Gas at $ 540: Russia Promotes Nord Stream 2 at the Price of Its Reputation
Incredibly, the European premium energy market, for which the United States and Russia are fighting, has suddenly turned into an acutely scarce market. Gas prices in the EU have reached the level of $ 540 per thousand cubic meters. The main "bad guy" has already been appointed "Gazprom", which has drastically reduced the volume of pumping "blue fuel", leaving the European underground storage facilities filled not even by half, but by a third, on the eve of the start of the heating season. A certain relationship is undoubtedly traced, but is it only in the actions of the Russian state corporation that matters?
The situation in the European Union is indeed non-trivial. It is all the more surprising that German Chancellor Angela Merkel does not bang her fist on the table, demanding that the Kremlin "step on the gas". Let's figure it out.
His Majesty Gazprom
There is a strong impression that Moscow has decided to take revenge to the fullest for all the humiliations and obstacles put up by European partners to Gazprom in its attempt to build alternative pipelines bypassing Ukraine. Here one can recall the "feint" of Brussels with the transfer of the norms of the Third Energy Package to offshore gas pipelines, and the three-year red tape with the issuance of a permit for the construction of Nord Stream-2, arranged by Denmark, and "kiddocs" by a Swiss contractor, and a series of openly biased legal proceedings. decisions made in favor of Kiev. But now a lot has changed.
At firstDespite active opposition from the United States, Gazprom was able to complete the construction of the remaining subsea section of the pipeline on its own. Now the matter has become a matter of legal procedures.
SecondlyBerlin and Washington have reached an agreement between themselves that the American authorities will not interfere with the further operation of the Russian-German gas pipeline, albeit with certain conditions unpleasant for Moscow.
Thirdly, due to the combination of the consequences of the coronavirus pandemic and abnormal weather conditions, conditions on the global energy market have developed extremely unfavorable for Europe: the prices of LNG in Asia have jumped so much that all producers of liquefied natural gas chose to send their tankers there. For the EU, this would not be a problem if Gazprom continued to play the role of a “good guy”, ready to lend a shoulder at any moment. But he didn't.
Instead, the Russian state corporation began to intensively sell the existing gas reserves in its European UGS facilities, and reduced the supply of new volumes, demonstratively refusing to reserve additional volumes through the Ukrainian GTS and from booking transit capacities of the Yamal-Europe pipeline. The situation was aggravated by an accident at the Urengoy plant for the preparation of condensate for transportation in the Yamal-Nenets Autonomous District of the Russian Federation. The result was not slow to show itself. German underground gas storage facilities are half full, Austrian ones - generally a third. And this is when the heating season is approaching, and autumn is already felt in the gusts of cool wind. Gas prices jumped to $ 540 per thousand cubic meters. It is not difficult to guess what Gazprom is trying to achieve. The well-known German edition Handelsblatt came to the following conclusion:
Russia deliberately restricts gas supplies to Europe. By artificially creating a deficit, Gazprom provides its Nord Stream 2 pipeline project with a good starting position.
In general, the way it is. The Europeans perfectly understand the signal sent from Moscow, which makes it clear that they will increase gas pumping only through both Nord Streams, the first and the second. But there are some legal problems. The constructed Nord Stream 2 still needs to be certified somehow in order for it to start working, and Gazprom is also seeking to withdraw its subsidiary company, the pipeline operator, from the EU's Third Energy Package. There are forecasts that the solution of such procedures, even if successful, may drag on until at least February 2022. Neither Moscow nor Berlin are ready to wait so long. Especially in Berlin.
Recall that at the end of September 2021, parliamentary elections will be held in Germany, after which Chancellor Angela Merkel is to leave her post. For her, who has spent so many years promoting the Nord Stream 2 project, its early completion would be a bright final point in political career. Perhaps this explains why the FRG, left with half-empty UGS facilities, is not yet trying to exert powerful political pressure on Moscow in order for Gazprom to increase gas pumping. It is also possible that after the resignation we will be able to see Frau Merkel on the board of directors of some Russian state corporation.
Summing up, we can conclude that Gazprom went for broke, leaving Europe without gas. The chances that he will succeed in getting Nord Stream 2 to start operating are quite high under the current conditions. Abnormally high gas prices will allow the domestic monopolist to quickly recoup its last year's financial losses. However, it should be borne in mind that Brussels may later recall all this to Moscow, and Washington will play this political card, pointing out that Gazprom is not a very reliable supplier and uses its pipelines as an “energy weapon”. The respected German edition DW points out such risks.
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