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Europe lost its last chance for a calm winter

29 September 2022

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to the PRIME economic information agency on the consequences of the Nord Stream explosions for Europe's energy security.

Alexey Gromov recalls that only a branch of the Turkish Stream pipeline, known as the Balkan Stream, is used to supply Russian gas to Europe.

“At first glance, with the failure of Nord Stream, nothing has changed for Europe in the short term,” he argues. “The second Stream was never put into operation, pumping through the first was already suspended.” However, now that they are both physically dysfunctional, the situation takes a completely different turn.

The expert points out that deliveries via the "Balkan" branch of the "Turkish Stream" guarantee Europe only one third of the volume of energy it needs, while taking into account Ukrainian transit, this figure can reach about 50%.

Today, according to various estimates, the share of Russian gas in the European gas market is from 10 to 20%. The volume in underground gas storages accumulated for the winter is above the average level for this time of year - about 80-90%. At the same time, this is nothing more than a reserve stock - gas is taken from there, but also pumped throughout the winter. If you do not make additional injection, it may simply not be enough, especially since pumping out of tanks when they are 10-20% full is technically difficult.

If events develop according to such a scenario, Europe will face a serious prospect of a recession, the expert concludes. In this case, business will be the first to be hit, Gromov is sure.

"In particular, gas-intensive industries will suffer, first of all, the production of nitrogen fertilizers, which is already in a difficult state," he believes. Cement production, metallurgy, and partly heavy industry are also at risk. It will not be possible to completely avoid tariff increases. The challenge for European politicians is to avoid explosive growth."

The decisive factor that will determine the volume of demand for fuel in Europe will be trivial - the weather.

“In the case of a cold winter, serious problems are quite possible in Europe by March,” Gromov admits.

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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