Europe’s gas crisis a boon for Moscow
As European gas prices soar and governments worry about their effect on a spiralling cost of living, Russia on Wednesday offered what it said could be a swift solution: rapid certification of its recently completed Nord Stream 2 pipeline that will pump Russian gas directly across the Baltic Sea to consumers in Germany and beyond.
The comments — from Russian Deputy Prime Minister Alexander Novak — will not cool European concerns that an energy crisis this winter is already playing into Moscow’s hands. Both the Kremlin and Russian gas firm Gazprom deny playing any role in a supply crunch that has seen European gas prices rocket up to eight times what they were a year ago, but some European energy experts say Moscow has held back from boosting supply.
At a meeting of Russian energy officials on Wednesday, President Vladimir Putin was reported to have agreed to increase gas exports but stressed that domestic demand should be met first. He said Russia remained a reliable supplier of energy, blaming the current crisis on technical changes in the European gas market several years ago, particularly to phase out long-term contracts favoured by Russia in favour of an open “spot” market.
Russian-linked energy crises have long been a feature of European winters. In January 2009, a dispute between Russia and Ukraine over alleged non-payment for Russian gas saw supplies to at least 18 European countries impacted until a deal was done.
Last week, Gazprom also switched gas supplies to Hungary from coming through Ukraine to separate pipelines through Austria and Serbia. That prompted a furious response from the government in Kyiv, which said the action breached previous agreements and should lead to US and German sanctions.
The fear in Ukraine is simple — that Russia will use a wider network of pipelines to cut off supplies and starve Ukraine of both heating gas and transhipment fees while building Moscow’s ability to switch on and off supplies to other European nations as a diplomatic weapon. If that were true, the potency of that weapon has been increased sharply by the current fuel price crisis.
To what extent Russia is genuinely driving the current price spike is hotly disputed. European gas stocks are at a 10-year low, while Britain is reported to have only four or five days winter fuel supply compared to 15 days previously. Stocks have also fallen in Asia, pushing up global prices.
Despite years of talks about diversifying away from Russian gas, Moscow remains Europe’s primary supplier, delivering 43% of the 27-nation European Union’s needs.
The European Commission says it will probe allegations that Russia has been manipulating markets, with Brussels also aiming next week to publish a “toolbox” of measures countries can use to tackle the price spike, including subsidies. The longer-term solution is a major switch to renewable energy, European officials say.
The timing of the crisis, however, appears suspicious to some. Having completed the Gazprom pipeline this summer, Russia is now keen to get it certified. That process, however, has been far from easy — the United States has imposed sanctions against the project, and this may be deterring the specialist firms needed for it to be certified for final gas deliveries.
The pipeline has long been contentious, with different Western allies taking divergent approaches. The United States and Ukraine in particular have opposed it outright, while France and Germany have pushed for its completion.
Critics say that has just rewarded Moscow for aggression and repression, including mobilising thousands of troops on the borders of Ukraine this April, the suspected poisoning then imprisonment of opposition leader Alexei Navalny, and a wider opposition crackdown. Each has been suggested as a possible fatal blow to Nord Stream 2, but none has been so.
Moscow also backs President Alexander Lukashenko of Belarus, whose government has brutally crushed opponents following disputed elections last year and is also accused by the Baltic states and Poland of pushing Middle Eastern migrants across their borders. Russia has been repeatedly accused of espionage — on Wednesday, Nato cancelled the accreditation of eight members of the Russian diplomatic mission there alleging they were spying.
Arguably, the fact this crisis is occurring now may reduce the risk of problems later in the year, particularly if deals are struck with Russia for more long-term supply.
If that includes certifying Nord Stream 2, however, that will be a major win for Russia, particularly after other events this year. Even if that mitigates the current crisis, it could set the tone for further confrontations in the years to come.