After Russia went to Europe’s aid and offered to increase gas supplies to the region amid rising prices, experts said one thing was clear: Europe is now largely at Russia’s mercy when it comes to energy, as warned by the United States.
Natural gas contracts reached new highs in Europe this week – and regional base prices rose by almost 500% this year – due to increased demand and reduced supply, which puts pressure on the energy sector as the weather gets colder.
Prices rose on Wednesday, reaching new highs before retreating after Russian President Vladimir Putin intervened, proposing to increase Russia’s supplies to Europe.
Market analysts say the move shows that Europe is becoming increasingly vulnerable to Russia, which is waiting for Germany to certify the controversial Nord Stream-2 pipeline project, which will bring more Russian gas to Europe via the Baltic Sea.
The $ 11 billion pipeline has now been completed, much to the chagrin of the United States, which has long opposed the project, warning for years during its construction that it would compromise Europe’s energy security and that Russia could seek to use energy as leverage.
The Obama and Trump administrations revived bipartisan views on the pipeline, and President Joe Biden also announced sanctions against the companies involved in the project, but they were lifted in May, which was seen as an attempt by the United States to restore relations with Germany.
“Energy blackmail”
“Europe has now remained Russia’s hostage to energy supplies,” said Timothy Ash, a senior sovereign strategist for emerging markets at Bluebay Asset Management, in his research report on Wednesday, calling the situation “incredible.”
It is clear that Russia has Europe (the EU and the UK) in an energy blockade, and Europe (and the UK) is too weak to resist and do something about it, “he said, calling it a form of” energy blackmail. ”
“Europe is shaking because it fears [that], as winter approaches, Russia will further unscrew the screws (disconnect power lines) and allow it to freeze until it gets a clear path and receives NS2 certification.”
Putin used Wednesday’s government meeting to propose increased supplies to Europe. He also blamed the region for canceling many of its long-term gas contracts in exchange for spot deals, saying the Kremlin was ready to negotiate new long-term gas contracts.
Many experts believe that Russia has deliberately suspended gas supplies to Europe in an effort to speed up Germany’s certification of the Nord Stream-2 gas pipeline. Russia has denied this, but Putin’s spokesman Dmitry Peskov denied on Wednesday that Russia had any role in Europe’s energy crisis.
However, Russian Deputy Prime Minister Alexander Novak said on Wednesday that the expected German certification of the controversial pipeline could help lower prices.
According to Ash, the earliest certification of Nord Stream 2 was “Moscow’s game”, adding that markets are really naive if they think that Moscow will do anything to mitigate the European gas crisis at any time before NS2 will certified “.
The German regulatory body has yet to show any signs of certification of the pipeline, saying on Tuesday that the pipeline must demonstrate that it will not violate competition rules by restricting which suppliers have used it, according to Reuters, and fines could be imposed if it pumps Russian gas. to Germany without obtaining the necessary permits.
Bilal Hafiz, CEO and head of research at Macro Hive, told CNBC on Thursday that he also believes Russia is taking advantage of the situation.
“I really think that Russia used this energy crisis to take advantage of the situation and try to speed up the use of the pipeline, and in a sense there is some evidence that they could have cut off pipeline supplies through Ukraine in order for Germany and the EU to speed up the pipeline. “Nord Stream – 2”.