The current energy crisis between Europe and Russia has two opposing causes. The EU countries believed that Russia was financing the war with its oil and gas revenues, and that it was sustaining it even stronger. Indeed, according to the International Energy Agency, in June Russia’s oil exports fell by 250,000 barrels per month to 7.4 million barrels per day. This is the lowest level in nearly a year. But in the same period, export revenues increased by 700 million dollars on a monthly basis. This represents a 40% increase compared to a year ago.
This is why the EU took two integrated decisions: first, to reduce gas imports step by step, which was achieved by 15%, and second, the G-7 countries (the US, Canada, France, Germany, Italy, Italy, the UK and Japan) announced a price ceiling.
Of course, Russia was not idle in the face of this important decision. The gas shutdown, already planned as a last resort for the upcoming winter months, was announced shortly after the decision to impose an oil price ceiling. Before reaching this stage, Russia had already severely restricted supplies through pipelines through cutbacks.
Russian energy company Gazprom said in a statement that the gas flow from the Nord Stream 1 pipeline to the west has been suspended due to malfunctions. From the Russian side, the reason for the gas cut was the sanctions imposed by the West. For example, the sanctions imposed by the manufacturer Siemens were one of the reasons why the damaged turbines used in Nord Stream 1 were not repaired. Nord Stream 1 is the largest gas pipeline from Russia to Europe and has the capacity to transport around 55 billion cubic meters of gas per year.
It is also true that Russia has not been able to achieve its military objectives in Ukraine in the time and efficiency it wanted, and that it has now evolved into a climate of uncertain war. This latest gas cut is a powerful instrument to force the EU to bring Ukraine to the table on its terms. Kremlin spokesman Peskov made a similar statement. “Life in Europe will get worse and people here will ask the current authorities about it,” Peskov said.
So what can Europe do in this situation?
The EU countries foresaw that this decision would come. In fact, since 2005, the process of dependence on Russian gas has been built with their own hands! Just before the illegal annexation of Crimea in 2014, Europe’s dependence on Russian gas rose from 30% to 45%. Germany played a leading role in this policy.
Of course, from another perspective, this was also a strategic success for Putin…
Therefore, in the last period, they tried to reduce their imports on the one hand and to prepare for the winter by filling their gas storage facilities on the other.
In Germany, the largest supplier, gas purchases from Russia have fallen by 60 percent compared to last year, according to estimates. Purchases from other countries also played a role. Norway supplied around 38 percent of Germany’s gas consumption last month and the Netherlands 24 percent.
In terms of storage, the EU’s overall gas storage level is reported to be around 80 percent, while Germany’s was 84 percent full before winter. It would have reached 90 percent by November 1 if there had been no cutbacks. This rate is 87 percent in France, 81 percent in Spain and 71 percent in Italy.
But this picture is not enough. In order for the stored gas to be sufficient for use – and even in the best-case scenario, it may be sufficient for 3-4 months – additional measures need to be implemented. Surviving this process with minimal damage will depend on finding additional gas import routes, on savings in domestic consumption and, of course, on how cold the winter months will be.
The wind is blowing so hard that France is talking about sending natural gas to Germany and Germany is talking about supplying electricity to France! Some companies have already started to cut production.
The increase in prices could be 20 times higher than 2 years ago.
The risk of inflation and recession will affect Europe as much as the economies that depend on it. Turkey is one of them. As an economy whose production and export system depends on Europe, Turkey’s economy could be adversely affected by this contraction.
In any case, Europeans will have to jump this Russian barrier to varying degrees.
Finally, we should add that the following is also being discussed on the EU front: If this winter can be survived with a reasonable loss, new supply opportunities, additional storage facilities and renewable energy investments will start to reverse the gas dependence on Russia and the Kremlin’s weapon will start to lose its effectiveness…
By: Kürşad Zorlu