HomeMediaLatest NewsWhy the gas panic in Europe is feigned

Why the gas panic in Europe is feigned

27 July 2022

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

Alexey Gromov commented to the Vzglyad business newspaper on the possible reasons for the current situation with Russian gas supplies via the Nord Stream 1 gas pipeline.

“In my opinion, Gazprom's position is purely pragmatic. All EU requirements are aimed at refusing further cooperation with Gazprom. Therefore, if Europe has problems with the transfer of turbines for Nord Stream 1, then Gazprom gives them the opportunity to solve them themselves,” Aleksey Gromov, Energy Director at the Institute of Energy and Finance said.

The problem is that Gazprom depends on Ottawa. “The turbines for Nord Stream 1 were originally ordered from the Canadian company Siemens. No other enterprise can undertake the maintenance and repair of these turbines. Therefore, Gazprom needs clear legal guarantees that not only the already repaired turbine is not subject to sanctions, but also that in the future it will be able to maintain the gas pipeline and repair turbines without hindrance.

Gazprom is well aware that if the Europeans now accumulate gas in underground storage facilities and pass the winter period, then in the spring the dances with tambourines around Nord Stream 1 will begin again, and the story of the restriction on the repair of gas pumping equipment can easily be repeated,” Alexey Gromov explains Gazprom's position.

Another important point. Europeans do not believe that almost all the turbines could fail almost simultaneously and that they all need to be repaired right now. “Perhaps, the official deadlines for equipment maintenance have not yet come up, there were statements that they would come up in September. And in a normal economic situation, no one would take such actions. However, we have a sanctions war with Europe in full swing, and we really do not know what to expect from our European partners. Therefore, I share the position of Gazprom to demand a guarantee now,” says Gromov.

Europe can thank Gazprom for demanding guarantees for long-term repairs of turbines in summer rather than winter. Thus, the Germans and all of Europe have time to resolve this technical issue, to withdraw from the sanctions not one turbine, but any turbines that require repair in Canada, and not for one winter, but for many years.

The sooner Europe solves the problem with turbines, the sooner Nord Stream 1 will start working at a higher capacity. And the more likely the Europeans are to pump the necessary volumes of gas into underground storage facilities for the winter heating season.

Finally, Gazprom can afford to take a pragmatic stance, because in any case, Russia will earn more from the export of Russian natural gas than last year, even with a significant reduction in the volume of these exports to Europe.

“Gazprom has no critical interest in maintaining the export volumes that were in previous years. Gas supplies via Nord Stream 1 have declined, and the price of gas has jumped again to $2,000 per thousand cubic meters.

Last year, Gazprom's entire revenue from Russian pipeline gas supplies to the European Union amounted to about $55 billion. This year, it may well reach 80 or even 90 billion dollars, that is, it can almost double compared to last year. Why overstrain in this situation, especially if our gas in Europe, in principle, is not wanted,” - says Alexey Gromov.

The worst scenario that awaits Europe if it does nothing is a complete shutdown of Nord Stream 1 during this year. At the same time, it is impossible to transfer the "northern" volumes of gas to other routes. Access to the Yamal-Europe gas pipeline is closed due to Polish sanctions and Russian counter-sanctions. In Ukraine, gas already flows through only one point - the Sudzha CS, and the second entrance is closed at the initiative of Kyiv. Some increase in supplies is possible through the Turkish Stream, but it will be small, because the pipeline is already loaded, the source notes.

“This means a significant reduction in Russian gas exports to Europe - by more than 50% year on year. But it seems to me that this scenario is unlikely,” says Gromov. In his opinion, most likely, Europeans and Germans will try in every possible way to resolve the situation with Nord Stream 1, continuing to show political discontent.

In his opinion, during August the problem with Nord Stream will still be resolved: the repaired turbine will return to Russia, Gazprom will receive all the necessary documents, and in the second half of August the gas pipeline will increase pumping to at least 40% of capacity. And then everything will depend on whether Germany will hurry up with the repair of other turbines.

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