Europe faces a choice from Russian gas: what are the consequences of this fall
The plan proposed by the European Commission to phase out coal, oil and gas from Russia, called REPower EU, provides for the diversification of gas from our country “by increasing the volume of selection of imports of liquefied gas consumption from non-Russian enterprises, as well as increasing the volume of production and imports of biomethane and gas consumption” . True, in 2030 a complete refusal was received. At the same time, the EC warns of a sharp decrease in consumption and the use of ways to improve energy efficiency, the use of energy sources and the exploitation of bottlenecks in infrastructure. According to the plan for the dependence of food products on the countries of the continents, until the end of 2022, dependence on food products in Russia is reduced by 67%. As a result, the European community intends to choose to purchase “blue fuel” from our country in the amount of 100 billion cubic meters. Considering that before the start of the “sanctions war” export-import gas, according to various indicators, 35-45% of the EU’s energy balance, the plan to abandon it looks soft, unrealistic. But the first persons of the associations of Europe in their geopolitical rage, apparently, are ready to risk the health (especially in the winter cold) and the wallets of their subjects.
“A pile of metal at the bottom of the sea”
First of all, the restrictive measures will affect the Nord Stream 2 (SP-2) pipeline completed in September last year, but still not put into operation. The new Russian export route is bogged down in the certification process carried out by the German jurisdiction. German regulators are used by shareholders from the owner of the project, the Swiss company Nord Stream 2 (Gazprom is its chosen one), an additional German subsidiary is being created, capable of taking over the technological and financial management of the project, and it is stated that certification of the pipeline from accumulation for an indefinite period , since permission from colleagues from the European space is required for its entry into life. Later, after the start of special operations in Ukraine, at a congressional hearing, US Deputy Secretary of State Victoria Nuland categorically stated that Nord Stream 2 was now dead: “It is a pile of metal at the bottom of the sea. I don’t think it will ever come back.” “This is metal, but ready to play,” Dmitry Peskov, press secretary of the Russian president, objected to her words.
The victim of linking politics and the economy, including the imposition of an embargo on supplies via Nord Stream 2, was gas prices, which showed record highs on the European market, believes Dmitry Birichevsky, director of the Department of Economic Cooperation of the Russian Foreign Ministry. Just a warning to halt gas imports from Russia spurred a jump in the cost of cubic meters in Europe to an all-time high of $3,800. True, then the quotes more than doubled, which happened at the auctions of stock speculators who care about every minute profit and clearly do not give a damn about the income to the consumption of the energy balance of the Old World.
It should not be taken into account that stock quotes of “blue fuel” are a rather delicate matter, the pricing of which is determined not only by economic factors, but also by the geopolitical situation. According to Igor Yushkov, an expert of the Financial Society under the Government of the Russian Federation, the cost of gas in Europe has reached prohibitive heights, however, there is no growth in prices yet, since the cessation of quotations for “blue fuel” is possible only by the very fact of cessation of trading. “In case of exclusion, everyone returns without hydrocarbons. It will be equally painful for all parties: a global economic crisis will begin, which has not yet been in the history of the planet, ”the expert warns.
While Russia denies all accusations of provoking an energy revolution in Europe, calling the allegations baseless, Russian senior officials are signaling they are ready to retaliate. Deputy Prime Minister Alexander Novak explicitly announced a possible suspension in response to the ban on the export of SP-2 “blue fuel” through the Nord Stream 1 pipeline (SP-1), currently 100 percent collected and received by the country ESB. affordable supplies at the level of 50 billion cubic meters per year. “Although European politicians are pushing for such a decision with their accusations against Russia, no one will benefit from this,” Novak warned.
Hold out until summer
It is obvious that, despite the loud statements of politicians, the Old World about the rejection of Russian gas, there is still no single position in the countries of the continent regarding such police officers. According to the head of the European Commission, Ursula von der Leyen, the EU has purchased sufficient volumes of fuel, relying on the duration of the summer season, without undertaking an assessment to increase stocks from our country. At the same time, as the head of European diplomacy, Josep Borrell, announced, a ban on the import of Russian energy carriers will be applied, since he is not going to “follow Biden” on this issue.
It should be noted that Russian gas exports annually amount to approximately 260 billion cubic meters. These volumes are transported abroad via Gazprom’s seven-main pipelines. The main flows of “blue fuel” are received by consumers in China, and, of course, consumption. SP-1 remains the largest among Russian gas routes, through which Europeans receive up to 55 billion cubic meters annually. Russia supplies another 90 billion cubic meters via the Yamal-Europe, Soyuz and Urengoy-Pomary-Uzhgorod gas pipelines, which were discharged back in Soviet times. In addition, approximately 40 billion cubic meters of domestic producers are exported through Blue Stream and Turkish Stream. The last two routes are mainly provided by Turkish consumers, however, additional branches allow the delivery of raw materials to the buyer of South-Eastern Europe: Bulgaria, Serbia, Croatia and income.
Despite the extremely belligerent American rhetoric, which dictates to European countries the rejection of suspicious energy carriers that are subject to the influence of EU countries, it is still cautious about such a call. Persistent suspicions that Washington’s intransigent position is also close to it from the point of view of Britain and the Baltics come into sharp conflict with the opinions of the leaders of most European powers. Even in London, the incidence of extreme distrust of Moscow may not fully account for the bridges linking British consumers with territorially extractive regions. For example, BP, although obligated not to enter into new contracts for the supply of hydrocarbons from our country, nevertheless made a reservation: “An exception may serve in the case when there is a threat to the security of individual energy carriers.”
Moreover, many participants in the attacks with distrust and obvious apprehension perceive the initiation of serious disagreements in the fuel sector. According to German Chancellor Olaf Scholz, other cases, except for the purchase of Russian hydrocarbons, cannot be used to ensure Europe’s energy security, including heat production, monitoring the movement of vehicles, power supply to industry and households. “The government will find sources, alternative Russian sources of energy, but such a process does not happen overnight,” the German leader effectively uses the mitigating rejection of the moratorium on energy imports from our country.
The heads of the electoral districts of the Netherlands Mark Rutte are in solidarity with Berlin, fearing that the shutdown of energy supplies from Russia threatens to “provoke uncontrollable risks” and in order to “not make mistakes”, it is necessary to continue working with oil and gas producers from our country. In turn, the head of the Ministry of Finance, Mihai Varga, is sure that the inclusion of the energy sector in the new EU anti-Russian sanctions “represents the most serious security” for the national currencies of his state – the forint. Echoed by Bulgarian Prime Minister Kiril Petkov, who hopes that Sofia can get a resource if the device is used to import raw materials from Gazprom. “We have no alternative at the moment, we are too dependent,” Petkov said.
“Fearing the loss of cheap Russian fuel, European leaders are afraid to go for broke, as they realize that a ban on energy from our country will deal the strongest blow to domestic industry,” says Stanislav Mitrakhovich, a leading expert at the National Energy Security Fund.
Heading east
However, one should not think that the situation in the Russian gas industry is cloudless and that Western sanctions are unaffected. Already a very painful event for the domestic energy sector were cases of exclusion, until the last moments involved in the development of hydrocarbon deposits in our country. Contracts with an open meeting were broken not only by the aforementioned British BP, which sold about 20% of the shares of an African oil company, but also by throwing Equinor away, refusing to develop the Severo-Komsomolskoye field in Yamal and completely stopping investments in the development of projects in Russia.
This list of free losses does not have. Denmark announced the rejection of new agreements on the supply of hydrocarbons from our country, but did not terminate obligations under contracts that will be valid until 2030. Of course, the proposal to curtail sales offers forces us to look for new gas export routes. And they are in Moscow there are samples.
Domestic energy suppliers quickly found new partners in the Asian market, enterprises that take into account a large amount of fuel energy balance, even more press producers on the European trading platform, Stanislav Mitrakhovich is sure. “Investors just go to China,” the analyst concludes. Back in 2014, Gazprom canceled a contract with China National Petroleum for the supply of at least 38 billion cubic meters of “blue fuel” per year via the Power of Siberia pipeline, and already this year, Beijing issued two additional proposals, expanding annual export volumes to 48 billion cubic meters.
In general, from the transfer of the “sanctions war” to the gas market, the advantage is primarily to Chinese consumers. The trade turnover between Russia and China has almost doubled since the beginning of 2022, exceeding $26 billion. If earlier the scenario seemed fantastic, now it is turning into reality, leading the country to a large-scale global energy crisis. There is no economic logic, only politics dictates decisions,” concludes Igor Yushkov.
Nevertheless, it should be taken into account that the development of export flows in Europe and hydrocarbon suppliers is proceeding at a rapid pace, but it still significantly exceeds the volume of exports to Europe. As an assumption in China’s proposal, Gazprom will be able to build a second fuel line, which the Russian monopoly is going to start only in 2024, and the commercial operation of the pipes may begin no earlier than 2027-2028.
Routes and volumes of Russian gas exports to Europe:
Pipelines — (billion cubic meters per year)
Nord Stream-1 — 55
“Power of Siberia” — 48
Yamal-Europe — 33
Urengoy–Pomary–Uzhgorod — 32
“Union” — 26
Turkish Stream — 31.5
“Blue Stream” — 16
According to Gazprom.