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Explainer: Europe has a shortage of natural gas. Is it Russia’s fault?

FRANKFURT, Germany (NWN) – Europe has a shortage of natural gas – dangerously low. A cold winter could mean a serious crisis, with utility bills soaring, burdening ordinary people and the economic recovery from the coronavirus pandemic weighing on the economy.

Russian President Vladimir Putin has pledged to help fill up European gas storage as energy prices rise – But supply constraints and political tensions have continued to stir up energy markets, keeping prices high. This has pinched businesses and forced them to pass on the costs to customers already facing high bills at home.

Moscow has been accused of using the volatile situation to press for the speedy launch of a newly built Russian pipeline under the Baltic Sea: Nord Stream 2, which is awaiting approval from German regulators and has been approved by Ukraine, the US and others. It has been criticized by the people.,

Europe is dependent on imported gas and Russia supplies 40% or more of imports, Putin has the advantage. He said the new pipeline is already filled with gas and could help increase supplies “a day after” it is approved.

Here are the key factors behind the gas crisis:

How did Europe get into this mess?

Many reasons. One was a cold winter that depleted the gas reserves, which are used to generate electrical power and are usually replenished in the summer. This year it did not happen.

The hot weather caused more gas evacuation than usual due to the demand for air conditioning. Less wind meant less renewable electricity, accessing gas fuels were the major generators. Limited supplies of liquefied natural gas, an expensive option that can be delivered by ship rather than pipeline, were snatched away by customers in Asia.

On top of this, Europe has pushed for day-to-day spot pricing rather than longer-term contracts for years. Russian-controlled gas giant Gazprom has fulfilled those long-term contracts, but has not pumped additional gas beyond that. Putin says customers who have these contracts pay far less for gas than other buyers.

Prices in October were seven times higher than at the beginning of the year and have recently risen almost four times.

How does the Nord Stream 2 pipeline work in this?

Gazprom invested billions in the construction of a 1,234-kilometre (765 mi) pipeline in Germany. This would allow Russia to sell gas directly to a major customer and bypass a pipeline through Ukraine, which has faced relentless pressure from Russia. Following Moscow’s 2014 annexation of the Crimean peninsula and its support for separatist rebels in Ukraine.

Even before the 2014 hostilities, Moscow had launched efforts to diversify gas supply routes to the EU, saying the Ukrainian system was dilapidated and accusing the country of gas theft.

Ukraine has lost $2 billion in annual transit fees. It and Poland, which sits on another bypass pipeline, are strongly opposed to Nord Stream 2. The United States and some other countries have also been strongly critical, warning that the project would increase Europe’s energy dependence on Russia.

British Prime Minister Boris Johnson said on Monday that he hoped “other European countries can recognize that an alternative is coming soon, with vast new pipelines to mainline more and more Russian hydrocarbons and sticking to Ukraine and Between becoming champions for peace and stability.”

Several analysts said they did not expect the Nord Stream to line up this winter – although there has been speculation that Europe may allow the gas to flow while regulators review it, perhaps more gas through Ukraine. in return for sending.

Has Russia stopped additional gas supplies?

Gazprom says no. The head of its export arm, Elena Burmistrova, said this month that “we are not interested in either record low or record high gas prices,” adding that “we want to see a well-balanced and predictable market”. ”

At least some analysts agree.

Thomas O’Donnell, an energy and geopolitical analyst at the Herty School graduate university in Berlin, said Russia would have to replenish its own gas reserves – like the European Union – after the cold winter.

While Putin prefers his role as “the gas godfather” and takes advantage of the shortfall to press for approval of Nord Stream 2, “the more mundane reality is … home storage for the winter,” o’ Written by Donnell, who blogs at Globalbarrel.com, “The Godfather was lying.”

O’Donnell said the only way for Russia to help make up for its gas shortage this winter would be to pump more gas through Ukraine — assuming Gazprom is willing to do so.

Putin orders Gazprom to send gas to European storage O’Donnell said Russia ended up replenishing its reserves last week, but “it is limited”. “He can pretend to do a lot more.”

US officials agree.

“Russia can and should provide additional supplies” Through Ukraine, which has substantial pipeline capacity, and for that they don’t need Nord Stream 2,” Karen Donfried, the top US diplomat for Europe, said last week.

“And, if Russia fails to do so, it will obviously damage European energy security and raise questions about what Russia’s intentions are in stopping those supplies,” she said.

O’Donnell said that by underscoring Europe’s reliance on Russian gas, Putin and Gazprom can expect more liberal EU market regulation of Nord Stream 2.

The pipeline was delayed on Tuesday after German regulators suspended the approval process Due to a problem with pipeline operator status under German law.

What could be the impact of Europe’s gas shortage?

Natural gas prices will sooner or later reflect in domestic and commercial tariffs for electricity and gas.

The European Commission, the EU’s executive arm, cited spiraling energy costs as a drag on the pandemic’s recovery because higher bills would take money away from consumer spending and business investment.

Europe’s tight market is echoing in the US, helping to drive up prices there, although the US market has seen nowhere near the price hike in Europe.

What could this mean for winter?

Analysts say it is difficult to predict. Not everyone expects a major late winter storm to threaten dwindling supplies.

Analysts speculate that electricity could be rationed – perhaps to some industrial customers – if things get really bad.

An energy apocalypse – a total loss of electricity or heat if gas reserves are drawn to zero and cannot be replaced – would likely cause death among poor and vulnerable populations, such as what happened in Texas this year. was when a winter storm knocked out power, causing more than 200 deaths.

What about threats to cut Belarus’ gas supply?

Poland and other EU countries accuse President of Belarus Alexander Lukashenko of authoritarian Using migrants trying to get into the EU through Belarus’ border with Poland as pawns to avenge their government’s restrictions on protests.

With the EU threatening more severe sanctions, Lukashenko threatened to cut off Russian gas supplies to Europe that pass through a pipeline in Belarus.

Although his statement further stirred the markets, it is unlikely that Lukashenko will be able to meet his threat, given his political dependence on Russia and Moscow’s desire to maintain the reputation of a reliable supplier.

Valery Karbalevich, an independent Belarusian political analyst, dismissed Lukashenko’s threat as a cynic.

“Decisions are made in Moscow, not Minsk,” he said. “Lukashenko wants to intimidate the European Union and drag Putin into a confrontation, trying to provoke the Kremlin to take more radical action.”

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Isachenkov reported from Moscow. Associated Press journalist Yuras Karmanau in Kiev, Ukraine contributed to this report.

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