Is an energy war between Russia and the EU possible?

Is an energy war between Russia and the EU possible?

Mikhail Katkov

The outgoing winter has become a difficult test for Europeans due to high fuel prices. At the same time, politicians are increasingly insisting on the rejection of Russian gas, which now accounts for about 40% of consumption in the EU. Deliveries are only increasing. Is Brussels ready to tip the world into an energy crisis – in the material of RIA Novosti.
Fuel populism
EU High Representative for Foreign Affairs and Security Policy Josep Borrell said that although anti-Russian sanctions will harm Europe, this price must be paid. However, the immediate cessation of fuel purchases threatens turbulence in the market.
In turn, a member of the European Commission, Kadri Simson, warns that Moscow itself can turn off the gas, and calls for preparations for this. In her opinion, complete energy security will be achieved by the end of this season.
British Foreign Secretary Liz Truss asks other G7 members to limit gas and oil imports from Russia. Economics Minister and Vice-Chancellor of Germany Robert Habek noted that Berlin is ready to completely abandon Russian raw materials. Prices will rise at first, but Germany has alternative suppliers that will cover the deficit, he is sure. Austrian Chancellor Karl Nehammer said that so far nothing threatens supplies, but in the medium term Vienna will reduce its energy dependence on Moscow.
The Belgian analytical center Bruegel believes that the European Union may well survive the next winter without Russian blue fuel. According to analysts, the EU will avoid serious economic damage due to the break with Moscow if it reduces gas consumption by 15% and switches to American liquefied natural gas (LNG). At the same time, filling at least half of underground storage facilities (UGS) will cost not ten billion euros, as it is now, but 70.
The situation is, frankly, not easy. At the end of last year, gas prices exceeded $2,000. UGS facilities in the European Union are only 29.5% full, Gazprom notes. In Germany, for example, – 29.4%, in France – 22.9%. In April 2021, this figure was close to 33%, this time it is expected that there will not be even 20.
Gazprom increased deliveries in February. To Italy – by 135.5%, to Poland – by 41.1%, to Bulgaria – by 26.4%, to Slovenia – by 53.7%, to Bosnia and Herzegovina – by 17.6%.
Russia has four routes to Europe: Turkish Stream, Yamal-Europe (through Belarus to Poland), Ukrainian transit and Nord Stream. There was also supposed to be Nord Stream 2, which was built but never launched. Certification was suspended, one of the largest oil and gas companies Shell withdrew from all projects of Gazprom, and the operator Nord Stream 2 AG, according to Reuters, is on the verge of bankruptcy. But this does not threaten other pipelines yet.
Since the beginning of the military special operation, Gazprom has even increased the supply of fuel in the Ukrainian direction to the 109 million cubic meters per day stipulated by the contract. About 156 million are being transported along Nord Stream with a throughput capacity of 165. For now, Yamal-Europe will be used only to balance supplies, but if any problems arise, they will be turned on to the fullest.
Theoretically, it is possible to abandon Russian raw materials, but this will not lead to a redistribution of the energy market, but to its complete transformation. Russia produces one sixth of the world’s gas, European customers consume 40% of this volume. Therefore, threats are threats, but Gazprombank was not disconnected from SWIFT – most of the payments go through it.
Alternative to Russia
Now Brussels has virtually no alternative. Gas also comes to Europe from Azerbaijan, Algeria, Libya and Norway, but they cannot increase production there.
In 2021, the Norwegians raised supplies by four percent to 112.5 billion cubic meters, but said that this was the maximum that could not be surpassed. Azerbaijan supplies about ten billion cubic meters to the European Union per year, Algeria – 22, Libya – 11. Russia pumped 131 billion to the EU last year.
The European Commission has asked Qatar and the US for more LNG, but the response has been disappointing. Energy Minister of Qatar Saad al-Kaabi said that everything is already written in long-term contracts. If supplies are shifted, the market will not survive and will respond with a jump in prices.
In addition, there may be problems with the infrastructure. Terminals for the processing of liquefied gas are distributed extremely unevenly in Europe. They are not in Germany, but Spain has a quarter of the capacities, but they are poorly integrated into the pan-European system.
“There is no surplus of blue fuel in the world. If the European Union refuses Russian, the alternative will cost about three thousand dollars per cubic meter. At the same time, Latin America and Southeast Asia will lose gas. The EU will have to buy half of the LNG market, and from Moscow, in turn , there are no ways to replenish the volumes of those who used to consume liquefied gas,” says Sergey Pikin, director of the Energy Development Fund.
However, Russia will still be able to supply something abroad. Among the obvious destinations is China. There are going to pull the second pipeline.
“The quotes of three thousand dollars will turn into a two-fold rise in the price of everything that is in the European Union. In addition, the global energy market will plunge into a crisis. I think the bans will last one winter, and that will be the end of it. It will be easier for Russia than for the rest of the world. Gazprom” exports only a third of its production. Well, yes, it will lose revenue, but Russian consumers will not feel much difference, “says the RIA Novosti interlocutor. Note that on March 2, gas prices have already exceeded 2.2 thousand, setting a new record.
However, it’s not just the current crisis. The European Union has long taken a course towards the decarbonization of the economy. “But if earlier they were going to reduce dependence from 2030, now they will try faster. As for Russia, we still had a strategy for switching to hydrogen. Due to sanctions, this task is complicated, nothing is clear yet,” points out director of the Energy Development Fund.
Sergei Suverov, head of the analytical department at BK-Savings Management Company, believes that in the medium term, for example, by 2025, the European Union may well solve the problem of the consequences of shutting down Russian gas. “By this time, the world will start producing more LNG, sign new contracts, build the appropriate infrastructure. From an economic point of view, this is not very rational, but today politics plays the main role,” the expert notes.
In this case, the ruble will survive a strong devaluation. But there is good news: domestic gas will become cheaper as supply exceeds demand. In addition, Gazprom will send more fuel to China.
Thus, given the difficult political situation in the world, the threats of the European Union should not be considered empty. These plans have been in the making for a long time. Although it is unlikely that the plan will be realized quickly, Russia needs to think in advance how to protect itself.

The post Is an energy war between Russia and the EU possible? appeared first on The Frontier Post.