Saturday, November 27, 2021

Energy crisis in Europe will deepen as Russia refrains from increasing gas exports

A week ago, President Vladimir Putin announced that Russia would be willing to increase its natural gas exports to help Europe cope with the energy crisis that caused soaring prices. But there is no sign that he will deliver on the relief he promised, energy experts say.

According to Bloomberg, this week the Russian state energy giant Gazprom appears to have decided not to increase gas exports to Europe and refrained from reserving additional gas transit capacity through Ukrainian or Polish pipelines at auctions.

Last week, in an interview with US broadcaster CNBC, the Russian president dismissed suggestions that the Kremlin was using gas as a geopolitical weapon, saying the talk was “politically motivated chatter.”

But Gazprom’s decision not to reserve additional capacity for gas exports to Europe has angered European leaders, who accuse the Kremlin of playing a political game.

European Union Foreign Minister Josep Borrell told reporters in Brussels on Monday that the rise in gas prices has deep geopolitical roots. “This is part of a geopolitical battle,” he said. But Borrell also admitted that Russia has fulfilled all of its contracts. “This is not to say that they do not deliver when promised, but this has not led to an increase in volumes,” he said.

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European Commission President Ursula von der Leyen was more reserved in her language on Wednesday during a briefing for the European Parliament, saying: “Gas prices are – and always have been – cyclical and are set by global markets. So this is not a regional or local phenomenon, it is a global phenomenon. “

But she added that she believed the Kremlin could do more to help, saying that Gazprom had responded to higher demand in previous years.

Russia supplies 43% of gas imports to the EU. Europe relies heavily on natural gas to generate most of its electricity. Gazprom’s exports in the first half of October actually fell.

FILE – Pipes and valves are visible above an underground gas storage facility near Strogo, Ukraine on May 28, 2015. Russia is reducing the role of Ukraine and Poland as transit countries for its gas exports to Western Europe.


EU national leaders are set to discuss the energy crisis at a two-day summit starting Thursday. In his invitation to the Summit for National Leaders, Charles Michel, President of the European Council, said: “We will address the current rise in energy prices, which is hampering recovery from the pandemic and seriously affecting our citizens and businesses.”

Some analysts say that while Russia may be trying to exploit the energy crisis in Europe, the continent’s leaders are partially to blame for their plight, as they abandoned long-term contracts a few years ago, preferring instead to opt for a market-based pricing system that could offer more low prices with surplus stocks, but very volatile and can lead to a sharp rise in prices in the event of a shortage. The Europeans also did nothing to diversify their suppliers.

The surges in natural gas prices are largely due to a sharp increase in demand in Asia and low supplies in Europe, where wholesale gas prices rose 280%. Electricity prices are also rising because natural gas is used across the continent to generate a significant portion of its electricity.

The International Energy Agency has called on Russia to increase gas exports. “The IEA believes that Russia could do more to increase the availability of gas to Europe and ensure that storage facilities are filled to an adequate level in preparation for the upcoming winter heating season,” it said in a statement earlier this month.

Nord Stream 2 and Ukraine

Ever since the 1990s, there have been fears that the Kremlin might use Europe’s dependence on Gazprom against it. A string of US presidents urged European leaders to be cautious and opposed the construction of the newly completed Nord Stream 2, NS2 gas pipeline, which will carry energy from Russia to Germany bypassing the older line through Ukraine and Poland.

Some European politicians suspect the Kremlin is deliberately aggravating the European energy crisis in order to force the EU to speed up the certification of the recently completed NS2 pipeline.

FILE - Nord Stream 2 Landfall Site in Lubmin, Germany, 7 September 2020.

FILE – Nord Stream 2 Landfall Site in Lubmin, Germany, 7 September 2020.

Central European politicians also oppose NS2, which runs 1,200 kilometers from Vyborg, Russia, to Lubmin, Germany, meandering along the bottom of the Baltic Sea – not only because their countries will lose lucrative transit fees from the older pipeline, but also because that they were afraid of the Kremlin. was building a new pipeline for political, not commercial reasons.

Nord Stream 2 is an unusual business project, ”said Inna Sovsun, a former Ukrainian minister and now a deputy and professor at the Kiev School of Economics. “On the contrary, it is a geopolitical weapon aimed at the very heart of Europe, which from the very first day was conceived as a tool to isolate Ukraine and strengthen Russia’s position in its confrontation with the Western world,” she said earlier this year in the newspaper. for the Atlantic Council, a US think tank.

She added: “In recent months, the Kremlin-controlled gas giant Gazprom has turned down Ukraine’s offer for additional pipeline capacity, despite surging gas demand in Europe due to a number of factors, including maintenance of alternative Russian pipelines. Moscow prefers to wait for the commissioning of Nord Stream 2 and wants to give a clear signal that it expects European buyers from Russia to immediately facilitate this process. “

European energy executives are warning of an upcoming tough winter in the northern hemisphere. They warn that energy-intensive industries may have to slow down production, which could lead to shortages of fertilizers, steel and food. Some energy companies have been trying all year to increase their gas reserves, which were depleted in the exceptionally cold winter of last year. Alfred Stern, CEO of the Austrian energy company OMV, says: “Everything will depend on how cold it gets this winter.”

On this score, the omens are not good. Meteorologists predict a high risk of colder-than-normal winter weather this year. If these forecasts come true, demand for natural gas and even higher energy prices will rise, leading to a rise in overall European inflation, which is currently 3.4%, the highest level since 2008.

Nation World News Desk
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