Any attempts to limit the supply of Russian oil and gas to the EU will hit European consumers first of all. This position was expressed by experts interviewed by Izvestia, commenting on the results of the meeting of the Council of Energy Ministers of the EU countries. At the meeting, officials discussed possible scenarios for further cooperation with Russia in terms of energy supplies. The countries of the Old World cannot yet afford to completely abandon Russian oil and gas, although they claim that they are ready for drastic measures in the future, analysts say. If Europe nevertheless decides to limit the consumption of Russian energy resources, it will face a 20-25% rise in prices, and Russia will simply redirect supplies to Asia, experts believe.
Save supplies
The energy ministers of the EU countries held a meeting at which they discussed the situation in connection with the crisis in Ukraine. As noted in the meeting note published on the official website of the Council, in addition to analyzing the current situation “with regard to the security of oil and gas supplies, as well as changes in energy prices”, the ministers set a goal to take stock of possible additional actions in terms of “preserving supplies , the use of strategic oil reserves, the management of gas reserves, especially in the coming weeks and months, as well as capacity building in this area.”
It is worth noting that the countries of the European Union are still succeeding in this. Since the beginning of the escalation of the conflict, gas transit through Ukraine has been going on at almost maximum levels. As of February 28, Gazprom’s deliveries, according to consumer requests, amounted to 105.8 million cubic meters out of 109 million possible under the transit contract. In addition, deliveries via the Yamal-Europe gas pipeline are also booked daily.
And meanwhile, as it was said in the note to the meeting, a ministerial review was also to be undertaken of possible Union-level responses and options for Member States regarding the impact of prices on households, industries and the economy in the current situation and in various hypothetical scenarios.
As it became clear from the statement of the European Commissioner for Energy Kadri Simson the day before, EU energy ministers also discussed the issue of synchronizing the power grids of the European Union and Ukraine.
“I believe this is the only possible course of action under the current circumstances,” she added.
Earlier, Minister of Energy of Ukraine Herman Galushchenko said that he had signed a decree refusing to join the Russian power grid.
Radical measures
In a note to the council, it was noted that ministers ready to discuss drastic measures. Apparently, it was about statements preceding the council. On the eve of Britain asked partners from the G7 to impose a limit on the import of gas and oil from Russia due to the military operation of the Russian Federation in Ukraine. This statement was made by British Foreign Secretary Liz Truss. According to Austrian Chancellor Karl Nehammer, in the medium term, Vienna will do everything to reduce its dependence on Russian gas imports. In addition, Italy is determined to cope with the consequences of anti-Russian sanctions in connection with the crisis around Ukraine, and intends to increase energy supplies from various international partners, as stated by Foreign Minister Luigi Di Maio.
However, it is unlikely that the EU countries will take the indicated measures today.says Ekaterina Kosavreva, managing partner of WMT Consult.
– It is worth recalling that the United States allowed energy deals with sanctioned Russian banks until June 24. It is likely that such a lag is given to fill European underground storage facilities and prepare additional LNG supplies. In the future, the refusal of the EU countries from Russian energy resources will lead to an increase in the cost of electricity for Europeans by about 20-25%. The principled decision not to reduce supplies is evidenced by gas prices, which today went down, replacing growth with a fall, the expert said.
Farewell energy transition
Any attempts to limit the supply of Russian energy resources will hit European consumers first of allsaid Valery Andrianov, an associate professor at the Financial University under the Government of the Russian Federation, in a conversation with Izvestia.
– Therefore, it can be expected that the EU countries, dependent on Russian oil and gas, will strongly oppose such a decision. It is easy to see that the sanctions are aimed primarily at the financial system of the Russian Federation and, to a much lesser extent, at the domestic fuel and energy complex, the expert said. – Despite all the intensity of passions, Europe is unlikely to cut the branch on which it sits. Britain, which is not connected to Russia by a system of main oil and gas pipelines, of course, is very profitable to call for a boycott of the Russian fuel and energy complex. As a result of the unsuccessful exit from the EU, the UK has significantly weakened its economic position and now tripping up the former partners in European integration is its most important task. The target of the sanctions proposed by London is precisely continental Europe, not Russia. But Britain is unlikely to be listened to.
Valery Andrianov added: Saudi Arabia has made it clear that it is not going to abandon the OPEC + deal and reimburse the volumes of Russian oil that theoretically could leave the world market as a result of Western sanctions.
– And Europe has no other sources of rapid increase in imports of both oil and gas. That’s why I do not think that the sanctions will be aimed precisely at interrupting Russian hydrocarbon exports. Vice versa, such an interruption can be considered as the most terrible anti-sanction on the part of Russia. Let’s hope it doesn’t come to that,” said Valery Andrianov.
As the head of the Center for Energy Development Kirill Melnikov noted, the idea of quoting the purchase of Russian energy resources by the EU countries is unlikely to affect supplies in the near future.
– The most significant is the dependence on Russian gas in the amount of 120-130 billion cubic meters per year. From a technical point of view, it is possible to reduce it to almost zero in ten years by introducing corresponding annually decreasing quotas. Such an ambitious plan will cause a sharp rise in gas prices with dire consequences for European business, the expert said.
He noted that if such a scenario is realized, Gazprom will need to build pipelines to China and LNG capacities in the same ten years.
“The problem is that this situation greatly strengthens China’s negotiating position on the terms of pipeline supplies,” said Kirill Melnikov.
As for oil, the impact of EU quotas will be less significant, since all volumes can be redirected by sea to other markets, primarily to India and China, he added.
— Quotas will have far from the same effect on different EU countries: states such as Hungary, Greece, Bulgaria, Germany will face the most serious problems. Therefore, it can be assumed that if the quotas are nevertheless approved, these countries will have longer periods for zeroing Russian supplies, the expert concluded.
Izvestia sent inquiries to the Ministry of Energy, Rosneft, Gazprom Neft, Lukoil, Surgutneftegaz and Gazprom.
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