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Gas shortage: How Germany can turn Putin's gas game

2022-06-25T08:48:51.686Z


Russia's gas flow follows economic warfare - and so far Germany looks weak. But with a ban on buying Russian gas for local companies and a European cartel, that is likely to change.


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Natural gas pipeline: So far, gas throttling has been economically profitable for Moscow, at least in the short term

Photo: Marijan Murat / dpa

Hopes that Russia will kindly supply enough gas while Germany and Europe slowly ditch Russian energy have unsurprisingly been dashed.

Now all political and legal possibilities must be seized to bring alternative amounts of energy onto the market in the short term.

Consumers need incentives to reduce gas consumption by 10 to 20 percent.

Germany must invest in European solidarity in order to be able to rely on energy supplies from partner countries in the event of a crisis.

And Europe needs to be strategically smarter to face Russia's economic warfare.

The gas supply situation in the EU has worsened.

As of today, Russian supplies have fallen from the usual three billion cubic meters of gas per week to less than one billion cubic meters.

The flow of gas follows the logic of economic warfare;

long-term gas supply contracts no longer play a decisive role.

By cutting supplies, Russia can achieve several strategic goals.

An energy undersupplied Europe risks massive social, economic and political upheaval and is therefore more vulnerable to blackmail.

In addition, the latest supply cuts can be interpreted as a direct response to European support for Ukraine.

In general, the timing of the delivery restrictions and the differentiated selection of the countries and companies affected suggest that Russia has targeted the solidarity and political stability of the EU and wants to put it to a hard test.

Moscow's demand for payment in rubles, although this contradicts the sanctions, and to justify the lower gas flows through Nord Stream 1 with technology sanctions, while at the same time offering to gladly deliver more via the Nord Stream 2 pipeline, which Germany has stopped, suggest this that gas deliveries are also used as a Russian tool in the sanctions fight.

And finally, it is not unlikely that the latest cuts are intended to slow down the surprisingly rapid storage filling in the EU so far.

Because once the storage facilities are full, the threat of a partial or complete delivery stop becomes less frightening.

From a Russian point of view, the costs for this are manageable.

The whole thing is even economically profitable, at least in the short term.

Due to the shortage and the associated uncertainties, European gas prices have increased almost tenfold compared to the long-term average.

A price ten times higher and a third of the quantity delivered still promises gas revenues more than three times higher than before the war.

It is unclear how long Russia can restrict the supply volumes without running the risk of having to close gas fields due to a lack of alternative transport options.

But the room for maneuver for Russia is large enough to pursue strategic goals through targeted, possibly temporary attacks.

Clever ideas abound, there is a lack of decisiveness

The dilemma can only be overcome if the EU uses all available options to become less dependent on Russian supplies as quickly as possible.

Thanks to gas storage facilities that are already half full, the procurement of LNG, which has started quite successfully, and an incipient decline in demand, it seems at least conceivable that Europe will be able to supply itself without Russian gas as early as this winter.

There is no shortage of clever suggestions on how to achieve the goal.

But in terms of decisiveness in the necessary uncomfortable measures to reduce gas demand and in the urgently needed coordination of cross-border cooperation mechanisms.

What should be done now:

  • It is necessary to reintroduce all existing power plant capacities that are being held back from the market by government regulations as quickly as possible, so that gas-fired power plants in Germany and its neighboring countries are pushed out of the electricity market.

  • Household customers should get a bonus if they manage to significantly reduce their gas or electricity consumption compared to the previous year.

  • Industrial customers should be given incentives through supplementary auctions and other procedures to save gas volumes purchased over the long term as far as possible, as recently announced by Federal Economics Minister Robert Habeck.

  • Germany could and should use its financial resources to procure replacement gas quantities on the world market together with its European partners and to fill the storage facilities.

    A clever joint purchasing procedure could not only reduce costs, but also help to ensure the cross-border gas flows that are essential for Germany and other countries in the event of a crisis.

  • As soon as the EU is sufficiently armed, the next step should be to ban European companies from buying Russian gas.

    With this new sanction, she can free the companies from their old contracts and thus free them from liability to Gazprom and its shareholders.

  • Then a European chief negotiator should take over the business and take over gas purchasing for the entire EU.

A possible move would be to offer Russia to sell the EU a desired quantity (about a third of the usual annual supply) at a mutually acceptable price (about the same level as before the aggressive war).

If the offer is rejected, there will be a complete stop to delivery.

In fact, Russia would be faced with the decision of not being able to sell any more gas in Europe today and in the future.

Or to continue using your existing infrastructure and continue to make profits – which, however, would be reduced to an economically 'normal' level by the EU.

What matters now is that the West accepts and resolutely shapes the political gas game that Russia has imposed on it.

Otherwise, markets and politics as playthings will have little to counter Putin's destructive strategies in the gas conflict.

Source: spiegel

All business articles on 2022-06-25

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