How Europe became so dependent on Putin for its gas

Russian gas attracted Europe because it was easy to transport and almost always available. Its importance has increased in recent years as some countries have decided to end coal and nuclear power generation and production from their own gas fields has declined. Russia’s state-controlled Gazprom supplied around a third of all gas consumed in Europe, until the war in Ukraine disrupted supplies and underscored the risk of over-reliance on a single source. energy supplier.

1. What changed as a result of the war?

After Russia invaded Ukraine, the European Union drew up a plan to cut Russian gas imports by two-thirds by the end of 2022. Russia, after suffering punitive sanctions, has fired back, with President Vladimir Putin signing a decree requiring all buyers from “hostile” countries to pay in rubles from April. They should open special accounts with the Russian Gazprombank JSC, in foreign currencies and rubles, to manage their payments. Buyers in Poland, Bulgaria, Denmark, Finland and the Netherlands refused to comply with the new terms and saw their gas cut off. Later, Russia also cut supplies through its largest pipeline to the mainland, cutting shipments even to those who found workarounds to the new payment order. As a result, customers in Germany, Italy, France and Austria did not receive all the gas they requested.

2. How did Russia become so important?

With its vast Siberian deposits, Russia has the largest natural gas reserves in the world. It began exporting to Poland in the 1940s and laid pipelines in the 1960s to deliver fuel to and through satellite states of what was then the Soviet Union. Even at the height of the Cold War, deliveries were steady. But since the breakup of the Soviet Union, Moscow and Kyiv have argued over pipelines crossing Ukrainian territory, prompting Russian authorities to find alternative routes.

3. How vulnerable is Europe?

A supply crisis in 2021 provided a glimpse of Europe’s reliance on Russian gas, with benchmark prices more than tripling. Stocks in the EU fell to a record low with heavy maintenance underway at North Sea fields and supplies of liquefied natural gas redirected to meet growing demand in Asia. In 2022, with Russian supplies under threat, European LNG imports were pushed into full gear, domestic producers vowed to keep production as high as possible and EU buyers tapped new supplies from Africa to Central Asia. Yet Russian volumes were still too large to be fully replaced in the short term. In mid-June, flows through the Nord Stream gas pipeline – the biggest link between Russia and the EU – fell by around 60%, forcing utilities to tap reserves normally used during the peak winter season.

4. How vulnerable is Germany?

The economic power of the EU depends on Russia for more than half of its gas and about a third of its oil. The standoff with Moscow has led Germany to double its investment in renewables and invest in LNG import facilities, but it will take years for these other sources to come online. In the meantime, the government has revived highly polluting coal-fired power stations and subsidized purchases from alternative energy suppliers to compensate for the sharp drop in Russian gas imports.

5. Which other countries are exposed?

Landlocked countries in Eastern and Central Europe are more vulnerable to disruptions from Russian gas because they have fewer alternative options than countries in Western and Southern Europe. Russian supplies accounted for around 40% of Italian demand in 2021, but that country is scouring the world for replacements and has struck new deals with suppliers, especially in North Africa. Some small gas buyers like Finland, also deprived of Russian gas, are considering using floating LNG terminals. Poland, which generates most of its electricity from coal, has invested in a new gas pipeline from Norway, which should start flowing in October, while Bulgaria plans to increase imports of Azeri gas in 2022 with the opening of a branch line from Greece, a country which can also supply LNG.

6. What role does Ukraine play?

About a third of Russian gas sent to Europe normally passes through Ukraine. Supplies through the country have been curtailed since May 11 after a transit point was decommissioned amid fighting in the east of the country. Before the cuts, Ukraine expected to earn at least $7 billion from transit fees under a five-year transit deal in December 2019.

7. How has Russia disrupted the market before?

In 2006 and 2009, disputes with Ukraine over gas pricing and siphoning led to cuts in Russian supplies passing through the country. The second shutdown lasted almost two weeks in the middle of winter. Slovakia and some Balkan countries have had to ration gas, close factories and cut power. Since then, the most vulnerable countries have rushed to lay pipelines, connect networks and build terminals to import LNG shipped from as far away as Qatar and the United States.

8. What are the supply networks?

External supplies, mainly from Russia, Norway and Algeria, account for around 80% of the gas the EU consumes. Germany imports much of its gas via a pipeline under the Baltic Sea called Nord Stream, which has been fully operational since 2012. (Another pipeline, Nord Stream 2, was completed in late 2021 but became entangled in politics and is now firmly on ice.) Nord Stream began a 10-day maintenance period on July 11, as Germany and its allies braced for the possibility that Putin could cut off streams permanently. Belgium, Spain and Portugal face the problem of low storage capacity, as does the UK, which is no longer part of the bloc and has closed its only major gas storage site. The continent has a mass of pipelines, but many cross multiple borders, creating many possible choke points, while some countries still lack connections.

More stories like this are available at bloomberg.com

About Leni Loberns

Check Also

Behind schedule Mountain Valley Pipeline wants permit extension / Public News Service

Developers of a more than 300-mile gas pipeline that would cross North Carolina, Virginia and …