Gas price crisis: is Putin using energy supply as a weapon and what is his new Nord Stream 2 pipeline? | World news


It only took a few words from Vladimir Putin on Wednesday about gas production in his country before its price on wholesale markets fell sharply.

He said Russia could increase gas production to increase supply and it crashed after an earlier peak of 155 € per megawatt hour (MWh) at € 92 / MWh.

For some, his brief statement revealed how extremely vulnerable Europe is to Russia and raised questions about how easily gas could be turned into a weapon.

Wholesale gas prices rose sharply before falling again

It came at a time when the price of some gas stocks had almost increased eightfold since the start of the year to trade at a new all-time high, but also in the midst of a debate on the opening of a new Russia-Germany gas pipeline.

Russia is already the EU’s biggest gas supplier, and some have claimed the opening of the Nord Stream 2 pipeline will increase European dependence.

So, is there a risk that Mr Putin will use gas to control Britain’s allies? Here are some of the factors:

How important is Russian gas?

Concerns have been raised about the role of Russian gas since at least 2009, when a dispute between Russia and Ukraine over the alleged non-payment of Russian gas caused shortages in at least 18 European countries until a agreement is reached.

In 2014, in the middle the Crimean crisisThere were concerns that southern and central Europe would be affected if Russia stopped sending gas through Ukraine – which ultimately did not happen, even though the West imposed sanctions.

Currently, Moscow remains Europe’s main supplier, supplying 43% of the European Union’s needs to 27 countries.

This is expected to increase with the commissioning of the Nord Stream 2 pipeline.

The entrance to the Nord Stream 2 gas line landing facility in Lubmin, Germany
The entrance to the Nord Stream 2 gas line landing facility in Lubmin, Germany

What is Nord Stream 2?

Nord Stream 2 is the £ 9.5 billion offshore gas pipeline that will bring Russian gas through the Baltic Sea directly to Germany.

It complements the gas that already passes through Nord Stream 1, a gas pipeline that has supplied Germany for ten years.

Prior to Nord Stream 1, most Russian gas imports passed through a decades-old pipeline network that traversed Eastern Europe, particularly Ukraine.

Ukraine earns billions of dollars every year by allowing Russia to transport gas through its territory by pipelines.

A map showing the Nord Stream 2 route
A map showing the route of Nord Stream 2, along the route of the existing Nord Stream 1

Much of the gas from Nord Stream 2, when it enters the EU in Germany, will actually end up in countries as far apart as Italy and Austria, bypassing Ukrainian pipelines, as it will connect to a grid wider European gas company.

But besides the impact on Ukraine, the project is controversial for other reasons.

The UK and US have opposed Nord Stream 2 because they claim it will increase the EU’s dependence on Russian energy and potentially weaken the hands of NATO members in any dispute or negotiation with Moscow.

Russia claims the United States opposes it because the United States wants to sell more American liquefied natural gas – produced by hydraulic fracturing – to Europe.

The two The Trump and Biden administrations have imposed sanctions on the companies involved in the construction of Nord Stream 2, delaying the project, but the United States reached an agreement in July with Germany to allow it to open until it has been used for Russian “aggression”.

Despite the delays, it’s now over, but has not yet been put into service as it needs to obtain official approval from the German authorities.

How Nord Stream 2 will avoid Ukraine
How Nord Stream 2 will avoid Ukraine

Sanctions frustrated Germany Angela Merkel, who, as the country’s chancellor for 16 years, helped move the project forward.

She retired before last month german elections, but, due to the tight outcome, is likely to remain as interim chancellor until the emergence of a new government in a few months.

With no other chancellor in place yet, there is no political reason why the approval would not be granted, but the German Greens have stressed their opposition to the pipeline, saying they will remove it if they enter the pipeline. government, and they currently have the potential to maintain the balance of power.

Is Russia using gas as leverage?

The Kremlin and Russian gas company Gazprom deny playing a role in a supply crisis that has seen European gas prices soar, but some EU officials and energy experts say Moscow has refrained from increasing the offer.

While Mr Putin has reportedly agreed to increase gas exports, he stressed that domestic demand should be met first.

Bovanenkovo ​​gas field gas refinery
The gas refinery of the Bovanenkovo ​​gas field, from which a large part of the gas that will be transported by the Nord Stream pipelines comes

He also blamed the current crisis on technical changes that took place in the European gas market several years ago, in particular to gradually eliminate long-term contracts favored by Russia in favor of an open “spot” market.

Experts say the main factor driving up prices is the global gas market.

European and UK gas stocks are low, raising alarm bells, and demand has risen sharply in Asian countries which have lower domestic production levels, pushing up prices around the world.

Russia supplies large amounts of gas to Europe, but due to the way it extracts it from the ground, it cannot easily change the amount it produces.

Dr Jack Sharples, a researcher at the Oxford Institute for Energy Studies, says that even if Russia wanted to send huge amounts of gas through Nord Stream 2, assuming it was approved, it probably could not do so because This will not be the case. able to bring sufficient supply into operation relatively quickly. He says it is this inflexibility that is contributing to the current rise in prices.

Diggers working on one of Russia's international gas pipelines
Diggers working on one of Russia’s international gas pipelines

The EU has tried to address the general rigidity of energy supply across the bloc by liberalizing its internal gas market, he added, but this in itself has led in recent days to the type of speculation. which would drive up the current prices, which traders buy and sell based on their expectations of price fluctuations.

In fact, it was this speculation that raised the Russian alarm, as it makes it harder to strike the kind of long-term gas deals Moscow prefers.

What is clearer is the impact of pipelines like Nord Stream 2 on Ukraine, which is still embroiled in a low-intensity conflict with the Russian-backed separatists. The amount of gas passing through Ukrainian territory is expected to decrease every year in the coming years.

This was illustrated last week when Russian state gas producer Gazprom shifted its gas supplies to Hungary – of which President Viktor Orban has been one of the Kremlin’s closest European allies – from transit through Ukraine. transport by separate gas pipelines via Austria and Serbia. The move sparked a furious reaction from the Kiev government.

The two onshore pipe outlets of the Nord Stream 2 Baltic Sea pipeline are pictured at the landing facility in Lubmin, Germany, September 10, 2020. Photo taken with a drone.  REUTERS / Hannibal Hanschke
The two onshore pipe outlets of the Nord Stream 2 Baltic Sea gas pipeline in Lubmin, Germany

So what does all this mean for Putin?

At a meeting of government officials and energy company leaders in Moscow on Wednesday, Mr Putin blamed Europe, saying EU countries were wrong to reduce the share of long-term deals in the natural gas trade for the benefit of the spot market.

He also reaffirmed that Russia was a reliable supplier of energy to Europe and added that the amount of gas sent through Ukraine would be higher than previously agreed, confirming theories that the price spike is more related to vulnerabilities of the more competitive EU. gas market and, as Dr Sharples puts it, “the inelasticity of demand”, than any attempt at pressure.

Dr Sharples told Sky News that Mr Putin or Russian officials would be unlikely to use the gas directly to lean on the West.

Workers on the construction site of the Nord Stream 2 gas pipeline
Workers on the construction site of the Nord Stream 2 gas pipeline

He said: “2014 has shown that just because Russia supplies Europe with gas does not mean that Europe will not react when something happens on the international stage.

“But where any sort of influence can be found is at the ‘behind closed doors’ level, at the lobbying level … at a lower and more subtle level … rather than Putin sitting down with it. the new German chancellor and saying: the taps if you put pressure on the other European leaders to relax the post-Crimea sanctions and annexation. It’s more subtle and insidious.

Nonetheless, Russian Deputy Prime Minister Alexander Novak said on Wednesday that certification of Nord Stream 2 could help keep European gas prices soaring.

Therefore, if the current crisis results in the certification of the subsea pipeline, it will be seen as a victory for Russia.


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