HomeMediaLatest NewsRussia has approached the zeroing of gas supplies to Europe

Russia has approached the zeroing of gas supplies to Europe

02 October 2022

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
Kondratiev Sergey V. Principal Director on Economic Studies, Head of the Economic Department

Alexey Gromov, Principal Director on Energy Studies and Sergey Kondratiev, Deputy Head of the Economic Department of the Institute for Energy and Finance, commented to the VZGLYAD business newspaper on the risks of "zeroing" gas supplies to Europe from Russia.

In the middle of the week, it became known that the Netherlands had early withdrawn the export license from the operator of the offshore section of the South Stream Transport gas pipeline due to the sanctions that the EU imposed on September 18. Gazprom explained that these sanctions do not apply to the transportation of gas through the pipeline. The point is that Europeans are now forbidden to maintain and repair the equipment of the offshore part of the Turkish Stream, by analogy with the restrictions for Nord Stream 1.

“For example, Russia may take a political decision in response to official Western accusations of undermining its own gas pipelines in the Baltic Sea. For such a distortion of facts and an unfriendly attitude, Russia can block both Ukrainian transit and the second string of the Turkish Stream, through which Southern Europe is supplied with Russian gas. Turkey is a friendly country to us, therefore, the supply of our gas to the Turkish market through the first line will be maintained in full," Gromov argues.

Otherwise, Russia can keep gas supplies to those countries with which we have special relations - these are Hungary and Serbia, which receive energy resources through the Turkish Stream, he adds.

“The consequences of zeroing deliveries are unpredictable and negative. In Europe, there will immediately be a threat of a physical shortage of gas, and no stocks in UGS facilities or expensive LNG will cover this shortage. The hole will still be there. Europe will have to take emergency measures to save energy. This is a forced shutdown of the industry. These are savings measures in terms of public utilities and even the electric power industry,” Gromov says.

“The main victims will be countries in Eastern and Central Europe, where the transport infrastructure is not developed. They will not be able to quickly switch to supplies from other countries. This problem is especially relevant for Hungary and Slovakia,” Sergey Kondratiev, deputy head of the economic department at the Institute for Energy and Finance notes.

Finally, the countries that now receive gas from Gazprom buy it at relatively low prices - these are Hungary, Serbia, Slovakia, Austria, and Germany.

“Prices in Gazprom contracts are on average three to four times lower than gas prices on the spot market. They are about 500-600 dollars per thousand cubic meters. This will be a serious price shock, especially for poor European countries,” Kondratyev said. The EU industry, of course, will have to take the brunt of the zeroing of Russian gas supplies.

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