"Moscow's move to slash natural-gas exports to Europe has pitched the continent's energy crisis into a dangerous new phase that threatens to drain vital fuel supplies and kneecap the continent's economy.Russia's state-owned gas giant Gazprom PJSC throttled deliveries via the Nord Stream pipeline to Germany this week, blaming missing turbine parts that were stuck in Canada because of sanctions.
European officials and analysts tried to dismiss the explanation. They said Moscow allegedly is weaponizing gas against European Union members that have imposed sanctions on the Russian economy and supplied weapons to Ukraine.
On Thursday, Russia's ambassador to the EU, Vladimir Chizhov, warned that the Nord Stream pipeline could be turned off because of the missing parts. The pipe is the main thoroughfare for Russian gas into Europe, handling about half of all piped flows in 2021. "I think it will be a disaster for Germany," he told Russian state newswire RIA Novosti.
Throttling supplies marks a high-stakes gambit for the Kremlin while it is under Western sanctions and manages an economy that, outside of selling energy, is mostly cut off from Western trade. Moscow's deliveries of gas to Europe began to fall last year, but Gazprom kept sending gas it was on the hook to deliver under long-term deals.
"The Kremlin believes it's in a perennial struggle with the U.S. and EU both in Ukraine and in geoeconomics, and Moscow has few tools to punch back," said Alexander Gabuev, senior fellow at the Carnegie Endowment for International Peace. "Gas is the most potent one, and it looks like Moscow has decided to make the first move now without giving Europe time to prepare."
Berlin said gas supplies are secure and that it could procure the missing fuel from other sources, though at higher prices.
But the reduction in Russian supplies would make it difficult to fill gas storage ahead of winter, potentially leaving factories and households across the continent in peril.
Data from Nord Stream showed gas flowing at about 55% of its rate from the start of the week. Benchmark European gas futures jumped more than 20% on Thursday before easing to end 3.3% higher at 124.36 euros, or about $130, a megawatt-hour.
Further price gains will complicate Europe's fight against rampant inflation, which has led to turmoil in the region's bond market and reignited worries about the stability of the eurozone. Prices for gas in the Netherlands, the benchmark in northwest Europe, surged 47% in the past week and are more than four times as high as they were a year ago.
Gazprom head Alexei Miller said Thursday the company is comfortable with the reduction in gas supplies because prices have increased.
After sanctions on Russia started, Gazprom severed exports to companies in Poland, the Netherlands, Bulgaria and elsewhere. Moscow said they failed to comply with an order by President Vladimir Putin to pay for gas in rubles. This week, Gazprom went further and cut supplies to firms that abided with the Kremlin's decree. Germany's Uniper SE, Austria's OMV AG and Italy's Eni SpA, among the continent's biggest energy companies, said deliveries from Russia had fallen.
Moscow is allegedly blackmailing the EU with energy supplies, said a spokesperson for the European Commission, the bloc's executive arm. There is no immediate threat to supplies, the spokesperson added.
Europe's options are limited in the short term. Government and company officials have scoured the globe for alternative sources of supply, striking deals in the U.S., Egypt and Israel, while securing higher volumes from producers including Azerbaijan and Norway.
But the continent's infrastructure for importing liquefied natural gas is close to maxing out, traders said, and is in any case distributed unevenly in the region.
Germany's first LNG import facility won't come online until later this year at the earliest. Nor will a new LNG terminal in the Netherlands.
"If Nord Stream is cut off, and even if it remains cut off at just 40%, the situation is going to be very dire for Europe," said Massimo Di Odoardo, vice president for gas and LNG research at Wood Mackenzie. If Gazprom stops pumping through Nord Stream and doesn't send the gas via another route, European gas stores would likely run out in January, he added." [1]
1. The Ukraine Crisis: Russia Slashes Gas Flows to Hurt Europe --- EU members could run out of fuel this winter, further squeezing struggling economies
Wallace, Joe.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 17 June 2022: A.7.
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