, global business banking, and wealth management.

Separately, Eduardo Garcia (in www.sentidocomun.co.mx) reports that SAN's Mexican sub,Grupo Financiero Santander, signed a breakthrough jv with American Express for credit cards which offers points to users and cross sells insurance to them. The AXP card will work globally.

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