Gas: What will happen in Europe if Putin turns off the pipes?

At a time when Russia is constantly concentrating troops and equipment on its border UkraineAnother sector of tensions emerges in the energy markets, note Times New York.

And why is not difficult to understand. The gas, which flows through a network of pipelines starting from Russia, ends up in countless homes and power plants in large parts of Europe. At the same time, Russia is one of the main sources of oil for Europe.

Now, Western authorities are being forced to create possible conditions in the event of Moscow escalating tensions by shutting down gas pipelines and cutting off oil supplies in the center of the European winter.

The US newspaper notes that the Ukraine-centric conflict is coming at a particularly bad time, with energy prices rising around the world as demand for oil and gas rises due to the gradual recovery of world economies.

In Europe, record-breaking prices attract gas tankers from the United States, Qatar and other manufacturers. On Tuesday, the White House announced that talks were underway to supply more US gas to Europe. It remains to be seen whether these will be sufficient to avert the risk of European blackout.

According to them, the following aspects of the problem are very important Times.

Why is Europe facing such huge energy problems?

This winter Europe has been plunged into an energy crisis, with gas and electricity prices soaring. The problem started last year when gas reserves plummeted to an unusual level.

Natural gas is being sold at five times the price last year. Although prices have halved since last year’s peak, they are almost seven times higher than in the United States. This increase also led to an increase in energy production costs and consumer electricity tariffs. Some factories that require enormous amounts of energy, such as fertilizer factories, have been forced to suspend their operations.

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Russia is already carrying the burden of Europe. It holds shares in its European gas facilities and exports less natural gas than usual GazProm At the lowest possible levels. Such tactics raise concerns about whether Europe will have enough gas to survive its icy winter.

“If things are so complicated in Ukraine, one can only observe that Europe is currently particularly vulnerable,” said Thein Gustafson, author of The Bridge, a study on gas trade between Russia and Europe.

How important is Russian gas to Europe?

Russia supplies about a third of Europe’s gas, and its market share is growing as production in other parts of the continent declines.

The Netherlands was once a major producer within the EU, but that has changed dramatically with the gradual cessation of production from the Croningen sector due to seismic activity in the region.

At the same time, the importance of natural gas is increasing, with coal-fired power plants gradually being abandoned in pursuit of green energy, while nuclear power plants across Europe are being shut down one after another.

Despite Europe’s large investments in renewable energy sources such as solar and wind, it is dependent on conventional sources. Gas power plants are one of the few options available.

To what extent will the Ukrainian crisis threaten European gas supplies?

Despite the change in flow, one-third of Russia’s gas reaches Europe via a pipeline through Ukraine. According to some analysts, these pipe connections could fall victim to a possible Russian invasion.

Russian President Vladimir Putin could cut off some or all of Russia’s gas supplies to Europe in response to the indefinite sanctions promised by the United States and other Western powers in the event of an invasion.

“If we try to exclude them from our capital markets, they will hit our weak point, which is energy,” he explains. Times Helima Kraft, in RBC Capital Markets, An investment bank.

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How likely is it that Putin will actually turn off the pipes?

Some analysts believe Putin is reluctant to take such drastic action against his most important buyers. Such a move would affect an important source of revenue.

“While Europe relies heavily on Russian gas, Russia is heavily dependent on the European market – it cannot be easily changed,” said David Goldwin, the Obama administration’s special envoy for international energy. Times.

Goldwin is now its chairman Goldwin Global Strategies, He added that Putin was trying to strike a subtle balance between “being a reliable supplier to Germany and reminding Europe of Russia’s dependence on gas.”

According to him, Putin may follow a similar logic with regard to oil, another important source of income for Russia. If Russia stops exporting oil, its consuming countries will turn to Saudi Arabia to fill that gap. However, the recent failure of the Organization of the Petroleum Exporting Countries to increase production to meet international demand shows that they can reach their full potential.

Are there solutions to the potential consequences?

In recent months, Russia has been testing Europe in a stressful way, they point out Times, Reducing gas flows in an obvious attempt to prevent the acceleration of problems such as the operation of a new submarine pipeline Nord Stream 2, The $ 11 billion investment will allow Russian gas to flow directly to Germany, excluding Ukraine.

The Cosprom A company spokesman says there is nothing unusual in its moves, which “supply gas to the needs of consumers and fully comply with its current contract obligations”.

And stocks may be lower and prices may be higher, but Europe is not running out of gas.

Market forces are at work – albeit belatedly. At the urging of the Biden government, a large group of tankers transported liquefied natural gas to Europe at high cost. Ships come from the United States and the rest of the world, and each tanker is three times more efficient than the current daily volume of gas reaching Russia from Europe.

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The increase is significant: in January, the amount of liquefied natural gas coming to the United States from Europe was higher than that of Russian gas. These transports, coupled with the relatively mild winters so far, have eased some concerns.

Massimo de Otordo, vice president of natural gas, said: “The risk of running out of gas has been reduced. Wood McKinsey, A financial research firm. “Concerns about resistance are declining.”

In addition, he mentions Times Another reason for the decline in gas supplies from Russia to Europe in January was due to increased prices as European companies preferred to sell gas from their stocks rather than deliver new quantities from Russia.

It is doubtful whether the situation can be saved if Russian flows are completely stopped by sending liquefied natural gas. Times. Liquefied natural gas requires specialized terminals, which are not large enough to cover such large losses in Europe.

“Europe’s import capacity is currently being tested, which means it is difficult for the region to increase them significantly,” said Laura Page. Kpler.

What impact will the Ukrainian crisis have on Russia’s relations with its customers?

Maybe worse. Proving power on the Ukrainian border “will cause problems in their presence in the market,” says Trevor Sikorsky, analyst Energy features.

Putin’s behavior could cast doubt on Russia’s claims to be a reliable energy provider.

“This crisis will accelerate geopolitical incentives that depend on gas in general and Russia in particular,” Goldwin said.

Source: New York Times

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