The dispute between Russia and the EU over gas

Winter is likely to be expensive for consumers. The reason is rising oil and gas prices. Russian President Vladimir Putin is making serious accusations against the EU and subliminally putting pressure on it because of Nord Stream 2.

The exploding gas prices and the attacks from the EU against the gas superpower Russia have been a top priority for President Vladimir Putin for days. He categorically defends himself against allegations that Russia is responsible for the ever new records. Consumers in Germany are worried about whether they will be able to pay their heating bills in the future. Putin now admits that urgent action is needed to ease the situation.

“Europe is turning blue from the cold without Russian gas,” was the headline of the Moscow daily “Nezavisimaya Gazeta”. In view of the “panic on the gas market”, other Russian media are already celebrating the president as a possible savior from an impending cold shock for the Europeans. The 69-year-old, who had been tried in gas crises, says that the state-owned company Gazprom can help if it doesn’t get too expensive for him. Russia is open to offers from bulk buyers from the EU, emphasizes the Kremlin.

“This policy is an absolute mistake”

The solution? Gas transit through Ukraine could be expanded significantly. But that is expensive for Gazprom. It is Putin’s way of saying that the Nord Stream 2 Baltic Sea pipeline is ready for cheap gas transportation. The only thing missing is the operating license from the German authorities. The Kremlin repeatedly points out that the rapid commissioning could ease the energy crisis.

Putin emphasizes that it is not Russia to blame for the high prices, but the situation on the world market – and the EU’s failed energy policy. Despite Russia’s warnings, she moved away from long-term contracts and switched to trading on the energy exchanges. “Today it is clear that this policy is an absolute mistake,” he said.

Port for Nord Stream 2: The project is controversial internationally. (Source: imago images / Jens Koehler)Port for Nord Stream 2: The project is controversial internationally. (Source: Jens Koehler / imago images)

Deputy Prime Minister Alexander Nowak, who is responsible for energy issues, also emphasizes that, despite the profits for the state treasury, Russia has no interest in such high gas prices. Because of the high costs, Nowak sees the danger that the transition to alternative energies will accelerate in the EU. Russia wants to sell its fossil fuels oil, gas and coal to Europe for as long as possible.

“Cooperation instead of confrontation with Moscow”

The tense situation was also an issue at the St. Petersburg International Gas Forum, which is due to run until Friday. The accusations from the EU that Russia is manipulating the gas price “in order to fill the Baltic Sea pipeline Nord Stream 2 with gas more quickly are unfounded and absurd,” says Rainer Seele, President of the German-Russian Chamber of Commerce (AHK). Gazprom is delivering the agreed quantities, which Chancellor Angela Merkel also emphasized this week.

For a long time, Seele was head of the energy companies Wintershall Dea and OMV OMV Stock, two of the five European companies that funded Nord Stream 2. “Anyone interested in inexpensive gas for German and European households and industrial companies should rely on cooperation rather than confrontation with Moscow,” he says.

He also criticizes the fact that too much “the free play of supply and demand has been set in the EU”. By renouncing long-term supply contracts for pipeline gas, there are now risks, “the consequences of which are now affecting European industry and millions of private households”. According to AHK data, Germany consumes around 87 billion cubic meters of gas a year, 55 percent of which comes from Russia.

But even if Russia is not responsible for the rise in energy prices, the question in Europe is whether the country might not be deliberately missing out on opportunities to ease the situation. The German diplomat and EU ambassador in Moscow, Markus Ederer, said in an interview with the Moscow newspaper “RBK” that Russia’s reputation as a reliable supplier could be damaged if the impression arises that the country cannot or does not want to respond to the demand.

The gas price has increased tenfold since the beginning of the year. But Gazprom is not opening the valves yet. First, the company’s own storage facilities in the country would have to be replenished because a possibly cold winter is imminent, the company said.

Strategic Reserves Debate

It is clear that Russia is calling into question an internal EU discussion on climate protection measures in order to delay as far as possible an exit from electricity generation with fossil fuels such as gas. EU states such as Poland also criticize the fact that energy prices are partly due to CO2 emissions trading. This makes electricity generation with fossil fuels more expensive in order to induce companies to save carbon dioxide.

In the EU, therefore, the discussions revolve primarily around the question of how strong fluctuations in energy prices can be avoided in the future. The European Commission wants to propose options for action in the coming week. It is conceivable that EU countries will work together when purchasing gas or at least create joint strategic reserves. The first directional decisions could be made in around two weeks at the next regular EU summit.

What is important here is how great the risk is assessed that there could be further sharp price increases in the future. Experts such as EU Energy Commissioner Kadri Simson currently expect prices to gradually fall from spring onwards. The global hunger for energy after the corona crisis is responsible for the current situation. Added to this are the shrinking gas supplies after the unusually cold winter, lower gas deliveries due to maintenance work on pipelines and a decline in gas production in Europe.