Russia is keeping Europe in check, and the yardstick and gas. The ambitious Nord Stream 2 is not yet operational, but the Kremlin’s tightening on energy supplies is already being felt across Europe. The price of gas futures continues to hit record highs and has risen by more than 600% within twelve months.
The problem is there. “What we are currently seeing in Europe,” explains an Atlantic Council report, “is a replica of America’s oil shocks in the 1970s. The matter is different, the safeguards are stronger, but the underlying dynamics are the same. It was not the lack of oil tankers that pushed crude oil prices up and triggered an economic recession in the United States nearly 50 years ago, but the decisions of major oil producers to suspend supplies. ”
The analysis focuses on what appears to all intents and purposes a paradox. “The problem behind the rise in gas prices in Europe is that there is no lack of transit capacities. While the Kremlin supports Nord Stream 2 as a solution to Europe’s energy problems, about twice as much gas can be shipped from Russia to the EU via Ukraine today. Yet the Ukrainian grid is empty and Europe cannot have enough gas ”. Because, in short, there is an infrastructure and it is not used
“In 2019, Ukraine signed a five-year contract with Gazprom for the transit of predetermined volumes of gas, with additional capacity offered at monthly auctions. These auctions have recently proved to be a particularly effective reporting tool for Russia. Whenever Ukrainian supply of additional transit capacity is reached, gas prices rise to new record highs. Indeed, Gazprom is reporting that it will not ship gas to Europe via Ukraine. So it raises the stakes further by running out of storage facilities during the low season ”. As a result, gas prices in Europe are breaking records day after day as the main supplier, Russia, keeps a cap on the additional flows needed to fill storage sites.
But there is more. “Anyone who is still wondering about the origins of the current gas crisis in Europe, with relative rise in prices, should consider the recent Kremlin statement confirming that the commissioning of Nord Stream 2 balances the parameters of natural gas prices in Europe. If this is not an effort to blackmail Europe, what is it
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Europe, however, must and can defend itself. According to the Atlantic Council, “Europe’s strength comes from the rule of law. The EU will be best protected if the gas market rules are applied in their entirety to all transit routes. European rules apply to Ukraine and this makes the Ukrainian transit corridor more reliable. The third energy package and Europe’s first line of defense against price manipulation and other abuses. Now is the time to use it ”.
Now, on Nord Stream 2, which by bypassing Ukraine will cause Kiev to lose about one billion euros a year, the European Union has split. On the one hand, Poland and the Baltic states, sided with Ukraine and worried about Russian ambitions. On the other hand, Germany, the main supporter of the project which it defines primarily as economic (and therefore not political) and the foundation for the energy transition. These factors, however, are not enough to stop Moscow’s pressure campaign to complete the pipeline project, the work of which was essentially completed close to the vote in Germany. A more solid response is urgently needed ”.
