🇷🇺🇪🇺 Gas trade between Russia and Europe has had its ups and downs for over half a century but has brought tremendous benefits to both sides.

Europe’s energy policy ambition of a fast shift to a carbon-neutral economy for which natural gas is undesirable and merely a near-term, stop-gap solution is a threat to Russia-Europe gas trade.

In these circumstances, Russia is likely to intensify its efforts to diversify away from its dependence on the European gas market both in terms of methods of gas delivery and target markets, writes Vitaly Yermakov, expert with the Centre for Comprehensive European and International Studies, National Research University Higher School of Economics.

https://valdaiclub.com/a/highlights/the-rude-awakening-europe-is-struggling-to-secure-/

#Gas #Europe #energy #NordStream2

📷 AP Photo/Petr David Josek

@valdai_club — The Valdai Discussion Club

🏗🇪🇺 Nord Stream 2 could provide Europe with cheaper and greener energy. What stands in the way?

In October, the German Federal Network Agency suspended the certification process on the pretext of the recently-completed Nord Stream 2 pipeline not being compatible with the energy legislation in place. Swiss-based Nord Stream 2 AG is planning to open a subsidiary in Germany to comply with the EU and German energy regulations.

While it is too early to speculate whether this move could further stall the start of Nord Stream 2, it has given rise to numerous statements on the project’s (negative) impact on the European gas market and the future of natural gas transit via Ukraine.

The polarisation of public opinion regarding the pipeline’s impact has fundamentally altered purely technical discussions regarding the project. This had led to a misunderstanding of the key commercial reasons for starting the project and the future impact of the pipeline on European consumers. 

The politicisation of energy often prevents decisions from being made based on facts rather than incorrect perceptions, writes Valdai Club expert Danila Bochkarev. 

https://valdaiclub.com/a/highlights/nord-stream-2-could-provide-europe-with-cheaper-gas/

#Corporations_and_Economy #NordStream2 #Europe #energy #gas

valdai_club — The Valdai Discussion Club

⛽️ What will happen if Russian gas flows to Europe stop?

Amid hostilities in Ukraine and the avalanche of the European economic sanctions against Russia, Russian gas has been flowing to Europe, including the transit via Ukraine, without interruption.

For now, it looks like Russia-Europe gas trade has been in the eye of the storm (an area of calm weather at the centre of a strong cyclone). But can it remain immune to the greatest geopolitical crisis of this century?

📝 Writes Vitaly Yermakov, Expert with the Centre for Comprehensive European and International Studies, Higher School of Economics.

🔗 Russian gas exports to Europe: In the Eye of the Storm

#EconomicStatecraft #Europe #sanctions #gas

@valdai_club — The Valdai Discussion Club

⛽️🐲 For China, happiness is multiple supply sources.

A new agreement with Russia providing for additional 10 bcm of natural gas sourced from Russia’s Far East (evidently from Sakhalin) serves to diversify China’s gas import portfolio with a relatively low-priced option (compared with LNG).

Even the lowest estimates for China’s future gas needs foresee an incremental 175 bcm of demand through 2030. Most forecasts for China’s domestic production converge at around 300 bcm in the 2030s, suggesting that around half of the demand increment will be met with domestic output. But this still leaves at least around 90 bcm of additional import requirements.

The deal thus comes at an opportune time from China’s perspective, with rising gas demand in China and in the context of highly volatile global LNG markets. 

A new reality in which Europe is going to reduce its energy dependence on Russia as soon as possible makes China a clear winner, writes Vitaly Yermakov, Expert an the Centre for Comprehensive European and International Studies, HSE University.

🔗 Russia and China Expand Their Gas Relationship: Causes and Implications

#Asia_and_Eurasia #China #gas

@valdai_club — The Valdai Discussion Club

🛢🏰 Summertime, and the living usually gets easy in the gas business: demand is down, and prices decline. Not this summer in Europe, though.

Since the beginning of June 2022, European gas prices spiked 70 percent, to $1,600 per thousand m3, the level almost seven times higher than a year ago. The key reason is the reduced flows of Russian gas to Europe: instead of “normal” 300 million m3/day they dropped to about 70 million m3/day. 

This has tightened Europe’s gas balance and led to gas withdrawals from storage (instead of the normal practice of pumping gas into storage during summer), putting the program of refilling the European gas storage facilities before the next heating season in jeopardy.

If Europe and Canada are unable to find a face-saving compromise to deal with the sanctions mess over gas turbines now, by November Germany’s choice might become even more embarrassing: to let Nord Stream 2 flow or risk a full-blown gas crisis and super-high prices in the midst of winter, writes Valdai Club expert Vitaly Yermakov.

#EconomicStatecraft #Europe #sanctions #gas

@valdai_club

📍🚧 As a transportation industry, gas pipelines play a critical role within major economic regions: the US, China, the European Union and Russia.

The rest of the world is mainly connected with liquefied natural gas (LNG). It’s true that LNG produces 25 percent more greenhouse gas emissions, but only the Greens care about that.  

The sustainable operation of large pipelines requires reliable pipes, compressors (turbines), a warranty service, freedom of use, insurance, and much more, as contracts require it, or rather, the need for supplies. Conflicts over freedom of pumping between distant partners, non-contractual gas off-take, or uncertainty regarding the reliability of equipment can make the use of pipelines risky for the industrial or domestic needs of importing countries.

Russian pipelines have worked for a very long time and reliably. The EU's decision to halt pipeline gas supplies in the foreseeable future suggests a transitional period, during which both sides create a clear and enforceable relationship structure. Something similar is likely to work in the future for grain, fertilizer and other critical Russian exports.

In this context, the disputes in the summer of 2022 regarding the repair and delivery of a Siemens turbine from Canada for Nord Stream 2 are not so much a technical issue but a legal and economic one this would be a pilot project for the coming years.

The EU's intention to reduce overall gas consumption by 15 percent by March 2023 is probably feasible, but only if there is moderately cold winter, writes Leonid Grigoryev, a tenured professor at the National Research University Higher School of Economics.

#ModernDiplomacy #Europe #gas

@valdaiclub

🛢🚫 The situation with the Nord Stream clearly illustrates the degradation of the legal basis for Russia’s interaction with the countries of the collective West and the lack of prospects for the revival of fairly-conducted trade in the medium term.

The actions of the Canadian authorities and Berlin’s solidarity with its transatlantic partners, which artificially creates obstacles to the implementation of joint gas transportation projects, indicate the predominance of the political factor in the traditional trade and economic mechanisms of interaction between the Euro-Atlantic partners and Moscow.

Taking into account the significant rise in the cost of hydrocarbons, the failure of the “green transition” in Europe and the ongoing stagnation of Western markets, the leading circles of Brussels and Washington considered that the time had come to transfer responsibility for turbulence in the energy markets and dynamically accelerating inflation in key European countries to Russia.

At the same time, the strengthening mechanism of unfair competition in the EU natural gas market becomes obvious. Gazprom’s competitors, primarily among the American LNG producers, see their interest in presenting Moscow as an “extremely unreliable partner” that imposes long-term contractual “bondage” on fuel supplies to democratic countries, and they are only waiting for the expensive LNG, given the current spot prices.

Such trends will inevitably affect the cost of all elements of production schemes in key sectors for the global economy: agriculture, fertilizers, the chemical industry, transport, etc. Such forecasts are mutually unacceptable both for the leadership of Brussels, and for Moscow, writes Valdai Club expert Vyacheslav Dmitriev.

#EconomicStatecraft #NordStream2 #gas #sanctions

@valdai_club

🧣🏰 “War is coming back to Europe” is the new mantra. However, war didn’t come back just because of Ukraine.

There have been previous winters of war in Europe, linked to the bloody disaggregation of Yugoslavia. However, war in Ukraine, with all its geopolitical consequences, is a true game changer.

The sanctions taken against Russia by EU countries are generating a major “boomerang effect,” one which could lead to a global energy crisis. The shock will probably be felt by the EU economy this winter and afterwards.

It is therefore at this time that crucial political questions will arise regarding the expediency of the EU countries’ policy towards Russia, writes Valdai Club expert Jacques Sapir.

#Norms_and_Values #Europe #geopolitics #gas

@valdai_club

🌀'Geopolitics of Chaos' in the Energy Sector

On October 10, the Valdai Club hosted an expert discussion titled “Explosions at Nord Streams: The Geopolitics of Interrupted Energy Ties”, dedicated to the state of gas cooperation between Russia and other countries. The moderator was Ivan Timofeev, Programme Director of the Valdai Discussion Club.

💬 Aleksey Grivach, Deputy General Director for Gas Problems of the National Energy Security Fund, noted that until recently, relations between Russia and Europe in the gas sector were a vivid example of interdependence, an important aspect of which was mutual trust. This system not only served as a solid basis for bilateral trade, but also a constraint on unfriendly steps. “Now it is, if not destroyed, then certainly staggering, which opens the way for further escalation not only in the energy sector, but also in the field of strategic security,” the expert admitted.

💬 Evgeny Tipailov, Executive Director of the Institute for Interdependence Studies, outlined a number of factors and patterns that affect energy relations between Russia and Europe in the short and medium term. The first of these he called the "chaotisation of order". The ‘business as usual’ formula has ended, and the market is now waiting for the degradation of the legal landscape, the relativisation of contractual obligations, the growth of government interference, the erosion of the financial infrastructure and the zeroing of trust. The second factor is “arrhythmia in the energy markets”, a parallel acceleration and deceleration of a number of market processes. The third factor is the Americanisation of European energy policy, and the growth of American intervention. The fourth factor is the turn of Russian energy diplomacy to the East. The fifth factor is “energy homeostasis”, the desire of both sides, against the backdrop of energy hunger in Europe, to balance their position. The sixth factor is the reconfiguration of interdependence. For Russia, the key task should be to create a system that is as balanced as possible in terms of risks. Finally, the seventh factor is the “swan song of the dying world order”, a high probability of unpredictable events that could radically affect the commodity market and complicate forecasting.

💬 Alexey Gromov, Chief Energy Director of the Institute of Energy and Finance, called the Nord Stream sabotage a continuation of the “geopolitics of chaos” and an attempt to destroy the pipeline infrastructure as a field of opportunity for further cooperation. Analysing the prospects for Europe, he noted that it has every chance of persisting through the current heating period, although without much comfort. However, the question is what will happen next, given that European storage facilities were filled in the first half of this year mainly with Russian gas. It is not clear how the European Union will fill them next year without Nord Stream. It is also not clear how serious the risk of a complete cessation of Russian supplies is.

#EconomicStatecraft #gas #NordStream #NordStream2

@valdai_club

🚧 The three-year period of 2020-2022 has transformed the landscape of the global gas market. 

▪️ 2020 was marked by a global recession and a decrease in gas consumption due to widespread anti-COVID restrictions.

▪️ In 2021, there was a “perfect storm” of a price crisis in the EU gas market.

▪️ In 2022, the galloping increase in gas prices in the EU continued against the backdrop of Russia’s Special Military Operation in Ukraine.

▪️ Unfriendly countries imposed sanctions on the Russian Federation, and the Russian Federation took countermeasures. As a result, Russian gas supplies to the EU were significantly curtailed.

▪️ In September 2022, the Nord Stream 1 and Nord Stream 2 gas pipelines were destroyed in a terrorist attack.

The restructuring of the world gas market has begun (both in the regional and global dimensions), which will take years and lead to accelerated growth in the share of LNG in the world natural gas trade.

The changes that have begun in the global gas market fit into the process of transformation of the entire system of international relations and international trade.

This will result in a new structure emerging for the global gas market and a possible adjustment of the positions of key gas producers and consumers on a number of energy development issues, writes Evgeny Tipailov, Executive Director of the Institute for Problems of Interdependence.

https://valdaiclub.com/a/highlights/global-gas-market-a-new-state-of-aggregation/

#EconomicStatecraft #energy #gas

@valdai_club

💡🌏 Today, the global energy order that emerged after the energy crisis of the 1970s is undergoing structural changes.

It happens under the influence of energy transition policies, geopolitical conflicts, and the transformation of traditional economic relations; access to energy resources can be determined within the narrow framework of strategic and even military alliances.

These times of great upheaval present new challenges and opportunities for the Energy Club of the Shanghai Cooperation Organisation. The key challenge for SCO member states and associate partners is how to turn the organisation’s Energy Club into an effective institutional body for harmonising their energy strategies and strengthening energy security, given the rapidly changing global energy architecture.

In the context of the transformation of the global energy order, the issue of increasing the role of the SCO Energy Club in managing energy processes at various levels is more acute than ever, writes Shamil Yenikeyeff, Professor, School of International Affairs, Faculty of World Economy and International Affairs, Higher School of Economics.

https://valdaiclub.com/a/highlights/the-sco-energy-club-in-the-changing-global-energy-/

#Asia_and_Eurasia #energy #gas #oil #ШОС

@valdai_club