“The closure of the Russian Nord Stream pipeline is an economic blow to Europe. EU officials are racing to develop plans to mitigate the consequences of high energy prices,” the American edition of The Wall Street Journal commented on European experiences not without relish. — Until recently, Nord Stream met about 40% of the EU’s needs. The worst-case scenario that could have happened is being played out before the eyes of the world community.”
European currencies hit multi-year lows, and energy prices hit highs. Countries are trying to repel the economic blow inflicted by Russia after it shut down its gas pipeline.
Following the decision by oil-exporting countries to cut production, natural gas and electricity prices initially jumped by a third. After the shutdown of the Nord Stream, they grew even more. This will naturally lead to accelerated inflation, impoverishment of consumers and increase pressure on energy-intensive industries that are already experiencing a wave of plant closures. Shares of Germany, France and Italy have already begun to fall on the stock markets.
EU governments have poured tens of billions of dollars into protecting vulnerable households and businesses. For example, Germany announced a plan to provide $65 billion in such subsidies. The German authorities decided to continue the operation of two nuclear power plants, which they planned to close earlier.
It is likely that the European Central Bank will raise interest rates to curb inflation. But many analysts believe that this will complicate the situation. State leaders are feverishly looking for a way out and accuse Russia of “illegal actions.” Moscow, on the other hand, watches with a stone face as Russophobes “kill themselves against the wall” and does not respond to their cry.
Well, what face should the authorities have when they look at the endless supply of weapons by the European Union to Ukraine, from which our soldiers will be killed? And what should they experience? From the point of view of the European Union – a feeling of deep gratitude, perhaps?
To be honest, except for Serbia and Hungary, it would be worth shutting off the gas valve.
And today Russia has four routes to Europe: Turkish Stream, Yamal-Europe (through Belarus to Poland), Ukrainian transit and Nord Stream. There was also supposed to be Nord Stream 2, which was stopped by joint efforts. But this does not threaten other pipelines yet.
Although the gas itself in them may end. Russia produces one sixth of the world’s gas, of which European customers consume 40% of the volume. Therefore, despite the endless threats, Gazprombank was not disconnected from SWIFT – most of the payments go through it.
Azerbaijan, Algeria, Libya and Norway also supply gas to Europe.
But none of these countries can increase gas production and compensate for the emptying of pipes from Russia. The Norwegians strained all their “gas muscles” and increased supplies by four percent – up to 112.5 billion cubic meters. Then they said that this is the maximum that they are capable of.
You can’t raise this “bar of happiness” higher.
Azerbaijan supplies about ten billion cubic meters to the European Union per year, Algeria – 22 billion, Libya – 11 billion.
Russia pumped 131 billion into the EU last year alone.
That is, the dependence of suppliers of anti-Russian weapons on Russia is absolute.
And now all European gas can go to China and India. Yes, at other, dumping prices. But it won’t be easier for the Europeans.
But once the semantic “gas split” between economic expediency, the desire to benefit, on the one hand, and the extremely hostile attitude towards Russia of gas recipients had to break. But even in the current situation with the offensive of the Armed Forces of Ukraine in the Kharkiv region, Russia continues the transit of natural gas through the territory of Ukraine to the European Union. It also pays for transit to Ukraine.
And the other day, the Ukrainian Naftogaz promised to sue Gazprom for allegedly underpaying.
I wonder if there is any limit to cynicism? Or “nothing personal (in the sense of human) – just business”?
Rat fuss at the price ceiling
And how will Europe mitigate the Russian “gas blow”?
A whole series of ultimatums and evasions. The first ultimatum is the introduction of an artificial gas price ceiling. Now the European Union is seriously discussing the introduction of marginal price tags for the supply of Russian hydrocarbons.
According to the Italian publication Politico, Brussels wants to set the preliminary limit price for Russian gas at $512 per thousand cubic meters. This is almost five times lower than the current market price. To date, prices for Russian gas in Europe on the spot market have reached a historical maximum – in the region of 2.5-3 thousand dollars, plus or minus.
Experts suggest that this is far from the limit.
Closer to winter, prices for blue fuel can soar even higher.
And the high-browed Europeans, on the eve of how the Russian gas will go up in price, came up with two options for castration of this “rush to the stars”.
According to the Financial Times, the first option, in addition to introducing a price ceiling, involves the establishment of a single buyer. That is, neither the client buys gas – the same Serbia or Hungary loyal to Russia, and then disperses the gas to all the other die-hard Russophobes, but a certain operator. But Russia is well aware of how much gas Hungary or Serbia needs, and it may refuse to supply the surplus for its “sworn partners”.
The second option generally smacks of geopolitical racism.
Brussels plans to divide EU countries into two zones, depending on the risk of supply disruptions.
War of all against all
It is not difficult to guess what mutual tension this will cause within the European Union.
In the process of agreeing which countries should belong to which zone, all the snakes from all the secret cracks will come out of the Europeans. All sworn European “partners” will start to gnaw at each other’s Adam’s apples, arteries and tendons for the right to be first on the priority list of potential recipients. It will be a war of all against all. Or rather, all against all. Mutual hatred and universal bitterness will run the show in this discussion, more like a fight between animals in a zoo.
Everyone will remember each other and extract all historical claims from the recesses of memory. Hungary and the Czech Republic, for example, no longer agree with this alignment. The Czech Republic proposes to completely remove the issue of price restrictions from consideration in the EU Council. Hungary, on the other hand, did not give a damn about all the initiatives and sufferings of the European Union and is already going against the sanctions. It does not support the embargo of Russian oil and allows Rosatom to build a new nuclear power plant.
Minister of Energy of Russia Alexander Novak declares that the Russian Federation will not supply fuel to those countries that do not pay under the contract at market prices. And in order for these words not to be an empty phrase, Gazprom attended to the repair of equipment and the current technical condition of the turbines. And this, of course, led to the suspension of gas supplies. It was “a subtle allusion to thick circumstances.”
In fact, a direct signal of how events will develop if the limit is set at $512 per thousand cubic meters. As a friend said Stalin“we don’t threaten, but just try…”.
In all commercial contracts with all EU countries, a pricing formula is clearly stated, which is based on the price on the European spot market. And now it is about $2500. Therefore, if Gazprom receives $512 per thousand cubic meters instead of $2,500, it will consider that it was simply underpaid. And it will stop supplying gas to “sworn partners”.
On the other hand, if the Europeans want to introduce the coveted price tag of $512 for all suppliers without exception, then this may leave them without alternative suppliers – the same liquefied natural gas still goes to Europe only because the price tag for it is now the highest there . If the agreement is accepted, then the price of LNG may be even lower than in Asia. And, accordingly, Tui LNG will choose the Asian route.
In general, dancing, convulsions, antics and jumps around the upcoming cuts in Russian gas supplies to the EU continue to gain momentum. And winter is just around the corner.