(Dan Tri) – When the Ukraine crisis broke out, Europe feared that Russia – the largest gas supplier to the `old continent` – could cut off gas supplies.
Russia is an important gas supply source for Europe (Photo: TASS).
According to the New York Times (NYT), while Russia strengthens soldiers and military equipment near its border with Ukraine, tensions are also escalating on another front: world energy markets.
So, amid escalating tensions, Western officials are calculating what will happen if Moscow responds by cutting off gas and oil supplies during Europe’s harsh winter.
The Ukraine crisis happened at the most inopportune time for the West.
The record high prices European countries are willing to pay has attracted natural gas tankers from the United States, Qatar and elsewhere.
On January 25, White House officials said they were continuing discussions to supply more gas to Europe.
Why could Europe be severely affected?
This winter, Europe is experiencing an energy crisis, with natural gas and electricity prices skyrocketing.
Price levels in Europe are 5 times higher than the same period last year and 7 times higher than in the US.
Things with Europe became even more tense when the Ukraine crisis escalated with concerns about Russia cutting off gas supplies.
The fact is that Russia began to export less gas to Europe than usual.
`If the situation in Ukraine worsens further, Europe is in a particularly vulnerable position,` warned expert on gas trade between Russia and Europe Thane Gustafson.
The importance of Russian gas
Russia supplies about 1/3 of gas to Europe (Photo: TASS).
According to NYT, Russia supplies about 1/3 of gas to Europe and Russia’s position has increased as the gas output of countries in the continent has been decreasing in recent times.
Gas is also growing in importance as coal-fired power plants are shut down in countries such as Germany to meet environmental targets, and so are nuclear plants in Germany and the UK.
Even though Europe is investing heavily in renewable energy sources such as wind power and solar power, countries still need traditional energy sources for production and people’s livelihood.
The Ukraine conflict threatens gas supplies
About a third of Russia’s gas exports to Europe go through Ukraine.
The West has recently repeatedly threatened sanctions and warned Russia that it would pay a heavy price if it attacked its neighbor, despite the Kremlin repeatedly affirming that all military moves at the border are only for defensive purposes.
President Vladimir Putin could cut off all or a large part of Russian gas flows to Europe in response to strong sanctions that the United States and other Western countries have threatened.
`If we try to close the door on Russia in the capital markets, they will find a way to attack our biggest pain point, which is energy,` Helima Croft, director of investment banking RBC Capital
Russian calculations
Russian President Vladimir Putin (Photo: Reuters).
However, some observers believe that Russian President Vladimir Putin will not want to choose this option.
Former US special envoy for international energy issues under former President Barack Obama, Mr. David Goldwyn, commented: `While Europe depends heavily on Russian gas, Russia itself also depends on the Russian gas market.
Mr. Goldwyn, now chairman of consulting firm Goldwyn Global Strategies, added that Mr. Putin is trying to strike a balance `between being a reliable supplier as Russia is showing itself to Germany and
A similar logic, he said, would likely govern Mr. Putin’s actions regarding oil, a more important source of revenue than gas.
Russia has challenged Europe’s endurance for many months as it tightens gas supplies to achieve many important strategic goals, including Nord Stream 2. The $11 billion project connects Russia and Russia.
In a statement, Gazprom dismissed European concerns, saying it had not done anything unusual, maintained `gas supply as requested by consumers and fully complied with its contractual obligations`.
While stockpiles remain low and prices high, Europe is not out of fuel.
Massimo Di Odoardo, Vice President of Gas at Wood Mackenzie, a market research company, said: `The risk of gas shortage is no longer as much. Worries about power outages are not as worrying as before.`
Whether or not liquefied gas imports can compensate for Russia’s complete cessation of gas supplies to Europe is still controversial.
