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Oct 4, 2021
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Nothing personal, just a gas business

On October 4, the gas price in Europe again broke the record and for the first time exceeded $ 1200 per 1000 cubic meters

At the end of July, one of the top news was the unprecedented rise in exchange prices for gas in Europe – more than doubling in three months, as a result of which the price reached a round figure (psychological mark) of $ 500 per 1,000 cubic meters.

And then the “psychological marks” began to be overcome one after another, reaching in two months to the absolutely fantastic figure of 1200 dollars per thousand m3

In the course of trading on October 4, the gas price in Europe again broke the record and for the first time exceeded $ 1200 per 1,000 cubic meters. Experts are wary of making predictions for the future.

This was influenced by a whole range of reasons, from an exorbitant enthusiasm for green energy and the cold last winter to games on the gas market. One way or another, Europe enters in winter with very high gas prices and unprecedentedly low gas reserves.

However, the culprit, as in the well-known Ukrainian saying about the daughter-in-law, has already been found – it is, of course, Russia and Gazprom. They say they are restricting gas supplies to Europe in order, firstly, to force European officials to issue permits for Nord Stream 2 as soon as possible, and secondly, to “warm their hands” at high prices.

Meanwhile, as reported in Gazprom, the corporation supplies gas in accordance with the applications of consumers in accordance with the current contractual obligations. This year, exports to non-CIS countries grew by 19.3% (by 15.3 billion m3) and amounted to 145.8.9 billion m3 gas is the 2nd largest indicator for 9 months in the entire history of supplies (in 2018 – 149.2 bcm3). Gas supplies to Turkey (by 138.3%), Germany (by 33.2%), Italy (by 14.2%), Romania (by 305.6%), Serbia (by 125.2%) increased significantly, Poland (by 11.2%), Bulgaria (by 52.5%), Greece (by 10.8%), Finland (by 17.5%).

There can be no formal claims against Gazprom.

The early gas business model assumed gas producers needed guarantees after they raised billions of dollars in field development and pipeline construction. Therefore, a system of long-term 20-30-year contracts was born, guaranteeing product sales for decades to come. Their prices were pegged to oil or a basket of petroleum products, taking into account the calorific value of energy carriers.

And when in 2008 oil prices rose to an unprecedented $ 140 per barrel, raising the cost of Russian gas to $ 500 per 1,000 cubic meters, Europe began to seek a revision of gas price formulas. Because of this, since 2009, Gazprom has faced a wave of arbitration proceedings with its clients, mainly to change the price formula in favor of the greater role of exchange prices. Buyers also tried to lower the level take or pay (when the client cannot reduce imports below 70-80% of the contract volume without fines). At some points, the company was simultaneously involved in several dozen such proceedings.

As a result, over the next ten years, the Europeans managed to largely remove the oil tie from Russian gas contracts. If in 2010 only 10-15% of Gazprom’s contracts had a spot component, at the end of 2020 there were already 87% of such contracts.

Another area of ​​pressure on Gazprom was the EU’s Third Energy Package, adopted in 2009 and subsequently repeatedly modified. Gazprom has lost the opportunity to own European gas pipelines, creating an integrated supply chain from fields in Siberia to a domestic gas stove, for example, in Berlin. Because of the Third Energy Package, there are problems with loading the OPAL gas pipeline (the continuation of Nord Stream in Germany), and now also Nord Stream 2.

A six-year antitrust investigation by the European Commission also forced Gazprom to remove from its contracts the ban on re-exporting gas to third countries (although such provisions are in effect in many LNG contracts around the world). The concern provided buyers with more options for revising contracts and began to develop spot gas trading.

In other words, now Gazprom’s obligations on gas supplies to European consumers have noticeably decreased, and they satisfy a much larger part of their needs by buying the same Russian gas at the current market price. As they say, what they fought for …

One can understand the irony of V. Putin, who recalled in one of his recent speeches that it was the European partners who insistently initiated the revision of long-term contracts, changing the peg to oil prices to peg to spot prices.

At the same time, prices in long-term contracts are now calculated using a formula that is tied to spot prices with a certain time lag. Those. $ 220 (the contract price for Germany, mentioned by the Russian leader) is today’s price, formed by the “gas rate” that took place a few months ago. And in the future, it will inevitably grow in accordance with the price rally that has begun.

And in fact, why sell a lot at a (relatively) low price, if the same, and most likely, a much larger profit can be obtained by selling a little at a high (it seems that the Norwegians adhere to the same position, having arranged repairs at their fields), so moreover that Gazprom will be declared to be “guilty” anyway?

Now Russia, using the favorable conditions for it, is trying to get the maximum income and, of course, certain political dividends. This is not about unilateral advantages, which Russia has never aspired to, but about the establishment of a truly equal partnership based on respect and consideration of mutual interests.

This also applies to the attempts of the West to “hang” on Russia the obligation to supply gas for the long term to Ukraine, a country pursuing an anti-Russian policy.

Taking advantage of the favor of the West and the local courts (Stockholm Arbitration), Kiev has long ignored the terms of gas contracts of 2009, and five years ago it stopped direct purchases of gas from Russia altogether, announcing this as a great “relief” and liberation from gas dependence, although it was obvious to everyone that that Ukraine consumes, significantly overpaying, all the same Russian gas coming through the same pipelines and only virtually crossing in both directions the border of Ukraine with its neighbors from the EU.

Now these games are going sideways, and earlier than 2024, when the transit contract expires. Russia and Hungary signed a new contract for the supply of gas, according to which it will be supplied to the Hungarians not through Ukraine, but along a different route.

And panic began in Kiev. I had to admit through clenched teeth that “gas independence” from Russia was a bluff. Naftogaz of Ukraine stated: “Taking into account that the import of natural gas from Hungary was carried out by means of a virtual reverse, there is no possibility of import from Hungary without transit.”

Yes, according to the current contract, Russia is obliged to pump 40 billion cubic meters of gas annually through the Ukrainian GTS, but the contract does not say exactly which consumers the gas should be supplied to. These volumes can be used to fulfill obligations to consumers from Austria, Germany, etc. Will they want to share with Ukraine?

Moreover, the head of Naftogaz, Yuri Vitrenko, has already expressed concern that Russia may take advantage of the clause of the current contract, according to which it, while paying for transit in the agreed volumes, is not obliged to carry it out physically. And the numbers on the bank accounts won’t keep you warm. There are no other channels for the supply of gas to Ukraine, except from Russia.

So it remains for Kiev to blame for unfriendly steps now not so much Russia (this goes without saying), but Hungary. However, there is nothing personal here either.

“Personal” appears only when you yourself behave honestly. Otherwise, there will always come a moment when all that remains is to scream: “And what are we for ?!” Now this applies to both Ukraine and Europe.

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