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Putin explained the reasons for gas supply to Europe

15 December 2023

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 on gas supplies to Europe to the business newspaper Vzglyad.

"Gazprom is a reliable partner if three conditions are met. The first is the availability of a long–term contract. Secondly, there must be infrastructural opportunities, that is, an undisturbed pipe through which it is not forbidden to pump gas. And the third condition is that the counterparty was obliged to open an account with Gazprombank and switch to payment in rubles," Alexey Gromov points out.

Germany has taken a number of steps that may lead to the irretrievable loss of Russian gas. Firstly, they have had a structural reconstruction of the economy, a reduction in industry, and now they need gas in much smaller volumes than it was before the start of the special military operation. Plus, Germany is actively investing in the construction of floating LNG terminals, which are being built during the year. Therefore, Germany is now more focused on receiving foreign LNG than on resuscitating the undisturbed Nord Stream 2 pipe," the expert explains.

Anyway, the EU had long before the special military operation plans to move away from hydrocarbons, and primarily from Russian hydrocarbons, and Russia's turn to the East was inevitable, it just clearly accelerated over the past year.

"At the same time, we must be aware that the profitability of the turn of the Russian gas industry to the East will be different compared to the trade of Russian gas in the European direction. The level of income that Gazprom and, accordingly, the state will receive through the tax payments will be lower. Currently, gas in Europe at TTF costs around $ 450 per thousand cubic meters, Russian pipeline gas is supplied to Europe at about $ 400 per thousand cubic meters, and the gas that we sell to China through the Power of Siberia costs $ 185-290 per thousand cubic meters. There is already a difference of about a third. It is wrong to assume that the marginality of Russian gas exports in the East will grow," Gromov concludes.

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