МОСКВА, 10 февраля 2022, Институт РУССТРАТ.


The administration of the current US President Joe Biden took the next step in preparing a sanctions strike against Russia — in the second half of January, it was announced its intention to «compensate for the loss» of Russian gas by Europe. The United States has no doubt: when Russia will attack Ukraine, Brussels will impose economic sanctions against Moscow, to which Russia will respond by stopping gas supplies to the EU. With the latter, the United States intends to help Europe — although it has not yet expressed such requests.

This intricate logical chain is not stopped by the absence of facts and even hints of a hypothetical «invasion», as well as numerous refutations of the presence of any militaristic plans on the part of the Russian leadership.

Over the past two weeks, the United States has taken a number of high-profile foreign policy initiatives in the international energy market to find alternatives to Russian gas for Europe. However, such events should be classified as pure PR. There is no replacement for Russian gas for the EU for years or even decades, and the global energy market is not at all inclined to dance to the tune of the no longer all-powerful American hegemon.

We’ll get them a cubic meter a little from here and a little from there around the world

«US finalising plans to divert gas to Europe if Russia cuts off supply,» said loudly the Guardian on January 25. According to the publication, «the US has helped prepare for the diversion of natural gas supplies from around the world to Europe in the event that the flow from Russia is cut, in an effort to blunt Vladimir Putin’s most powerful economic weapon.»

Preparation is reflected in the fact that Washington has held talks with a «global supplier» and now the United States believes that Europe «would not suffer from a sudden loss of energy for heating in the middle of winter”.

Britain expressed solidarity with the United States, when Prime Minister Boris Johnson said that Germany seeks to avoid the introduction of sanctions against Russia, but he intends to «persuade Berlin and others to go further”.

Even if the countries of Europe are ready to go somewhere by the decree of a Britain that left the EU, there are problems with the exact route of this hike. Even before the loud announcement of the «completion of plans» to find suppliers alternative to Gazprom for the EU, one of the largest potential candidates for this role admitted their impotence.

On January 18, Norwegian Prime Minister Jonas Gahr Støre, in an interview with the ZDF media company, said that the country meets 30% of Germany’s needs, the pipelines are working at full capacity, and in case of a disruption of supplies from Russia, they will not be able to lend a shoulder to their European counterpart in Oslo. «We do not have reserves with which we could fill the deficit,» summed up Jonas Gahr Støre.

One of the main alternative gas suppliers pointed out by Washington is Qatar. «The American leader hopes that this gas-rich country will once again come to the aid of the West, which is threatened by the prospect of a European energy crisis if Russia invades Ukraine,» writes Voice of America.

The problem is that Qatar produces LNG, more than 70% of which goes to the Asian market, primarily to China. There are no free gas capacities for European consumers in the emirate, as well as in Norway. Even before Joe Biden’s talks with Tamim bin Hamad Al Thani took place, American experts published enough articles that Qatar would be happy to improve relations with the United States, but there is nothing to ensure this due to the lack of free gas that could be supplied to the EU.

It is difficult to say what the US confidence in the successful passage of the heating season by Europe without gas supplies from Russia is based on. Reuters tried to find traces of those who could assure Washington of their readiness to replace Gazprom, but the results were modest. Royal Dutch Shell, ConocoPhillips and Exxon declined to comment, the responses of Chevron Corp, Total, Equinor and Qatar Energy came down to the fact that global gas supplies are limited and that there is no gas to replace large volumes from Russia. 

Global market and figures

Gazprom accounts for more than 41% of gas in the EU’s total balance. In 2020, 174.9 billion cubic meters of gas were delivered to European countries, and from them 78% of supplies from Russia were to Western European countries (including Turkey), and 22% to Central European states.

According to the well-known results of 2021, supplies to Germany increased by 10.5% — which means that in order to refuse gas from Russia, Berlin will have to look for about 50 billion cubic meters of gas for each sanctions year. The EU as a whole has purchased 135.75 billion cubic meters of gas in Russia.

Qatar produces about 105 billion cubic meters of gas for export annually, and its main market is the Asia-Pacific region. Prices on the European gas market are usually derived from prices on the Asian market, and this market looks much more preferable for Qatar. Even if the United States somehow convinces Qatar to break off contracts with Asia — after all, Qatar does not have free volumes — then in the short term there is a question of compensation for the inevitable penalties which should be paid to the emirate.

Some optimism in terms of Washington’s idea could be given by the Southern Gas Corridor, which allows transporting up to ten billion cubic meters of fuel from Azerbaijan to Italy – but only up to comparison with the EU’s total gas demand.

The gas price crisis, which has been going on with varying intensity since September last year, has clearly demonstrated the lack of tools to influence the pricing of the gas market. The successfully implemented liberal pricing model with a low share of long-term contracts, combined with globalisation, makes rash movements, such as abandoning 41% of gas, extremely risky in terms of possible consequences.

The idea of «self-disconnecting» from Gazprom looks extremely extravagant also because we will have to expect a united front from too many countries that have their own and diametrically opposed interests. For example, given the good relations between Moscow and Budapest, Hungary is likely to keep gas supplies for itself in any scenario of events along the Russia-EU line. This will create a sharp competitive advantage for Hungary, because even if its neighbours will have gas, it will be many times more expensive.

And this, not to mention the purely technical side of the attempt to «self-disconnect».

Algeria is in fifth place on the list of EU suppliers, having delivered about 40 billion cubic meters in 2020. Since November 1, 2021, the African supplier has completely stopped pumping gas through the Maghreb–Europe export gas pipeline (MGE), which passes through Morocco and comes to Spain. The reason for the non-extension of the 25-year transit contract through Morocco was the aggravation of bilateral relations.

The only pipeline from Algeria that remained in operation since 2011 is the one for which Spain is the host country. The monarchy depends on Algerian gas supplies by 30%, and the conflict between Algeria and Morocco led to a reduction in supplies by those 10% that went through the blocked MGE. Only to close this gap, a long-term freight of up to 50 gas carriers will be required – and there are not that many vessels of this class in the world, especially free ones.

At the moment, taking into account extremely favourable gas prices, the United States was able to send 34 gas carriers to Europe, the total capacity of this flotilla is approximately 3.5 billion cubic meters. Accordingly, to compensate for 135.75 billion cubic meters of Russian gas, it is necessary to reorient at least 1300 LNG tankers to Europe.

As far as we know, no shipyard in the world has announced a giant program to create gas carriers.

Winter of which year?

Naturally, the question arises — which year does collective Washington have in mind when claiming the guaranteed availability of energy resources in Europe without Russia during the heating season?

The winter of 2021/2022 is nearing its calendar end, by the heating season of 2022/2023 it is hardly possible to build hundreds of gas tankers, as well as conduct geological exploration of new gas fields, master already known ones, or at least increase production and supply by an order of magnitude for those already operating ones.

The Leviathan gas field off the coast of Israel is noted in the promising category, but supplies from it will require the construction of a pipeline about 1,900 kilometres long. However, even this will give the EU no more than 20 billion cubic meters of gas in the future.

To significantly compensate for the loss of Russian gas, Europe will have to seriously reconsider all the ambitious energy strategies adopted in recent years. First of all, those that relate to the so-called «green transition».

The deconservation of nuclear power plants and those coal and fuel oil-fired capacities that have not yet been demolished as part of the «greening» of the energy of the leading economies of the European Union will be faster than the construction of gas carriers and the search for new deposits, but in any case it will take a couple of years.

Is it possible to implement Washington’s plan, at least partially, in the medium term? From the point of view of linking the possible exchange of sanctions strikes to the situation around Ukraine, the answer to the question should be no.

There are serious doubts that the very existence of the Ukrainian state will be an objective fact in two or three years. However, it is impossible to exclude the development of a plan to abandon Russian gas by Europe as a long-term strategy. Especially that such an intention has been repeatedly expressed in various forms earlier, and has been confirmed now.

Quoting senior officials from Washington, the Guardian confirms the awareness of the US’ behaviour in terms of Russian gas exports.

«When we pick these sectors, it’s quite deliberate. These are sectors that Putin himself has, has championed, as the way forward for Russia to diversify its economy beyond oil and gas. And so that would lead to an atrophying of Russia’s productive capacity over time,» the source told the publication.

The EU’s rejection of the most environmentally friendly and convenient of the known fuels completely contradicts economic logic, but Europe with depressing regularity demonstrates the renunciation of its own interests for the sake of political solidarity with the United States. Measures that allow to minimise the damage from a possible future abandonment of Russian gas — in full or, rather, in part — will not be superfluous.

In this sense, the expansion of cooperation in the gas sector with China and India, an equally capacious potential market, is of great interest. And the fully-fledged implementation of “Power of Siberia 2” gas pipeline is becoming a key element of the likely confrontation.

Already back in 2019, Gazprom noted the need to increase gas supplies to China to 130 billion cubic meters annually — which is commensurate with the current level of European exports. The movement towards the target indicator is proceeding quite smoothly, which is connected both with the objective pace of the organisation of the necessary infrastructure and with political factors.

Although the relationship between Russia and China is close to a strategic partnership, the situation of a «single buyer» carries certain risks.

On February 4, Gazprom and China’s CNPC signed a long-term contract for the supply of an additional 10 billion cubic meters of natural gas along the «Far Eastern» route. After the project reaches full capacity, the volume of Russian pipeline gas supplies to China, taking into account «Power of Siberia», will reach 48 billion cubic meters per year.

A week earlier, on January 25, 2022, Aleksey Miller and Deputy Prime Minister of Mongolia Sainbuyangiin Amarsaikhan approved a feasibility study for the construction of a gas pipeline from Russia to China through Mongolia, the construction of which is expected to begin in 2024. The length of the gas pipeline on the Mongolian section will be 960 km, 50 billion cubic meters of gas per year will be transported through it.

The gas pipeline will be a continuation of the projected Russian gas pipeline «Power of Siberia 2», which, in addition to expanding the export potential, will unite the gas transportation systems (GTS) of the east and west of Russia. Thus, it will be possible to redirect gas from a number of large fields in the right direction, reducing the risks of rather laborious conservation of gas wells due to unfavourable political conditions.

India represents a more complex geographical route for gas pipelines, but there is already a positive experience in the supply of Russian LNG there. At the end of October 2021, the gas carrier Marshal Vasilevsky delivered the first batch from the Yamal LNG plant to the Indian port of Dabhol. The tanker was traveling along the Northern Sea Route, the ever-growing importance of which can be found in another RUSSTRAT article.

The LNG from the NOVATEK project was delivered by Gazprom under a long-term contract with the Indian company GAIL. India, the 4th largest importer of LNG in the world, wants to increase the share of natural gas in the energy balance to 15% from the current 6.2% by 2030, which creates great opportunities for the development of the LNG sector of Russian gas exports.

Thus, an attempt to organise a resource base for the EU’s refusal of Russian gas will be impossible at least in the coming years. The readiness of the ruling class of the EU to make such a decision, which seriously worsens the competitiveness of the European union as a whole, remains outside the forecast brackets.

The probability that energy exports from Russia will remain on the list of targets for sanctions or other measures of influence will be high as long as these exports are important for the economic development of the Russian Federation.

In order to neutralise attempts to attack energy exports from Russia, it is advisable to use the available time to diversify it, including through the conclusion of direct contracts with existing consumers, as well as expand the scope of presence in new markets.

Институт международных политических и экономических стратегий Русстрат


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