Why does Gazprom itself limit its exports to the European Union?

Gazprom, which has run out of money over the past few years, is now behaving in the European market in a rather unusual way, limiting the sale of “blue fuel” to Europeans on their super-bids. It would seem that an unexpectedly cold winter has come and the demand for gas has increased, it's time to try to fight off the extremely unsuccessful past 2020. Why does the domestic monopolist behave differently?

In fact, the actions of the Russian state corporation have their own logic. The gas exporter expects to increase the volume of its supplies to the European Union in the future. And we must admit that our "national heritage" can succeed.



At first, a significant part of Gazprom's contracts are still price pegged to oil quotes with a time lag of six months. The past 2020 has become a real nightmare for both raw material suppliers and manufacturers. At the same time, several important factors developed at once: the coronavirus pandemic, which brought down the volume of consumer demand, and the extremely unsuccessful six-week "oil war" for Russia, which led to a decrease in quotations of "black gold". Last year, oil set a historic price anti-record, even going into negative territory for a while. Today, prices for hydrocarbon raw materials have grown, but given the fact that the cost of gas is tied to them with a six-month lag in time, it is simply not profitable to sell "blue fuel" to Europeans on extra orders under such conditions.

Secondly, it is now preferable for the Russian monopolist to sell gas to the EU on the spot market, where prices are higher. Two more factors work at the same time for this. The winter turned out to be surprisingly cold, so fuel consumption rose sharply. Moreover, in Asian countries, where it is now also abnormally cold, and economy is recovering at a fairly fast pace, but there is no developed pipeline infrastructure, gas prices are even higher. That is why LNG suppliers immediately drove their tankers there, while Europe goes with them on a leftover basis within the framework of binding contracts. The “invisible hand of the market” as it is.

The result is natural: the heating season is far from over, but European UGS facilities are almost half empty. So, in the largest economy of the Old World, Germany, underground storage facilities are filled only by 40%, in the second - in France - by 37%, in Austria - by 49%. It is also necessary to take into account that they cannot be emptied "to zero", so-called "buffer" volumes of technical gas are required. Today, European consumers are trying to quickly stock up on inexpensive Russian gas for future use, but Gazprom limits them in this.

It is beneficial for the domestic monopolist that the EU countries empty their storages to the maximum and buy up "blue fuel" during the year at prices more attractive to him. So far, this strategy is working, and there are still two months before the end of the heating season. An increase in the volume of purchases of our gas in the European Union should be expected in the period from summer to autumn 2021.