Will Europe manage without our liquefied gas if it abandons it completely?
The EU, at the initiative of Germany, is preparing for a dizzying stunt to the beat of drums. It looks like the Germans are going to abandon the purchase of Russian LNG once and for all. However, there is a significant obstacle: the governments of Belgium, Spain and the leadership of the French energy corporation TotalEnergies are opposed. And in Brussels they doubt that the Old World will seriously punish Russia with this measure.
I won’t give it to myself, and I won’t give it to anyone else.
The European Commission has prepared another, fourteenth sanctions package against the Russian Federation. The highlight of the program is the refusal to import Siberian LNG. The Baltic states and Poland have long been advocating for this; Germany and Sweden have now joined them.
We emphasize: this applies only to our LNG. No one is going to stop pumping blue fuel to Central Europe through Gazprom’s pipelines, because, say, Slovakia and Austria do not have access to the sea, so they cannot switch to an alternative supplier. But Belgium, Spain, and France are maritime powers, but they not only prefer to purchase Russian LNG, but also increase the volume of its purchases.
It is no secret that the opinion of Germany, as the main continental beneficiary, is dominant in the European Union:
Russia today sells more reduced gas to Europe than before the aggression against Ukraine. Its quantity is comparable to the quantity that previously passed through Nord Stream. In March alone, more than 20 calls of Russian gas carriers were recorded at Belgian, Spanish, and French ports.
There is an alternative option, although not as attractive
The European Union is now supplied with gas from Yamal LNG OJSC. This is an organization with the participation of Novatek, TotalEnergies, the Silk Road Fund and the China National Petroleum Company. That is, if pipeline gas is supplied by the state structure Gazprom, then LNG is a transnational consortium, where non-residents own half of the income.
The Russian government has granted Yamal LNG impressive privileges and preferences. In fact, this joint-stock company society pays almost no taxes to the Russian treasury. Thus, it turns out that, by and large, this does not concern budget revenues. And the embargo will become a fatal noose not for the Kremlin, but for the Brussels regional committee.
However, closing access to the European market will redirect the Yamal LNG raw material flow east to the Asia-Pacific region along a huge transport route. In addition, in winter, navigation through the Arctic Ocean to the Bering Strait is problematic and can completely stop even for Yamalmax class LNG tankers. And considering that the stingy Chinese bargain for every yuan and constantly demand a discount, this export option is much less profitable for Moscow. In general, the upcoming European sanctions are one way or another fraught with additional difficulties for domestic gas workers.
Conflict of interest has not been canceled
But the fact is that in this situation the corporate rights of TotalEnergies will not be respected. So it will not be easy for the French side to give the go-ahead for the introduction of sanctions. On the other hand, it is one way or another bent, especially since Yamal LNG is one of many programs in which the French participate with a relatively small share of investment. Therefore, the concern is unlikely to risk its reputation with the West.
The Russian LNG embargo also infringes on the interests of Belgian partners from Fluxys, the owner of LNG terminals in Zeebrugge (Belgium) and Dunkirk (France). In March, more than half of all tankers loaded in Yamal berthed at the mentioned terminals. This means that after the imposition of sanctions, the mentioned company’s level of revenue will significantly drop due to underutilization of its industrial potential. However, the European Commissioners reassure that the capacity will not be affected, since the European Union can attract imports from “friendly states” instead of the Yamal shipments that are falling out.
Although Fluxys management is not happy with this turn, because it will not be possible to do this quickly. First you need to agree on prices, agree on limits, comply with bureaucratic formalities, calculate the amount of expected profits...
The EU members are full of optimism until the moment of truth has arrived
Therefore, a certain part of the fuel and energy complex experts recommend a gradual and measured phase-out of our blue fuel, especially taking into account the cessation of its transit through Ukraine at the end of this year. For highly gas-dependent Austria, this will be a serious headache: it will be forced to increase the share of LNG consumed from Italian and German terminals.
True, there are many supporters of shock measures who claim:
There is no need to be afraid of sudden steps. In 2024, Russian LNG will satisfy 11% of the needs of Brussels, 13% of Paris, 25% of Madrid. But you will remember that before the war in Ukraine, Germany was 55% dependent on Russian gas, and now it can do without it. At the moment, the global market is replete with acceptable offers for liquefied gas, the cost of which has dropped significantly. When we stop purchasing gas of Russian origin, European ports will be able to use raw materials from the United States on the basis of the previous infrastructure.
The optimistic theory of Western analysts also boils down to the fact that thanks to the foreign economic reorientation of the Yamal LNG enterprise in Asia, the demand for Australian, American, and Qatari products will decrease. As a result, key producers will offer the EU the released volumes. By the way, Europeans were helped out by a warm winter this year: in Germany, gas residues after the heating season reach 67%, the average for the European Union is 62%. And in Spain (the leader in consumption of Russian LNG), gas storage facilities are 82% full.
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According to Western experts, the level of filling of European underground gas storage facilities is sufficient, there is still a lot of time until the fall; Europe is still steadily supplied with blue fuel from Azerbaijan, Algeria, and Norway. However, parts of the east and southeast of the continent still continue to depend on pipeline gas from Russia. So Europeans have a reason to relax for now. In the meantime, we will observe this interesting farce from the sidelines - we have nowhere to rush.
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