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The gas 'poker game' between Russia and Europe

By Julien MIVIELLE
The EU relies heavily on Russian gas, raising concerns that Moscow could use its export to blackmail the 27-nation bloc. ©AFP

Paris (AFP) - The drop in Russian gas flows to the European Union has had no major effect on supplies, but it raises pressure on the region to wean itself from Moscow's energy.

Here is a look at the issue:

Heavy dependence

The EU relies heavily on Russian gas, raising concerns that Moscow could use its export to blackmail the 27-nation bloc.

Last year, the EU received around 155 billion cubic metres of Russian gas, accounting for 45 percent of its imports of the fossil fuel.

While the EU is discussing an embargo on Russian oil, a gas ban is less likely for now as some countries such as Germany, the EU's economic engine, are heavily reliant on the energy source.

"Of course, the Europeans have been quite bad in this poker game -- they showed too openly how scared they were to lose the Russian gas that now, Russia is gaining the upper hand," said Ipek Ozkardeskaya, analyst at Swissquote Bank.

Ukraine has pleaded with the EU to ban Russian gas, pointing out that it gives Moscow the financial means to press on with its war against its neighbour.

In the first two months following the February 24 invasion, Russia has raked in 63 billion euros ($65.5 billion) in gas exports, including 44 billion euros from the EU, according to the Centre for Research on Energy and Clean Air.

Low gas flows

Russian gas flows via Ukraine fell this week.

Ukraine's pipeline operator GTSOU said it halted gas transport at the Sokhranivka transit point from Wednesday as Russian occupying forces now in control were interfering with operations.

Ukraine urged Russian energy firm Gazprom to increase supplies via another site, Sudzha, but the company said it was impossible to reroute all the supplies through there.

"Roughly one third of Russia's total Ukrainian transit flows through the Sokhranivka entry point, while the rest (two thirds) passes through the Sudzha station," said Ole Hvalbye, commodities analyst at SEB bank.

The loss amounts to two percent of Europe's Russian gas consumption, according to Hvalbye.

"This does not scream crisis, but it is a wake-up call for what is to come," he said.

Gazprom also announced on Thursday that it would stop sending natural gas via the Polish section of the Yamal-Europe gas pipeline after Moscow imposed retaliatory sanctions against Western energy companies.

The pipeline can carry up to 33 billion cubic meters of gas from fields in Russia's Yamal peninsula and western Siberia through Belarus and Poland to Germany.

But a market source said the impact is limited as the pipeline had already been carrying low volumes for months.

The move will make "no difference" as long as long-term contracts for Russian gas via other pipelines are fulfilled.

Russian and Ukrainian intentions

Some analysts suggest that Ukraine has deliberately disrupted Russian gas flows to Europe in frustration over the EU's reluctance to impose an embargo on Russia's energy exports.

Carsten Fritsch, analyst at Commerzbank, said it was "possible" that Ukraine, which relies heavily on Russian oil, is pressuring Hungary to drop its opposition to an EU crude embargo.

While the EU has balked at a gas ban, there are fears that Russia could turn off the taps in retaliation at Western sanctions over the war.

Kaushal Ramesh, senior analyst at the research firm Rystad Energy, said "supplies could be stopped unilaterally by Gazprom".

"The chances of this happening are slim, but not zero," Ramesh said.

EU buyers are "not caught completely off guard" as storage levels are currently sufficient to last through "most of 2022, even if Russian flows were to stop instantly".

But, he added, "the outlook for winter 2022 supply is now a lot more pessimistic".

The alternatives

The EU has set a goal of cutting Russian gas imports by two thirds this year.

Germany says it can make up for the recent drop in Russian deliveries by getting gas from Norway and the Netherlands to stock up before winter.

Europeans are also counting on liquefied natural gas (LNG), which can be shipped by boat from other countries such as Qatar and the United States.

Denmark is looking into possibly raising its own natural gas production in its North Sea fields, while Romania is eyeing legislation to encourage gas extraction in the Black Sea.

Experts say the situation is another argument in favour of speeding up the transition away from fossil fuels.

"The rollout of clean energy solutions alone can lead to a reduction of 101 bcm (101 billion cubic metres of gas), which is equivalent to two thirds of Russian imports, already by 2025," according to the E3G climate think tank.

The European Biogas Association is also ready to step in, saying it could nearly double its production to 35 billion cubic meters by 2030, equivalent to 20 percent of Russian gas imports.

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Dive Deeper:
Russia using energy 'as weapon', says Berlin
Berlin (AFP) - German Economy Minister Robert Habeck accused Russia on Thursday of using energy as "a weapon", after Moscow…
Russian pipeline sanctions raise fears of gas interruption
European gas prices have risen after Russian state-owned exporter Gazprom said it would no longer send supplies to Europe via…
What’s the Fallout from Ukraine’s Pipe Shutdown?
The shutdown of a gas pipeline in eastern Ukraine has sent a fresh wave of energy jitters through Europe. The…
EU to help break blockade on Ukraine’s Odesa to free up grain exports
The European Commission said Thursday it would help Ukraine break the Russian blockade on the port city of Odesa, where…
One subscription that gives you access to news from hundreds of sites
EXPLAINER: What's the fallout from Ukraine's pipe shutdown?
The shutdown of a gas pipeline through Russian-held territory in Ukraine is sending a new wave of energy jitters through…
European gas prices rise as flows via key Ukraine route stop
European natural gas prices rose after Russian transit flows via one of the key entry points in Ukraine stopped, as…
Get all your news in one place