French newspaper Le Monde reflects about the strategic options of the Bloc concerning gas supply in the light of skyrocketing energy prices and the clatter of boots at the border to Ukraine:
Europe is entering winter, and the question is no longer whether it will have gas to heat itself and run the factories, but at what price. It has flared up in recent weeks and costs six times more than a year ago. The bill for individuals and manufacturers will be heavy in 2022. The functioning of the European market lends itself to this, as does the economic context: demand is strong during this season, activity remains strong despite the threat of the Omicron variant of SARS-CoV -2, storage is at a very low level (63%) and the unexpected shutdown of French nuclear power plants is increasing tensions.
If there were just that ... Gas prices, and by extension electricity prices, are also trending against the backdrop of Russian boots on Ukraine's eastern borders. Russia supplies a third of the European Union (EU) gas. This share, greater than that of Norway and Algeria combined, puts Vladimir Putin in a strong position to derive double benefit, financial and political, from the situation. The Russian president has been playing this market power for months by asking Gazprom not to export more than expected by its contracts with European customers.
A project crystallizes tensions with the Twenty-Seven, who say they are ready to make Russia pay a "huge price" in the event of Ukraine's aggression: Nord Stream 2, a 10 billion euro pipeline financed by Gazprom (50%) and five European energy groups, including the French Engie. 1230 kilometers long, it must carry Russian gas to Germany via the Baltic Sea, thus avoiding countries of the former Soviet bloc (Ukraine, Poland, the Baltic countries) which have become members of the EU or attracted in the western orbit.
This energy corridor, completed in September, can deliver 55 billion m3 of gas per year, almost two thirds of German consumption. Its commissioning was suspended across the Rhine by the energy regulator for non-compliance with European law. It will wait until summer at best, and may be postponed indefinitely by Europe in the event of military escalation - including with political backing from Berlin. Such a decision by the new coalition would decide the position of Angela Merkel, who had supported Nord Stream 2 tooth and nail in the face of pressure from Donald Trump and several Eastern European countries.
Joe Biden finally gave the green light to launch the pipeline by waiving sanctions "in the interests of the United States." He now admits having gone too quickly, since his blockage is now presented in Washington (and Brussels) as a priority response to any Russian adventurism. With what chances of success? Until now, the freezing of assets, the blacklists of businessmen and banks, the ban on the use of the dollar or the embargo on petroleum equipment decided upon following the annexation of Crimea in 2014 handicapped Russia, without bringing it to its knees.
This constantly reinforced arsenal has not compromised strategic projects such as the Yamal LNG and Arctic LNG liquefied natural gas plants, or even the Nord Stream 2. It has also not undermined Moscow's determination to prevent Kiev from joining. to the EU and NATO, to muzzle all opposition and to make repeated use of cyber attacks. The sanctions have even helped to strengthen ties with Beijing. Can Europeans and Americans go further? Prohibit the convertibility of the ruble into foreign currency? Exclude banks from the Swift system protecting international financial transactions?
In this great energy game, the "gas czar" is certainly increasing the pressure and giving voice to all that his country has to war. The runaway does not spare TV stars like Olga Skabeeva, a pro-Putin host of the public broadcaster Rossiya-1, who recently said that Russia was going to launch Nord Stream 2 very soon and then lash out at the Ukraine.
However, President Putin does not have all the cards in his hand. Russia needs Nord Stream 2 to sell some of its gas. A no from the West would hit it at the cash register, even if this steadfastness would come at the cost of raising the bill for Europeans in a lose-lose game. Moscow cannot increase the flow of the aptly named Brotherhood gas pipeline through Ukraine without abandoning its goal of depriving this rebellious neighbor of hundreds of millions of euros in transit rights. As for the threat of redirecting its flows towards China, it makes no economic sense: profitable to develop the fields in eastern Siberia, the operation would be too expensive with the gas fields closer to Europe, which will remain the first Gazprom customer.
The European Commission has just opened a new front by proposing the end of long-term gas contracts in 2050, in the name of reducing the energy dependence of the Twenty-Seven. Without naming it, Brussels is targeting Russia, convinced on the contrary that they ensure visibility and security of supplies. Since the signing of the first agreements with the USSR at the end of the 1970s, in the midst of the Brezhnev ice age, Gazprom has always respected them, pleads Mr. Putin, adding rightly that they protect Europeans from the irrational exuberance of the markets. .
But a heavier mortgage weighs on its future resources. Through the Green Deal, Europe has embarked on a transition that is supposed to lead to a “zero carbon” economy in 2050. Russia will have to compromise to better manage the planned drop in oil and gas revenues and prepare for the aftermath. -hydrocarbons. In short, give up this generous cash cow. Convinced that an energy-thirsty Asia will take over from the Old Continent, Russian leaders rarely speak of the end of the Golden Age. Mr. Putin less than the others.
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