Thursday, December 2, 2021

Why “gas godfather” Putin will play a key role in Europe’s winter energy crisis

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Europe depends on imported gas, 40 percent of which comes from Russia. Because of this, its leader will play an important role in the development of winter

Winter is coming and Europe is short of natural gas. Lower temperatures could lead to a serious supply crisis, with electricity bills skyrocketing and slowing economic recovery from the coronavirus pandemic.

Russian President Vladimir Putin has promised to boost gas supplies to Europe amid rising prices, but political tensions and supply shortages have shaken energy markets and prices remain high. That has cornered businesses, forcing the cost to pass on to consumers who are already facing higher bills at home.

Amid the scarcity, Moscow has been accused of using the unstable situation to speed up the start of a newly built Russian pipeline under the Baltic Sea: Nord Stream 2, which has been criticized by Ukraine, Britain and the US.

On Tuesday, the German energy regulator suspended the pipeline certification process due to concerns about the organization’s legal structure. The Kremlin has said it does not think the decision is political, but with Europe relying on Russia for around 40 percent of its imported gas, Mr Putin is a major player in developing events this winter.

Here are the main contributing factors to the crisis.

Several reasons. One was a cold winter that depleted gas reserves that are used to generate electricity and are usually replenished in summer. That didn’t happen this year.

Instead, the hot weather let off more gas than usual due to the demand for air conditioning. Less wind meant less renewable electricity, which led generators to turn to gas fuel. Limited shipments of liquefied natural gas, an expensive option that can be shipped by ship instead of pipeline, have been bought up by customers in Asia.

In addition, Europe has been pushing for up-to-date spot prices instead of long-term contracts for years. The Russian-controlled gas giant Gazprom has fulfilled these long-term contracts but has not produced any additional gas. According to Putin, customers with these contracts pay much less for gas than other buyers.

As a result, prices in October were seven times higher than at the beginning of the year. They recently dropped to around four times.

Gazprom has invested billions in building the 765-mile pipeline to Germany. It would allow Russia to sell gas directly to a major customer and bypass a pipeline through Ukraine, which came under relentless pressure from Russia after Moscow annexed the Crimean peninsula in 2014 and supported separatist rebels in eastern Ukraine.

Even before the 2014 hostilities, Moscow had made efforts to diversify gas routes into the European Union, claiming the Ukrainian system was dilapidated and accusing the country of siphoning off gas.

Ukraine loses $ 2 billion (£ 1.48 billion) in transit fees annually. It and Poland, which lies on another bypassed pipeline, vehemently oppose Nord Stream 2. The United States and several other countries are also very critical and warn that the project would increase Europe’s energy dependence on Russia.

Boris Johnson said Monday he hoped “other European countries may see that a choice will soon be made between forwarding more and more Russian hydrocarbons in huge new pipelines and standing up for Ukraine and advocating peace and stability” .

Gazprom says no. The head of the export department, Elena Burmistrowa, said: “We are not interested in record lows or record high gas prices,” added: “We want a balanced and predictable market.”

Thomas O’Donnell, energy and geopolitical analyst at the Hertie School in Berlin, said Mr Putin was enjoying his role as a “gas godfather” and had to replenish his own gas reserves first. However, he added that the Russian leader had taken advantage of the shortage to push for Nord Stream 2 approval and has now refused to send some available supplies across Ukraine.

“The person who invaded Ukraine in 2014 is now refusing to send gas across Ukraine,” said O’Donnell, who blogs on globalbarrel.com.

“He now has the gas there and Ukraine is even offering him a 50 percent discount on transit fees. This could make a significant contribution to alleviating the impending winter energy crisis in Europe.

“Instead, Putin has now sent large numbers of Russian troops to the borders of Ukraine and has de facto threatened the country in recent weeks.

“This is a serious energy and security situation for Europe and Ukraine. The shortage of winter gas in the storage facility and also of coal in the Ukrainian storage facility is a threat to the heating and power supply of the citizens. “

US officials have asked Russia to deliver additional supplies to Europe. “You don’t need Nord Stream 2 for that,” said Karen Donfried, the senior US State Department official for European affairs.

“And if Russia doesn’t do this, it will obviously violate European energy security and question Russia’s motives for withholding these supplies,” she added.

Sooner or later, natural gas prices will be reflected in house and commercial charges for electricity and gas. The European Commission has cited rising energy costs as a drag on pandemic recovery as higher bills weigh on consumer pockets.

For the winter, the results are harder to predict as there are fears that a storm in late winter could threaten dwindling supplies. Analysts have speculated that electricity could be rationed, perhaps for industrial customers first, if things get really bad.

An energy apocalypse – a total loss of electricity or heat when gas reserves are pulled to zero and cannot be replaced – would likely result in deaths among poor and vulnerable populations, much like the Texas disaster this year when a winter storm lost power resulting in more than 200 deaths.

Warsaw and the EU have accused Belarusian President Alexander Lukashenko of using migrants stuck on the Polish-Belarusian border as pawns to avenge sanctions against his government’s actions against protests.

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