Russian gas was attractive to Europe because it was easy to transport and almost always available.
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Its importance has grown in recent years, as some countries have stopped producing coal and nuclear power, and output from their own gas fields has declined.
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The Russian state-controlled company Gazprom supplied around a third of all the gas consumed in Europe.until the war in Ukraine interrupted supply and highlighted the risk of excessive dependence on a single energy provider.
What changed as a result of the war?
After Russia invaded Ukraine, the European Union drew up a plan to cut Russia’s gas imports by two-thirds by the end of 2022.
Russia, after suffering sanctions, struck back, and President Vladimir Putin signed a decree requiring all buyers from “unfriendly” countries to pay in rubles starting in April.
With the condition of opening special accounts in the Russian bank Gazprombank JSC, in foreign currency and in rubles, to manage your payments.
Buyers from Poland, Bulgaria, Denmark, Finland and the Netherlands refused to comply with the new conditions and had their gas cut off.
Later, Russia also cut supplies through its largest gas pipeline to the mainland, cutting off shipments even to those who found solutions to the new payment order.
As a result, customers in Germany, Italy, France and Austria did not receive all the gas they ordered.
In July, EU energy ministers reached a political agreement to reduce their gas consumption by 15% until the winter of 2022/23.
Although the goal was voluntary, it could become mandatory in an emergency.
How did Russia become so important?
With its vast Siberian deposits, Russia has the largest natural gas reserves in the world..
It began exporting to Poland in the 1940s and built gas pipelines in the 1960s to supply fuel to satellite states of the then Soviet Union.
Even in the midst of the Cold War, deliveries were constant.
But since the dissolution of the Soviet Union, Moscow and kyiv have been squabbling over pipelines through Ukrainian territory, prompting Russian authorities to seek other routes.
Still, Europe has maintained its heavy reliance on Russian gas, which was often cheaper than alternatives, even as Moscow annexed Crimea in 2014.
How vulnerable is Europe?
Supply shortages in 2021 highlighted Europe’s dependence on gas from Russia, as benchmark prices more than tripled.
Stocks in the EU fell to an all-time low with North Sea fields holding strong and liquefied natural gas supply redirected to meet growing demand in Asia.
In 2022, faced with the threat of Russian supplies, European LNG imports accelerated to the maximum, domestic producers promised to keep production as high as possible and EU buyers turned to new supplies from Africa to Central Asia.
However, Russian volumes were still too large to fully replace in the short term.
In mid-June, flows through the Nord Stream gas pipeline – the biggest link between Russia and the EU – fell by nearly 60%, with some utilities struggling to stay afloat and large industrial users considering energy-saving measures. .
From the end of July, supply via Nord Stream will be reduced to about 20% of capacity, and Gazprom announced that a turbine due for maintenance would be taken out of service.
But European politicians and Kremlin insiders see political motives in this move, as Russia retaliates against sanctions imposed on the nation for its war in Ukraine.
How vulnerable is Germany?
The EU’s economic powerhouse used to depend on Russia for more than half of its gas and around a third of its oil.
In summer, dependency was reduced to 26% in the case of gas and 12% in that of crude oil. The showdown with Moscow prompted Germany to double down on renewables and invest in LNG import facilities, but those other sources will take years to come online.
Meanwhile, the government has restarted highly polluting coal-fired plants and subsidized purchases from alternative energy providers to offset a sharp drop in Russian gas imports.
What other countries are exposed?
Landlocked Eastern and Central European Countries Most Vulnerable to Russian Gas Disruptionas they have fewer alternative options compared to Western and Southern European countries.
Russian supplies accounted for around 40% of Italy’s demand in 2021, but Italy has been looking around the world for substitutes and has struck new deals with suppliers, especially in North Africa.
Some smaller gas buyers, such as Finland, which has also been deprived of Russian gas, are planning to use floating LNG terminals.
Poland, which generates most of its electricity from coal, has invested in a new gas pipeline from Norway, which will start flowing in October, while Bulgaria plans to increase Azeri gas imports in 2022 with the opening of a branch from Greece. , a country that can also supply LNG.
What role does Ukraine play?
About a third of the Russian gas that reaches Europe normally passes through Ukraine.
Supplies through the country were reduced after May 11, when a transit point was put out of action amid fighting in the eastern part of the country, and Russia refused to redirect flows, keeping transit through limited. of the nation.
Before the cuts, Ukraine had been hoping to earn at least $7 billion from transit fees under a five-year transit deal in December 2019.
How has Russia disrupted the market before?
In 2006 and 2009, disputes with Ukraine over gas prices and diversion led to cutoffs to Russian supplies transiting the country.
The second outage lasted nearly two weeks in the dead of winter. Slovakia and some Balkan countries had to ration gas, close factories and cut off electricity supplies.
Since then, the most vulnerable countries have rushed to lay gas pipelines, connect networks and build terminals to import LNG shipped from as far away as Qatar and the United States.
What supply networks exist?
External supplies, mostly from Russia, Norway and Algeria, account for around 80% of the gas consumed by the EU.
Germany imports much of its gas through Nord Stream, a pipeline under the Baltic Sea that has been fully operational since 2012. (Another pipeline, Nord Stream 2, was completed in late 2021, but got mired in politics and now is firmly frozen).
Faced with the persistent reduction in the flows of Nord Stream, Germany and its allies have prepared for the possibility that Putin cuts the flows definitively.
Belgium, Spain and Portugal face the problem of scarce storage capacity, as does the United Kingdom, which is no longer part of the bloc and has closed its only large gas store.
The continent has a large number of gas pipelines, but many of them cross several borders, creating a large number of potential choke points, while some nations still lack connecting links.
Bloomberg
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