Source: Arab day
Not so long ago, it seemed as if the ‘energy poker’ game played by Europe and Russia, was under control despite its gravity. The oil and gas sector was among the few sectors not targeted by European sanctions. Russia also continued to secure supplies of gas to European countries.
And despite the fact that Europe was considering imposing a ban on energy imports, and despite Russia’s demand in late March, “unfriendly” countries to pay for their incoming shipments of gas in Russian rubles (instead of euros or dollars), otherwise Russia would cut them off, I think every On the one hand, the other lacks the courage to escalate. After all, Europe imports 40 percent of its gas from Russia, and Russia in turn reaps revenues from its sales, amounting to 400 million euros (equivalent to 422 million dollars) per day.
But on April 27, Russia raised its bet. State-owned energy giant Gazprom has stopped sending gas to Bulgaria and Poland following falling behind Moscow’s ruble payment deadlines. For its part, the European Union is striving to respond to this step. Accordingly, European gas prices resumed their significant rise, ie by a fifth, following witnessing a slight decrease since then.
In this context, the immediate impact of Russia’s latest move, which the EU has described as a “breach of contract”, is limited in scope. So that Poland’s imports, at 10 billion cubic meters annually, and Bulgaria’s 3 billion cubic meters, together represent only 8 percent of the total imports of the European Union. As Poland’s contract with Russia was due to expire in January anyway, so the amount of revenue that Russia would lose by breaching it is small.
For his part, Shi Nan, from Rystad Energy, said that both Bulgaria and Poland can cope with this situation, despite their heavy dependence on Russian gas. Poland is expected to start receiving gas from Norway in October. Regasification stations might help it import more LNG. Bulgaria is expected to start importing Azeri gas via Greece later this year.
After Moscow cut off gas to Poland and Bulgaria, the fate of the rest of the European countries seemed unknown until now. The deadlines set by Russia for payment in rubles may partly reflect the details of the non-public contracts, but they are expected to fall in May, according to the magazine “The Economist”. This may entail significant risks. The reason is not because Europe needs gas now that consumption declines with rising temperatures, but because mass stocks amount to only 33 percent of storage capacity.
For its part, the European Commission urged member states to ensure that their facilities are 80 percent full by November, which implies a sharp rise in demand for energy in the future.
It should be noted that Russia may deprive itself of the funds it needs to finance its costly and long war on Ukraine in the event of cutting off gas from major importers. So who will weaken first?
Most European buyers have already ruled out the decision to pay directly in rubles, but Moscow is offering a compromise. So I suggested that buyers open two accounts with “Gazprom Bank” (a lender not subject to sanctions). Buyers pay in euros (in their first account) to the first, ask the bank to convert the amount into rubles and deposit the money into the second account, which will then be transferred to “Gazprom”.
In this context, many European countries did not welcome this plan, which is considered as capitulation to Russian blackmail and risks creating a legal headache. Accordingly, the countries are divided into three groups, so that the first group, which includes Belgium, Britain and Spain, imports little or no gas directly from Russia, and thus refuses to make concessions. The other group includes big buyers such as Germany and Italy, which are struggling to replace imports quickly and may accept the Russia deal. Finally, the third group includes the reluctant countries that are only partially dependent on Russia, and whose contracts may expire soon.
This situation may have many consequences. So that an isolated country can indirectly affect other countries, if gas passes through it to other places, for example. Nor is it clear yet who will accept a Russian settlement, or whether Russia might eventually turn off the gas taps.
Gas markets might stumble if Russia cuts supplies to Germany. Energy prices in Europe are six times what they were a year ago. This might attract more LNG from the rest of the world and cause prices to rise elsewhere. Jack Sharples of the Oxford Institute for Energy Studies may believe that stopping the flow of Russian gas supplies to Europe may cause a global recession so that the poker game in Russia takes a more terrifying upward trend.
