FRANKFURT, Germany (AP) – Europe is short of natural gas – dangerously short. A cold winter could mean a severe crisis, and utility bills will rise, weighing on ordinary people and weighing on the economic recovery from the coronavirus pandemic.
Russian President Vladimir Putin has vowed to help fill Europe’s gas tanks as energy prices soar, but supply shortages and political tensions have continued to rock energy markets, now high prices. This has pinched businesses down and forced them to pass the costs on to customers already facing higher bills at home.
Moscow has been accused of using the volatile situation to push for the rapid launch of a new Russian pipeline under the Baltic Sea: Nord Stream 2, which is awaiting approval from German regulators and has been criticized by Ukraine, states -Unis and others.
With Europe dependent on imported gas and Russia providing 40% or more of those imports, Putin has leverage. He said the new pipeline is already full of gas and could help boost supplies “the day after” its approval.
Here are the important factors behind the gas crisis:
HOW DID EUROPE ENTER THIS MESSAGE?
Many reasons. One was a cold winter that depleted gas reserves, which are used to generate electricity and usually replenished in the summer. This did not happen this year.
The hot weather drained more gas than usual due to the demand for air conditioning. Less wind meant less renewable electricity, which caused generators to turn to gas. Limited supplies of liquid natural gas, an expensive option that can be delivered by ship instead of a pipeline, have been picked up by customers in Asia.
On top of that, for years Europe has advocated overnight spot prices, rather than long-term contracts. Russia-controlled gas giant Gazprom fulfilled those long-term contracts but did not pump additional gas beyond. Putin says customers with these contracts pay much less for gas than other buyers.
Prices were seven times higher in October than they were at the start of the year and have become around four times higher in recent times.
HOW DOES PIPELINE NORD STREAM 2 PLAY IN THIS?
Gazprom has invested billions in the construction of the 1,234 kilometer (765 mile) pipeline to Germany. This would allow Russia to sell gas directly to a major customer and bypass a pipeline crossing Ukraine, which faced relentless pressure from Russia following Moscow’s annexation of the Crimean Peninsula in 2014 and its support for separatist rebels in Ukraine.
Even before the 2014 hostilities, Moscow had launched efforts to diversify gas supply routes to the European Union, claiming Ukraine’s system was dilapidated and accusing the country of siphoning gas.
Ukraine stands to lose $ 2 billion in annual transit fees. He and Poland, which is on another bypassed pipeline, are fiercely opposed to Nord Stream 2. The United States and some other countries have also been very critical, warning that the project would increase Europe’s energy dependence on it. vis-à-vis Russia.
British Prime Minister Boris Johnson said on Monday he hoped “other European countries will recognize that a choice is ahead, between keeping more Russian hydrocarbons in giant new pipelines and defending Ukraine and defending the cause of peace and stability “.
Several analysts have said they don’t expect Nord Stream to be up and running this winter – although there has been speculation Europe may allow gas to start flowing while regulators review it , perhaps in exchange for an additional shipment of gas via Ukraine.
HAS RUSSIA RETAINED ADDITIONAL GAS SUPPLIES?
Gazprom says no. Head of its export branch, Elena Burmistrova, said this month that “we are not interested in record low or record gas prices”, adding that “we want to see a well balanced and predictable market”.
At least some analysts agree.
Thomas O’Donnell, an energy and geopolitical analyst at Berlin’s Hertie School, said Russia needs to fill its own gas reserves – just like the EU – after a cold winter.
As Putin relishes his role as “gas godfather” and exploited the scarcity to seek approval for Nord Stream 2, “the most mundane reality is … there has simply been no spare Russian gas available. export until Russia has finished filling its own national storage for the winter, ”wrote O’Donnell, who blogs at globalbarrel.com. “The godfather was bluffing.
O’Donnell said the only way for Russia to help fill the gas shortage this winter would be to pump more gas through Ukraine – assuming Gazprom is prepared to do so.
Putin ordered Gazprom to send gas to European storage after Russia finished filling its reserves last week, but “it’s limited,” O’Donnell said. “He could pretend he’s doing a lot more. “
US officials agree.
“Russia can and must provide additional supplies through Ukraine, which has sufficient pipeline capacity, and it does not need Nord Stream 2 for that,” Karen Donfried, the most senior American diplomat for Europe.
“And, if Russia fails to do so, it will obviously harm European energy security and call into question Russia’s motives for refusing these supplies,” she said.
By highlighting Europe’s dependence on Russian gas, Putin and Gazprom can hope for more lenient European regulation of the Nord Stream 2 market, O’Donnell said.
The pipeline suffered a delay on Tuesday when German regulators suspended the approval process due to an issue with the status of the pipeline operator under German law.
WHAT IMPACT COULD THE GAS SHORTAGE HAVE IN EUROPE?
The prices of natural gas will sooner or later affect residential and commercial electricity and gas prices.
The European Commission, the EU’s executive body, has cited skyrocketing energy costs as a drag on recovery in a pandemic, as higher bills will take money away from consumer spending and business investment.
Europe’s tight market echoes the United States, helping to raise prices there, although the American market has not seen the price spike in Europe.
WHAT CAN IT MEAN FOR WINTER?
Analysts say it’s hard to predict. Everyone is hoping that there won’t be a big late-winter storm that threatens dwindling supplies.
Analysts have speculated that electricity could be rationed – perhaps for some industrial customers early on – if things really go wrong.
An energy apocalypse – a complete loss of electricity or heat if gas reserves are reduced to zero and cannot be replaced – would likely cause deaths among the poor and vulnerable, as happened in Texas this past year. year when a winter storm cut off electricity, resulting in more than 200 deaths.
WHAT ABOUT BELARUS ‘THREAT OF CUTTING OFF GAS SUPPLY?
Poland and other EU countries accused authoritarian Belarusian President Alexander Lukashenko of using migrants attempting to reach the EU through Belarusian border with Poland as pawns to avenge sanctions against crackdown of his government against the demonstrations.
As the EU threatened more crippling sanctions, Lukashenko threatened to cut off Russian gas supplies to Europe through a pipeline to Belarus.
Although his statement rocked the markets even more, Lukashenko is unlikely to be able to follow through on his threat, given his political dependence on Russia and Moscow’s desire to maintain his reputation as a reliable supplier.
Valery Karbalevich, an independent Belarusian political analyst, called Lukashenko’s threat a boast.
“Decisions are made in Moscow, not in Minsk,” he said. “Lukashenko wants to frighten the EU and drag Putin into the confrontation, trying to provoke the Kremlin to take more radical action.
Isachenkov reported from Moscow. Associated Press reporter Yuras Karmanau in Kiev, Ukraine contributed to this report.
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