By Dr Sandeep Tripathi and Dr. Kirill Sablin
Russia’ s gas supply to EU before February 2022
For a long time Russia has been a key supplier of natural gas to the EU countries. PJSC Gazprom is the only operator using the pipeline for gas supplies. The company uses long-term contracts with the condition “take-or-pay” as the basis of its activities in the European gas market. Total volume of gas exports from the Russian Federation to European countries were 174.3 billion cubic meters in 2021 [Gazprom Export – https://gazpromexport.ru/]. In particular, in the last four months of 2021 (from September to December) company pumped 25.6 billion cubic meters of gas to the EU (e.g. September 6.3 billion cubic meters; October 6.4 billion cubic meters; November 5.9 billion cubic meters and December 7 billion cubic meters [Actual gas supplies for the EU – https://www.gazprom.ru/investors/disclosure/actual-supplies/2021/].
PJSC Gazprom exported 11.4 billion cubic meters of gas to the EU in the January and February 2022. It is important to note that the Russian company increased gas supplies to Europe in the February 2022 if compared to export volumes for the same period last year. In the February 2022 exports increased compared to the previous year, in particular, to Italy – by 135.5%, to Poland – by 41.1%, to Bulgaria – by 26.4%, to Slovenia – by 53.7% [Gazprom increased gas exports in Europe in the February / Russian Newspaper – https://rg.ru/2022/03/01/gazprom-v-fevrale-uvelichil-eksport-gaza-v-evropu.html].
Since war and till now- Volume status
After the conflict began the government officials in Russia used the term–special military operation– on the 24th February as PJSC Gazprom continued to export gas to the European market. The company continued to fulfill its obligations under long-term contracts after the start of a special military operation and the imposition of anti-Russian sanctions according to representatives of the company. Moreover, during the special military operation, the decline in exports to the EU countries was lower than in general since the beginning of 2022.
From the February 24th to the April 26th, 2022 about 20.5 billion cubic meters of gas were sent to the EU through pipelines according to the official information of gas company. This is about 20.5% lower than the same period in 2021. After the April 26, 2022, data on gas export volumes to the EU are not available. Pipeline gas from Russia comes to the EU via the Nord Stream (capacity is 55 billion cubic meters per year), the Yamal-Europe gas pipeline (capacity is 33 billion cubic meters per year), through the gas transport system of Ukraine and through Turkey via the Turkish Stream. Under a long-term contract in 2022 Russia must supply at least 40 billion cubic meters of gas via the gas transport system of Ukraine under the “take-or-pay” scheme. Russian gas supplies were not interrupted for a single day until the end of April 2022.
Gazprom reduced gas supplies via the Nord Stream gas pipeline by 40% in June explaining this by the difficulties of repairing equipment due to sanctions [Gazprom has reduced gas production and reduced supplies to non-CIS countries – https://www.kommersant.ru/doc/5444481]. The problem for the EU is that it will not be able to quickly phase out Russian gas for several reasons. The first reason is the presence of infrastructure obstacles. For instance, the construction of terminals for receiving liquefied natural gas on the coast of the Baltic Sea. Secondly, the transition to low-carbon technologies and the “green economy” was not so fast and requires significant investments. The third reason is linked to relations within the EU and a more loyal position of some European countries towards Russia. For instance, Hungarian Prime Minister V. Orban said that the imposed sanctions against Russia were not working, and “Europe shot itself in the lungs”.
Complete facts and figure of Russian gas after the payment system is locked
President V. Putin signed a decree on March 31, 2022 (Decree on a special procedure for the fulfillment of obligations by foreign buyers to Russian natural gas suppliers – http://kremlin.ru/events/president/news/68094) on the transfer of payment for gas supplies to unfriendly countries into rubles after the introduction of new sanctions by the USA, EU, UK and Canada. The scheme provides that the buyer opens a special account in Gazprombank, to which he credits the currency and then he exchanges it for rubles and transfers them to PJSC Gazprom. As a result, according to the Russian vice Prime-Minister A. Novak, by the May 2022 about half of gas importers opened special accounts in Gazprombank to pay for supplies in rubles [Novak: about half of Russian gas importers opened accounts in rubles – https://www.vedomosti.ru/business/news/2022/05/19/922675-okolo-polovini-importerov].
Does EU have viable alternative if Russia stops gas supply?
Over the past week, Russian state-owned energy giant Gazprom has decided to cut off 20% of its capacity due to turbine issue. Russian President Putin has signaled a warned tone that gas flows via the Nord Stream 1 pipeline may be limited unless the sanctioned politics is resolved.
What are the options then?
- Liquefied natural gas from the USA and Qatar.
- Gas from Azerbaijan and Turkmenistan through Iran.
- LNG is for the middle-term and long-term perspectives. Azerbaijan – technical and economic difficulties.
- EU will have no choice except to cut energy consumption just because new sources of gas will not replace the Russian gas in terms of supply of volume and infrastructure.
If Russia stops in winter, ramifications of this in EU
EU will resort to saving electricity consumption and space heating. It will also force EU to the use of traditional energy sources (coal and wood) and Cutback of economic activity in some EU countries
This might lead to the high consumption of Liquefied natural gas. Overall, EU member states’ gas inventories have reached 52 percent of capacity, up from 43 percent at the same point in 2021
Dr. Sandeep Tripathi is Founder and President of Forum for Global Studies. Dr Kirill Sabin is an Associate Professor at the Department of Economics , Kemerovo State University, Russia.