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Illustration: Eniola Odetunde/Axios

The corporate and geopolitical winners in a world that gets serious about cutting carbon emissions aren't easy to predict.

Driving the news: A new Moody's Investors Service report looks at how "energy transition" creates risks and opportunities for state-owned oil-and-gas companies like Saudi Aramco, Russia's Gazprom and China's CNPC.

The big picture: State-owned players' "exposure to carbon transition risk will vary," they find, and overall they're not well prepared and "lag behind" investor-owned oil majors.

  • Some will change strategies for business reasons or to align with government climate efforts."[T]he ability of others to make the transition to less carbon-intensive models is constrained by fiscal obligations to or the social objectives of their sponsoring governments."
  • If energy transition and lower demand mean lower prices, that's a problem for countries, including Persian Gulf states, reliant on petro-exports. But some of these same players enjoy low production costs and state-protected market positions.

Why it matters: It's part of the wider puzzle covered in a new Foreign Policy essay headlined, "Everything you think about the geopolitics of climate change is wrong."

  • Jason Bordoff, head of a Columbia University energy think tank, makes a few points:

1. He cautions against assuming China's huge investments in producing clean energy tech like batteries and solar panels (and harvesting the critical minerals to make them) means they'll be become a Saudi-like force.

  • A huge footprint in those markets simply doesn't convey the same influence that petrostates once had and to a degree still do.
  • For instance, restricting battery shipments might temporarily raise car prices and delay new EVs.
  • But that's not the same thing as cutting off oil-and-gas supplies, which can quickly "stymie mobility, trigger price spikes, or lead to people freezing in their homes."

2. He warns against pre-writing the obit for big Middle Eastern producers.

Yes, they'll eventually face declining crude demand in a CO2-constrained world that they have not prepared for by adequately diversifying their economies.

  • But during oil's decades-long exit as a dominant fuel, it's the lowest-cost producers — that also have comparatively low per-barrel emissions — that are best positioned.
  • Even as demand shrinks, "OPEC’s share of global production could rise as a result of its members’ lower costs and emissions, strengthening the cartel’s grip on a market that will remain sizable for some time."
  • Also, he notes, supply may decline even faster than demand, which would raise prices and boost oil-state coffers.

3. Another dynamic: "[S]ome of today’s petrostates may be tomorrow’s electrostates."

  • The essay notes the ability of states like Saudi Arabia and Chile to send clean power and hydrogen across borders.
  • Russia's big role as a nuclear tech supplier will also become more important as countries look to electrify transportation and buildings in order to cut CO2 emissions.

Go deeper

2 hours ago - World

Biden seeks to reboot U.S. sanctions policy

Sanctions increased under Obama and dramatically under Trump. Photo: Tom Williams/CQ Roll Call

The Biden administration is rethinking the U.S. approach to sanctions after four years of Donald Trump imposing and escalating them.

The big picture: Sanctions are among the most powerful tools the U.S. has to influence its adversaries’ behavior without using force. But they frequently fail to bring down regimes or moderate their behavior, and they can increase the suffering of civilians and resentment of the U.S.

2 hours ago - World

Merkel's farewell spoiled by Poland crisis at EU summit

One last awkward EU "family photo." Photo: John Thys/AFP via Getty Images

Angela Merkel took up her vaunted mantle as Europe's crisis manager for what could be the last time tonight, as she urged the EU to find compromise in its showdown with Poland.

Why it matters: The European Commission has threatened to withhold over $40 billion in pandemic recovery funds after Poland's constitutional tribunal — stacked with loyalists from the ruling right-wing populist party — rejected the principle that EU law has primacy over national law.

Republicans who put it all on the line

Rep. Nancy Mace speaks with reporters after voting to hold Steve Bannon in contempt of Congress. Photo: Anna Moneymaker/Getty Images

A small contingent of House Republicans risked their political futures on Thursday, they say, in the name of constitutional responsibility.

Why it matters: The nine Republicans who voted to hold former Trump aide Steve Bannon in contempt of Congress are now in peril of becoming political pariahs. They've opened themselves up to potential primary challengers and public attacks from their party's kingmaker — former President Trump.