Saturday, November 26, 2022

Russia Closes Gas Pipeline to Europe, Blames Western Sanctions

The Kremlin has declared it will stop shipping gas to Germany through the Nord Stream 1 pipeline, prompting European leaders to propose price caps to cut into Russia’s financing for its war in Ukraine.

The shutdown prompted renewed concern about the impact of fossil energy shortages on food production, industry, and fuel prices, even as Russian President Vladimir Putin vowed to cut off all supplies and let Europe freeze.

Moscow initially said it had closed Nord Stream, the biggest gas line between Russia and Western Europe, for maintenance, Al Jazeera recalls. But on Monday, Kremlin spokesperson Dmitry Peskov said Western sanctions against Russia were the sole reason for the shutdown.

“[Gas] pumping problems arose because of the sanctions imposed against our country and against a number of companies by Western states, including Germany and the UK,” Peskov told the Interfax news agency. “Sanctions that prevent the units from being serviced, that prevent them from being moved without appropriate legal guarantees… it is these sanctions imposed by Western states that have brought the situation to what we see now.”

A European Commission spokesperson responded that Russia was shutting down the pipeline under “fallacious pretenses”. The United States accused the Vladimir Putin regime of using fossil energy as a weapon, while pledging that Europe would have enough gas to get through the winter ahead.

“The U.S. and Europe have been collaborating to ensure sufficient supplies are available,” a White House spokesperson told Reuters. “As a result of these efforts, European gas storage will be full by the critical winter heating season,” although “we have more work to do.”

The U.S. Energy Information Administration reported this week that three new LNG export projects are under construction, but they won’t begin coming online until January, 2024.

On Wednesday, the European Union said Putin was weaponizing fossil energy supplies and proposed the price cap, which some member countries previously opposed, Reuters writes. “The escalating standoff could drive up sky-high European gas prices further, adding to already eyewatering bills EU governments are paying to stop their energy providers collapsing and prevent cash-strapped customers freezing in the cold months ahead.”

The EU is prepared to take action, “not only because Russia is an unreliable supplier, as we have witnessed in the last days, weeks, months, but also because Russia is actively manipulating the gas market,” EC President Ursula von der Leyen told media. “I am deeply convinced that with our unity, our determination, our solidarity, we will prevail.”

The renewed talk of a price cap had Putin threatening to cut off all fossil energy exports and let “the wolf’s tail freeze,” a reference to a famous Russian fairy tale, Reuters and the Washington Post report. “We will not supply gas, oil, coal, heating oil—we will not supply anything,” he told a meeting of the Eastern Economic Forum in Vladivostok, in the far eastern region of Russia, adding that there was plenty of demand for his country’s products in Asia.

“The main thing is strengthening our sovereignty, and this is the inevitable result of what is happening now.”

Finland’s Centre for Research on Energy and Clean Air estimates Putin has generated £141 billion/US$162 billion on sales of oil, gas, and coal since the war began, compared to £86 billion spent on the war, the Times of London states.

But even so, International Energy Agency Executive Director Fatih Birol says it’s a myth that Russia is winning its energy war—or even that it’s managing to disrupt the shift off fossil fuels.

“Russia is undoubtedly a huge energy supplier and the increases in oil and gas prices triggered by its invasion of Ukraine have resulted in an uptick in its energy income for now,” he writes, in an opinion piece for the Financial Times. “But its short-term revenue gain is more than offset by the loss of both trust and markets that it faces for many years to come. Moscow is doing itself long-term harm by alienating the EU, its biggest customer by far and a strategic partner. Russia’s place in the international energy system is changing fundamentally, and not to its advantage.”

Birol also challenges the “absurd claim” that today’s global energy crisis was brought on by the shift off fossil fuels.

“When people misleadingly blame clean energy and climate policies for today’s energy crisis they are, intentionally or not, moving the spotlight away from the real culprits—the gas supply crunch and Russia,” he says. But energy policy-makers aren’t complaining about relying too heavily on cleaner energy sources.

“On the contrary, they wish they had more. They regret not moving faster to build solar and wind plants, to improve the energy efficiency of buildings and vehicles or to extend the lifetime of nuclear plants. More low-carbon energy would have helped ease the crisis—and a faster transition from fossil fuels towards clean energy represents the best way out of it.”

But those earlier, unforced errors have European countries in a short-term bind.

This week, German business newspaper Handelsblatt reported that high fossil energy prices “are beginning to bite into companies’ investment plans and curtail production in Germany, raising the spectre of deindustrialization in the country that boasts one of the largest industry sectors of all major economies,” Clean Energy Wire reports. “Wholesale gas prices for 2023 are currently eight times higher for German companies than for competitors in the U.S.,” risking what one industry lobbyist called “the winding-up of the basic materials industry in Germany”.

In the Netherlands, meanwhile, industry associations say bakeries are facing down a wave of closures after fossil energy prices increased tenfold, Reuters writes.

“I am hearing from a lot of entrepreneurs that if this holds up for much longer, they’ll have to close up shop,” said Marie-Hélène Zengerink, general manager of the 1,600-member Dutch Association for Bread and Pastry Bakers. “We are talking about a lot of family businesses. It’s a real emergency.”

After weeks of deliberation and speculation, German Economy and Climate Minister Robert Habeck announced this week that his country will keep two of its three remaining nuclear plants on standby through the winter before decommissioning them in April. That was after a power grid stress test “found that keeping the two nuclear plants in the south of the country operational could help avoid grid bottlenecks in extreme situations during the upcoming winter,” Clean Energy Wire reports. “The plants would only be reactivated to produce electricity if other instruments are not sufficient to avert a supply crisis” in the country’s industrialized southern region.

This article first appeared in The Energy Mix

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