How not to freeze in winter: Gazprom is accused of disrupting the supply of blue fuel to the EU

Gennady Charodeyev

According to Gas Infrastructure Europe, gas reserves in Europe usually amount to 90% of the required volumes in September. This year, inventories have dropped, for example, to 58.6% in Germany and to 48.4% in the Netherlands. And the price of gas today has risen to a record $ 700 per 1,000 cubic meters.

In the fall, analysts in the UK, where Russian gas supplies make up no more than 1 percent of the total, came to the conclusion that she, too, may face the problem of introducing rationed gas consumption. London believes that they will be dependent on Russian energy resources after the start of Nord Stream 2.

According to the Daily Express, Europe lives in fear. For some reason, they decided that the European Union was in Putin's hands, so London announced plans to phase out ...gas boilers, which today play a key role in heating homes and in the industrial sector. So gas became a dangerous energy weapon in the hands of Gazprom.

With winter approaching, the British are increasingly worried that they will not be able to meet their fuel demand. Some experts argue that the UK is "more vulnerable to a gas supply crisis" than other Western European countries. With storage depleted, the British could face a cap or a price shock, with none of their neighbors helping them, analysts say.

Professor Michael Bradshaw of the University of Warwick School of Business hastens to reassure the general public:

“Britain is very lucky because it has trade relations with Norway and Qatar, from where the kingdom receives gas directly. And we can count on a certain volume of supplies from these countries, and not from Russia".

Meanwhile, gas prices in Europe continue to rise at unprecedented levels. It costs one and a half times more than oil. October futures for the Dutch TTF index, the most liquid European hub, has broken another record.

The price explosion has several reasons, the main of which is the low reserves in European underground gas storage facilities, Gazprom said. There are now ten to fifteen billion cubic meters less than it should be for a comfortable winter season. Another factor is the growing demand for liquefied natural gas in the Asian markets.

"The Russian company does not violate any agreements on supplies", - Gazprom officials say.

But Western media continue to blame Russia for everything. American Bloomberg and the business channel CNBC are confident that the gas holding regulates supplies "at its own discretion" in order to force the Europeans to abandon restrictions on Nord Stream 2.

The Daily Express is not so categorical:

"Gazprom fulfills its obligations to customers, but ignores all additional applications beyond the agreements. Thus, Gazprom maintains high prices for raw materials and is trying to achieve the earliest possible launch of the Nord Stream 2 gas pipeline".

Incidentally, the countries of Central and Southern Europe do not consider Nord Stream 2 a good idea, because less gas will flow through Ukraine to southern Europe.

But there is also liquefied natural gas - it is a different type of fuel and a separate source, different from pipeline gas. For example, countries such as Great Britain provide about 50% of their gas needs from LNG, but pipeline gas is also used there. This means that the United Kingdom and other LNG importing countries could limit Russian control over gas supplies to Europe by increasing LNG purchases and reducing their dependence on Russian gas from the pipeline.

Warsaw, in turn, announced that Poland is ready to pay exorbitant prices for blue fuel in order to buy LNG, and not pipeline gas from Siberia.

Russia, too, must be careful about how much it promotes its political advantage. Gas blackmail could backfire if it forces Europe to accelerate its transition to renewables and energy heat pumps, or even revive long-term nuclear power. There are things that can be done in the near future to send a signal to Vladimir Putin, - the newspaper The Telegraph notes.

“I have serious reasons to believe that Gazprom is deliberately holding back gas supplies to Europe on the eve of the heating season”, - Mikhail Krutikhin, an analyst of the Russian oil and gas industry, told Novye Izvestia. - And this is being done so that the Europeans agree to launch Nord Stream 2. Gazprom clearly demonstrates to the whole world that Russia is an unreliable partner and supplier. Everyone knows that this is not the first time this has happened. There were cases of not just a reduction in supplies, but a complete shutdown of Russian gas to Europe at the height of the heating season - in 2006, 2009, 2014, 2015. And all this, mind you, was done at the will of the country's political leadership. In Europe, they rightly decided that anything can be expected from these Russians, it is necessary to provide ourselves with gas from alternative sources. And the work is in full swing. New gas pipelines are being built, in particular, the southern gas transmission corridor from Turkey and Azerbaijan, from Norway through Denmark to Poland, new terminals for receiving LNG are being built throughout Europe. For the sake of ensuring energy security, the EU is taking serious measures. And, of course, they will hit Russia with a boomerang, the expert concluded.

Sergey Pikin, director of the Energy Development Fund, told Novye Izvestia that Moscow was not involved in the rise in gas prices in Europe. With the same success, Vladimir Putin, as the head of the Russian state, can be blamed for the rise in prices on the world market for non-ferrous metals, food or cement. The president does not have such opportunities - to influence the whole world! The rise in prices for natural gas was caused by objective reasons. Due to the pandemic last year, demand for it fell, and this year, businesses that consume gas began to operate and consumption rose sharply. In addition, the economies of Asian countries began to recover faster than the rest of the world and, in order to lure suppliers to their market, they inflated prices for natural gas. All rushed to the East for profits. Of course, Europe will not be left without gas in winter. Moreover, we will launch Nord Stream 2 in October. By the way, there would be no American sanctions, it would have been launched a year and a half ago, - said Sergei Pikin.

Igor Yushkov, an expert of the Financial University under the Government of the Russian Federation, in an interview with a correspondent of Novye Izvestia said that the main reason for the rise in gas prices in Europe is the huge demand for blue fuel in Asian countries. And it is more expensive there. The prices are kept by large consumers - China, Japan and South Korea. All LNG is going to Asia today. And producers of liquefied gas want to earn more and do not pay attention to the needs of Europe on the eve of winter. The laws of the market are cruel: if you want to get gas - pay, as in Asia! Therefore, prices in Europe are growing.

“As for Russia, during the current year - at least from April to September - it has regularly supplied the same volumes of gas to the EU countries”, - the expert emphasized. - Therefore, when the Western media accuse us that Gazprom allegedly cut off the valve, cut supplies and so on. - it is not true. It's not about us. Yes, today almost all LNG goes to Asia. At the same time, it is known that gas production in Norway has been falling for the fourth year. By the way, the Norwegians also want to make money, so they are trying to liquefy more and send LNG to Asia. And they seem to be the last thing to think about filling their pipelines to Great Britain and Europe. Or another example: Algeria, which supplied the EU with gas, reduced supplies - enterprises started working there, and domestic gas consumption is growing. Nevertheless, for some reason, no one makes claims to these players, only Russian Gazprom and Vladimir Putin are scolded.

According to the expert, there is a lot of talk about low reserves in European gas storage facilities. And indeed it is. Why didn't they prepare for winter? Because the price of gas has been growing throughout the year and the companies constantly thought: we will buy expensive fuel now, and what if prices will fall in December. Fearing to sell too cheap, businesses are afraid to pump gas into storage facilities. Moreover, many companies took strategic gas reserves from their bins and sold it to current consumers, Igor Yushkov stated to Novye Izvestia.