EXPLAINER: Europe Lacks Natural Gas. Is It Russia’s Fault? | Business News


By DAVID McHUGH and VLADIMIR ISACHENKOV, Related Press

FRANKFURT, Germany (AP) — Europe is in need of pure fuel — dangerously brief. A chilly winter might imply a extreme crunch, and utility payments are headed increased, burdening bizarre individuals and weighing on the financial restoration from the coronavirus pandemic.

Russian President Vladimir Putin has promised to assist fill European fuel storages as vitality costs soar — however provide shortages and political tensions have continued to rattle vitality markets, retaining costs excessive. That is pinched companies and compelled them to cross alongside prices to prospects already dealing with increased payments at residence.

Moscow has been accused of utilizing the risky state of affairs to push for a fast launch of a newly constructed Russian pipeline beneath the Baltic Sea: Nord Stream 2, which is awaiting German regulators’ approval and has been criticized by Ukraine, the U.S. and others.

With Europe depending on imported fuel and Russia supplying 40% or extra of these imports, Putin has leverage. He is mentioned the brand new pipeline already is stuffed with fuel and will assist improve provides “the day after” it is authorized.

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Listed below are necessary components behind the fuel disaster:

HOW DID EUROPE GET INTO THIS MESS?

A number of causes. One was a chilly winter that drained fuel reserves, that are used to generate electrical energy and sometimes replenished in summer time. That did not occur this yr.

Sizzling climate drained extra fuel than normal by means of demand for air-con. Much less wind meant much less renewable electrical energy, main mills to achieve for fuel gasoline. Restricted provides of liquid pure fuel, an costly choice that may be delivered by ship as a substitute of pipeline, had been snapped up by prospects in Asia.

On high of that, Europe for years has pushed for day-to-day spot pricing, as a substitute of long-term contracts. Russian-controlled fuel big Gazprom has fulfilled these long-term contracts however hasn’t pumped extra fuel past that. Putin says prospects who’ve these contracts pay a lot much less for fuel than different patrons.

Costs had been seven occasions increased in October than they had been firstly of the yr and have eased to about 4 occasions increased these days.

HOW DOES THE NORD STREAM 2 PIPELINE PLAY INTO THIS?

Gazprom invested billions into constructing the 1,234-kilometer (765-mile) pipeline to Germany. It might permit Russia to promote fuel on to a serious buyer and circumvent a pipeline by means of Ukraine, which has confronted relentless strain from Russia following Moscow’s 2014 annexation of Crimea peninsula and its assist for separatist rebels in Ukraine.

Even earlier than the 2014 hostilities, Moscow had launched efforts to diversify fuel provide routes to the European Union, saying the Ukrainian system is dilapidated and accusing the nation of siphoning fuel.

Ukraine stands to lose $2 billion in annual transit charges. It and Poland, which sits on one other bypassed pipeline, are fiercely against Nord Stream 2. The US and another nations even have been strongly essential, warning the venture would improve Europe’s vitality dependence on Russia.

British Prime Minister Boris Johnson mentioned Monday that he hoped “different European nations might acknowledge {that a} alternative is shortly coming, between mainlining ever extra Russian hydrocarbons in big new pipelines and sticking up for Ukraine and championing the reason for peace and stability.”

A number of analysts mentioned they don’t count on Nord Stream to come back on line this winter — although there was hypothesis Europe may permit fuel to start out flowing whereas regulators assessment it, maybe in trade for sending extra fuel by means of Ukraine.

HAS RUSSIA WITHHELD EXTRA GAS SUPPLIES?

Gazprom says no. The pinnacle of its export department, Elena Burmistrova, mentioned this month that “we aren’t taken with both report low or report excessive fuel costs,” including that “we wish to see a well-balanced and predictable market.”

At the very least some analysts agree.

Thomas O’Donnell, an vitality and geopolitical analyst on the Hertie Faculty graduate college in Berlin, mentioned Russia needed to fill its personal fuel reserves — identical to the EU — after a chilly winter.

Whereas Putin relishes his position because the “fuel godfather” and has exploited the scarcity to press for approval of Nord Stream 2, “the extra mundane actuality is … there merely has been no spare Russian fuel to export till Russia finishes filling its personal home storage for winter,” wrote O’Donnell, who blogs at globalbarrel.com. “The godfather was bluffing.”

O’Donnell mentioned the one manner for Russia to assist make up the fuel scarcity this winter can be to pump extra fuel by means of Ukraine — assuming Gazprom is prepared to do this.

Putin ordered Gazprom to ship fuel into European storage after Russia completed filling its reserves final week, however “it is restricted,” O’Donnell mentioned. “He could possibly be making a present of doing way more.”

“ Russia can and will present extra provides by means of Ukraine, which has adequate pipeline capability, they usually don’t want Nord Stream 2 for that,” Karen Donfried, the highest U.S. diplomat for Europe, mentioned final week.

“And, if Russia fails to do this, clearly it’s going to harm European vitality safety and convey into query what Russia’s motives are for withholding these provides,” she mentioned.

By underlining Europe’s dependence on Russian fuel, Putin and Gazprom might hope for extra lenient EU market regulation of Nord Stream 2, O’Donnell mentioned.

The pipeline hit a delay Tuesday when German regulators suspended the approval course of due to a problem with the pipeline operator’s standing beneath German regulation.

WHAT IMPACT COULD EUROPE’S GAS SHORTAGE HAVE?

Pure fuel costs will eventually be mirrored in residence and enterprise expenses for electrical energy and fuel.

The European Fee, the EU’s govt arm, cited spiraling vitality prices as a drag on the pandemic restoration as a result of increased payments will take cash away from shopper spending and enterprise funding.

Europe’s tight market is echoing within the U.S., serving to elevate costs there, although the U.S. market has not seen anyplace close to Europe’s worth spike.

WHAT COULD IT MEAN FOR THE WINTER?

Analysts say it is laborious to foretell. Everybody hopes there is not a giant late-winter storm that might threaten dwindled provides.

Analysts have speculated that electrical energy could possibly be rationed — maybe for some industrial prospects at first — if issues get actually dangerous.

An vitality apocalypse — a complete lack of electrical energy or warmth if fuel reserves are drawn to zero and cannot be substituted — would doubtless trigger deaths amongst poor and weak populations, like what occurred in Texas this yr when a winter storm knocked out energy, resulting in greater than 200 deaths.

WHAT ABOUT BELARUS’ THREAT TO CUT OFF GAS SUPPLIES?

Poland and different EU nations accused authoritarian Belarus President Alexander Lukashenko of utilizing migrants attempting to get to the EU by means of Belarus’ border with Poland as pawns to avenge sanctions over his authorities’s crackdown on protests.

With the EU threatening extra crippling sanctions, Lukashenko threatened to chop off Russian fuel provides to Europe that cross by means of a pipeline in Belarus.

Though his assertion additional rattled the markets, it’s unlikely Lukashenko would be capable of fulfill his risk, given his political dependence on Russia and Moscow’s want to take care of the fame of a dependable provider.

Valery Karbalevich, an unbiased Belarusian political analyst, dismissed Lukashenko’s risk as bluster.

“The choices are made in Moscow, not Minsk,” he mentioned. “Lukashenko desires to scare the EU and drag Putin into the confrontation, attempting to impress the Kremlin to take a extra radical motion.”

Isachenkov reported from Moscow. Related Press journalist Yuras Karmanau in Kyiv, Ukraine, contributed to this report.

Copyright 2021 The Associated Press. All rights reserved. This materials will not be printed, broadcast, rewritten or redistributed.



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