Thu. Sep 29th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

September 3, 2022

The following two news reports both make senses. But they are irreconcilable. The end results though could be that both are losers.

Europe, especially Germany, has been relying on Russian energy for decades so their desire to be free from the dominance of Russian energy is understandable. However, West led sanctions against Russia right after the broke out of war in Ukraine were ill-conceived and backfired on Europe causing unprecedented energy crisis. As of now, Europe is still counting on Russian natural gas for getting thru this winter. EU and England are facing dangerously high energy cost. If this winter is bitter cold, social unrests would be almost inevitable. So, yes, there is “No going back to reliance on Russian gas from here.” But many European nations still need some Russian gas for this and next few winters. Without Russian energy, it will be tough go.

It will be a serious test of European’s resolve and unity to keep supporting the war in Ukraine during the cold winters.

Russian law maker’s point is well taken. Nord Stream II can be operational in a very short time; it has enough capacity to export Russian gas to Europe so their energy crisis could be averted almost overnight. Unfortunately, US just won’t let it happen. Russian energy will have to find markets in Asia.

Even after the war in Ukraine is somehow resolved in the future, the global energy market will be transformed and now no one knows what the new market system would be! Most likely, US and Europe governments will strengthen policy interventions, but rest of the world will be dominated by market force or price. The challenge of this mixed modes of operation is sensitive to other global challenges including climate change, natural disaster, and market disruptions. In that case, economy of the whole world will tank.

BBC: No going back to reliance on Russian gas from here

Faisal Islam Economics editor @faisalislamon Twitter

This is no coincidence. Russia’s state-controlled gas giant announced an indefinite extension to a three-day maintenance halt to flows of gas through the continent’s key energy artery, hours after leading western finance ministers vowed to escalate sanctions on Russian oil.

Gazprom’s official reason is that an oil leak has been found and the pipeline cannot work without German imports of technology, which are now subject to sanctions.

Few observers believe, however, that this is anything other than an attempt essentially to blackmail Europe over supplies.

The G7 world’s main economies, including the UK, agreed to cap the price they pay for oil from Russia. This is a way to limit the revenues that fund the Kremlin’s war in Ukraine – it earns more from oil exports than gas.

But this is a very serious development. Even during the height of the Cold War, Russia kept supplies of its gas flowing into Europe.

This cut-off though – and the pointed attempt by Gazprom to blame the German energy giant Siemens for the malfunction – is the culmination of decades of dysfunction in the energy relationship between Russia and Germany.

For most of that time, of course, Bonn and then Berlin were delighted to avail themselves of cheap Russian gas. A younger Vladimir Putin did his PhD thesis on the importance of Russian energy exports.

When I visited Gazprom’s headquarters a decade ago and its fields in Siberia, I was told menacingly “anyone who artificially tries to diminish the role of Russian gas is playing a very dangerous game“. A visit to the Novi Urengoy field showed Gazprom consolidating its hold on the Russian state, with some assistance from Berlin.

Former German Chancellor Gerhard Schroeder enshrined this dependence with the building of this same Nordstream pipeline, which then gave him a job on its board. Gazprom sponsored German football, Europe’s premier football competition the Champions League, and bankrolled various Russian soft power projects.

Perhaps most incredibly, German industry swapped the gas storage facilities under its soil for privileged access to deep-lying gas reserves under the Siberian tundra.

The very facilities, including Germany’s largest, designed for resilience in the face of Russian energy diplomacy were passed into Russian ownership. It beggars belief that this was completed in 2015, after Russia’s annexation of Crimea.

One sliver of hope, though, now lies in those same storage facilities. The German government seized ownership of the storage facilities that had been left at very low levels last year.

There, and across the continent, energy companies backed by government loans have spent the summer buying up as much gas as possible at any price. The major economies are now on course to fill massive stores of gas, designed to cope with a cut to supplies of several weeks. Germany’s huge stores are now 84% full, having been less than half full in June.

As a result, gas prices traded in international markets have come down from extreme highs over the past week. But they are still very high by normal standards.

There remains a dash to secure alternative supplies that is pushing up the price for all countries, including Britain. And the true impact of all this will depend on just how long the pipeline outage lasts.

But surely now, for Germany and the rest of Europe, there will be no going back to reliance on Russia.

Russian lawmaker says Europe can resolve the energy crisis ‘they have created for themselves’ by lifting sanctions and restarting Nord Stream 2

Jennifer Sor Fri, September 2, 2022 at 6:04 AM

  • Europe’s energy crisis is self-inflicted, a Russian lawmaker said.
  • He said that Europe could lift sanctions on Russia and restart the dormant Nord Stream 2 pipeline.
  • Certification has been delayed on Nord Stream 2 due to sanctions on Russia.

Europe has the power to resolve its energy crisis, a Russian politician said on Friday, advising the European Union to lift its ‘illegal’ sanctions on Russia and restart the dormant Nord Stream 2 pipeline.

Since the invasion of Ukraine, Europe has been relying on Nord Stream 1 for Russian gas flows, but Russia has slashed capacity to 20% and halted gas flows twice this summer for maintenance, leading some to fear that Russia will cut off Europe completely from its natural gas supplies this winter.

It’s led to a scramble to find alternative supplies in Europe, driving a painful energy crisis for the EU. Russian politician Vyacheslav Volodin said in a recent statement on Telegram that the pain is self-inflicted, calling the energy crisis a situation European leaders “have created for themselves.”

“The energy security of Europe without Russia is impossible,” Volodin wrote, noting that the EU had two options: “The first one. Lift illegal sanctions against our country and launch Nord Stream 2. The second one. To leave everything as it is, which will lead to problems in the economy and make life even more difficult for citizens,” he said, according to Reuters’ translation.

UK Prime Minister Boris Johnston accused Russia of weaponizing natural gas in retaliation to western sanctions at a press hearing on Wednesday, though he emphasized Europe would not back down from its support of Ukraine, with countries like Germany shifting away from Russian energy supplies entirely. Europe is also on track to meeting its natural gas storage targets this winter, a positive sign as countries try to get by without Russian energy flows.

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