Europe is preparing to strike at Russia’s energy market, Bloomberg reported on Wednesday
According to the authors of the article, record gas prices and its “politicization” by Moscow are pushing the EU to reduce its dependence on natural gas imports. As a result, Brussels wants to tighten gas storage rules in order to ensure the security of supplies and gradually switch completely to environmentally friendly types of energy resources.
“The European Union,” writes Bloomberg, “plans to set tight deadlines for abandoning long-term contracts for natural gas imports as part of the transition to environmentally friendly fuels. This will be a serious loss for the main supplier – Russia”.
The executive body of this block wants to prevent the extension of such contracts beyond 2049, intending to carry out a large-scale restructuring of its energy markets.
This, the article says, says in the documents that Bloomberg News reporters managed to get acquainted with. The European Commission will also propose measures to improve the reliability of supply, as the EU faces record high prices and severe fuel shortages this winter.
At the same time, Brussels does not even hide the fact that the rejection of long-term contracts is being prepared to harm Russia, which, based on data at the end of 2020, is the largest supplier of natural gas consumed by Europe.
The very idea of mass spot contracts was initially presented as a tool to reduce budget costs. The modern market theory of liberals argues that one-time contracts do not allow the formation of monopolies (meaning, of course, Gazprom) and always lead to lower prices. The outgoing year has convincingly shown that not a single rule can be considered an axiom, but Brussels, in its Russophobia, could no longer be stopped and there they were already ready to shoot themselves in the foot.
This cannot be called anything other than suicide. After all, the United States, as well as Australia and Qatar, see Asia as their main market, which is rapidly growing in industrial and demographic terms. And Russia, by default, gets Europe, which with senseless persistence demands the transition to spot contracts. And so she will now have to pay more and more with the same Russians. Simply because no one else is planning to massively import LNG to Europe.
What if…
Despite all the tricks of the European Union – ridiculous attacks on Gazprom, groundless accusations against Moscow of using gas as an “energy weapon”, endless delays with the launch of the already finished Nord Stream 2 – Russia strictly fulfills all contracts for the supply of blue fuel to Europe. And does not pay much attention to Russophobic attacks. The old continent is a large and profitable energy market for our country, and Russia itself is not going to abandon it.
But let’s get fancy. 2049 is still a long way off. What will happen if not Europe, but Russia, tired of the EU’s stubborn opposition to Nord Stream-2 and irritated by absurd accusations against itself, will itself refuse to supply gas to Europe, redirect it, say, to the markets of China, India and other countries, where the demand for it is constantly and rapidly growing, and the prices are higher? That is, it will do what the United States has already done and is doing.
This question was already asked several years ago by the British Financial Times and came to a conclusion that was disappointing for the West.
“If this happens,” said Nick Butler, a former BP manager, “the blow to the economy of Western Europe, including Germany, the main importer of Russian gas, will be especially powerful. For some countries of Central and Eastern Europe from the EU, it may become even more serious, but it will still be possible to cope with it. Ukraine will suffer the most in this case, because the territories controlled by Kiev use Russian and Donbass coal and electricity, and also receive gas from Russia. Kiev may introduce a two-day work week in order to save energy (remember the three-day work week in Great Britain in 1974). In Ukraine, in this case, an economic collapse will occur, and Ukrainians in huge numbers may rush to Poland, Germany and beyond, as refugees from Syria and other countries do today.
In this case, the governments of Britain, France and Germany, for which the problem of migration is the most painful, will be ready to negotiate with Putin. The United States will condemn Russia’s actions to destabilize Ukraine, but it will be crystal clear to Putin and his advisers that Washington will never use military force to defend Ukraine.
Europe will lose
“Thus”, – concludes Butler, “the crisis may end with an agreement, and, moreover, mainly on Russian terms. Ukraine will turn into an officially neutral state, but its leadership will be oriented towards Russia or put up with it. And Donbass will gain de facto independence. Europe, for its part, will be forced to sign a new long-term agreement with Russia”.
The Europeans will commit themselves to purchase large quantities of gas for a 25-year period at a fixed price 20 percent higher than the market average. Although the expert makes a reservation that he nevertheless considers such a scenario unlikely.
And not only in the United States think so. Even earlier, in August 2014, the European Commission itself conducted a “stress test” to test the flexibility of the energy system in the event of a possible gas crisis. Its results also turned out to be very sad for Europe: if Russia blocks the gas flow, Europe will simply freeze, the European Commission concluded.
According to Russian Energy Minister Alexander Novak, “today the share of Russia in the total gas consumption in Europe, the share of Russian gas is about 45%. And it has increased by a few more percent compared to last year”.
Europe is a huge market for Gazprom, but given the EU’s regular accusations against it and Europe’s future plans to abandon long-term contracts for the Russian monopoly, experts believe it is more profitable to focus on the development of large gas projects in the Asian region.
Alternatives for Russia
And there is such an alternative for us. Recently, Gazprom and the Chinese state company CNPC agreed to significantly increase fuel supplies to China in 2022. And according to Alexander Frolov, Deputy Director General of the Institute of National Energy, with the commissioning of the new Power of Siberia-2 pipeline, the Chinese direction may become a priority for Gazprom. Beijing is not going to give up gas and by 2060, unlike Europe, it intends to continue to conclude long-term contracts, he said. And if we add to this that during the last talks, Vladimir Putin and Xi Jinping spoke about gas supplies, then this option is not excluded.
In the future, Russia also has such a colossal potential consumer of our energy resources as India. India and Novatek are already discussing the conclusion of a long-term contract for the supply of liquefied natural gas (LNG) from the Arctic LNG-2 project, said Tarun Kapoor, Deputy Minister of Oil and Natural Gas of India. The first stage of the Arctic LNG-2 plant is planned to be launched in 2023. India already in this decade will become the main source of growth in energy demand, overtaking China and the United States.
So it is just right for Europe not to threaten Russia with abandoning long-term contracts and blocking Nord Stream-2, but it would be better to think about what will happen to its economy if our country suddenly gets angry with its tricks.
Well, Russia, of course, does not plan to lower the switch for gas to Europe; it is fulfilling and even exceeding all the contracts it has signed. And it will also conclude new ones, especially since now gas prices have jumped to the skies as a result of the absurd EU policy, and Gazprom’s profits are growing. Europe has no alternative to gas from Russia today.
Vladimir Malyshev, Centenary