Russia can survive even without exporting it because only 2% of GDP depends on those revenues
Gas from Russia: if Putin turns off the taps, next winter is likely to be very difficult. The weak point starts with logistics: to transport gas, unlike coal and oil, it takes structures that take years to build or reconfigure. It means that in the short term it is difficult to find alternative suppliers, more complicated than in the case of coal and oil. But the reverse is also true: it is difficult to quickly divert gas to new markets and new customers. Here, however, the second weakness of the question comes into play. This is clear from an analysis of Moscow exports. The Russian economy would collapse without oil exports – which have made up around 10% of GDP in recent years, which is why the Kremlin is making every effort to break the Western embargo by sending the crude oil to other markets notably China and India. But in gas it is different. Simply, Russia can survive even without exporting it because only 2% of GDP depends on those revenues. So the Tsar can turn off the taps convinced that he is causing more damage to Europe than to his own country. That’s why he threatens to do it.
And it is a not so far-fetched scenario now. The European Commission admitted today that it expects Gazprom not to restart the flow of gas through Nord Stream 1, which was closed for maintenance last week. In theory, supplies should have resumed this Thursday, but the fear is that Russia is using the failure as a means of retaliation against European sanctions and military support for Ukraine. Adding to the suspicions is the fact that Gazprom has not compensated by increasing the supply from alternative gas pipelines passing through Ukraine. This risks compromising even more the storage objectives, that is to fill the European tanks to 80% by November, the minimum threshold to overcome the winter (Italy has reached 64%, better than Germany, and some countries remain below 50%). The moment of truth is therefore near. Europe has worked on alternatives, but has not yet made itself independent from Moscow. And there is not much room left for liquefied natural gas, because the regasifiers are already working almost at full capacity. Besides, Algeria is not such a decisive source. Data in hand, it turns out that in the first half of 2022 it sent almost 20% less gas than normal to EU countries. In short, as the ISPI explains, what Algiers sends more to Italy takes away from Spain (a revenge after Madrid recognized Moroccan sovereignty over Western Sahara), forcing Madrid to rely more on liquefied natural gas, much more expensive. The risk is precisely this: that in an emergency, each country does it for itself. Like at the beginning of the pandemic when mask exports were blocked. It is the most feared scenario, and therefore the energy solidarity plan on which the European Commission is working is highly anticipated. The idea is that countries should share storage capacities and ensure the free movement of gas. The more integrated the system is, the more resistant it will be.
In any case, the blanket seems too tight at the moment. A total shutdown of gas from Moscow will inevitably force Europe to reduce demand or – far worse – apply rationing. If Putin really turns off the taps, analysts at the Buregel think tank estimate that Europe should reduce its gas demand by an average of 15%. Precisely Europe which for years was the main market for Russian gas exports, totaling 70% of the gas sent abroad from Moscow in 2021. Yet this is a far less relevant sector than oil. In 2021, for example, Europe spent three times more on Russian crude and oil products than on gas. After all, last year oil represented 72% of Moscow’s energy export revenues (gas 16%).
Hence, in the short term, turning off the taps for Putin is worthwhile. It puts the European Union in serious trouble, testing its resistance and ability to cooperate in the face of danger. But Europe, already in the past, has been able to shake itself up in moments of crisis.
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