The Nord Stream 2 pipeline is the key to delivering hydrocarbons between Russia and Western Europe. Photo: AFP
Western sanctions against Russia related to the Russian operation in Ukraine affect the financial, military, aviation, maritime and energy sectors of the Eurasian country.
However, the European Union (EU), one of the largest buyers of Russian energy resources, has not yet stopped imports of Russian gas, which for the time being continues to reach the countries of the bloc.
Meanwhile, due to the freezing of Russian assets abroad, the President of the Eurasian country Vladimir Putin has ordered that natural gas supplies to “non-friendly countries” be settled only in rubles, but the G7 countries refused to make payments in this currency and noted that payment in rubles “would constitute a unilateral and clear violation of existing contracts”.
For his part, Kremlin spokesman Dmitry Peskov emphasized that “free gas” does not exist, and the Kremlin is also “calculating” the possibility that Europe will not pay in rubles. But, What would happen if Moscow decides to turn off the gas tap?
“Heating and electricity will hardly be affordable anymore”
The EU imports about 40% of its gas from Russia, but the distribution is very uneven.
Germany, the bloc’s largest economy, is one of Russia’s top gas customers, buying 55% of all its natural gas last year, Economy Minister Robert Habeck warned against an immediate import stop could bring “supply bottlenecks next winter, economic slumps and high inflation”, while “hundreds of thousands of people will lose their jobs” and for many people “the way to work will be hardly affordable, as well as heating and electricity.
A period of three years to replace Russian gas in Italy
Italy, which would be one of the hardest hit economies, imports about 40% of its total gas purchases from Russia.
Italy’s Minister for Ecological Transition, Roberto Cingolani, stated that full replacement of Russian gas is “possible in a time horizon of at least three years”.
However, some imports could be replaced “in the short to medium term” by a range of measures, including increased gas imports from Algeria and coal- and oil-based power generation.
Other European countries affected
For its part, Austria obtains around 80% of its natural gas from Russia and is heavily dependent on its steady flow, particularly for its industry and power plants.
87% of the natural gas imported by the Czech Republic is of Russian origin, and to create reserves in case Russian gas runs out, the country bought up to 200 million cubic meters of gas. Slovakia is supplied 100% from this source.
The states of the bloc are already experiencing a rise in energy prices, causing households problems when it comes to paying their electricity billsalso in countries that are less dependent on Russian energy imports, such as Spain, where March is already the month with the most expensive electricity in history at an average of 283.30 euros per megawatt hour.
Consequences for Russia
Shutting down Russian gas exports to Europe would also have consequences for the Eurasian nation.
This is what the analysts at BCA Research point out Russia’s economy depends heavily on gas sales, especially with sanctions restricting its revenue streams.
Therefore, the country needs to export gas to “ensure internal stability”.said, among others, Mathieu Savary, chief strategist for Europe at BCA Research.
On the other hand, several experts warn against it If Russia stops supplying gas to Europe, oil prices could soar to $200 a barrel or even higher.
Look for alternatives to Russian gas
According to a report by independent think tank Brugel, Europe could weather the coming winter even if Russia halted imports.
It should be noted that such a scenario assumes that the EU is able to purchase unprecedented amounts of the gas before the shutdown, that market participants have sufficient incentives to buy and store it at high prices, and that the Gas is smoothly distributed between countries. Furthermore, The region must reduce gas demand by at least 400 terawatt hours, i.e. between 10% and 15% of annual demand.
With this in mind, European countries are looking for new ways to diversify their energy supply. Specifically, the bloc said it plans to cut Russian gas imports by two-thirds by the end of this year, gradually reducing its dependency by 2030.
At the same time, countries are looking for alternatives to reduce their dependency on gas. For example, Germany is examining the possibility of extending the useful life of three nuclear power plants that are scheduled to be decommissioned this year. It is also considering betting on Australian green hydrogen.
Are there other countries Europe can get gas from?
Naturally, Russia isn’t the only country in the world selling natural gas, but replacing Russian supplies won’t be that easy.
Ari Capital’s investment strategist Sergei Suverov explained that European nations will not be able to quickly replace Russian gas with gas from other exporters such as the US, whose capacity is limited, or Qatar, whose supplies are largely already under contract. to replace.
For his part, Otkritie Broker’s chief analyst Andrei Kochetkov said that there simply isn’t enough gas in the world for Europe to buy from other countries.
“If gas is diverted from Qatar, Australia or elsewhere, it means Asia will run out of gas,” the expert said, warning that high prices in the market “will ruin any economic growth.”
(Adopted from RT)