3 years ago

Russia comes to Europe's rescue amid energy crisis

Existing transit routes allow for bolstering supply from Russia as gas prices rise to a record high in Europe in recent days.

AP

Russian President Vladimir Putin attends a meeting on energy sector development at the Novo-Ogaryovo residence outside Moscow, Russia, on October 6, 2021.

Russia has the potential to boost natural gas supplies to Europe, where surging gas prices have ramped up pressure on consumers, the Kremlin said.

Kremlin spokesman Dmitry Peskov said existing gas transit routes allow for bolstering supplies before the new Nord Stream 2 pipeline that will carry Russian gas to Germany begins operating.

“There is a potential,” Peskov said during a conference call with reporters. “It all depends on demand, contractual obligations and commercial agreements.”

Europe’s soaring gas prices dropped on Thursday, a day after Russian President Vladimir Putin suggested his country could sell more gas to European spot buyers via its domestic market in addition to through existing long-term contracts.

Russian Deputy Prime Minister Alexander Novak said on Wednesday that getting Nord Stream 2 launched would quickly stabilise European energy markets, a statement seen by some in Europe as an attempt to prod regulators into moving fast to certify the new pipeline.

Asked about Novak's comment, Peskov replied that Russia could boost supplies along existing routes.

The 27-country European Union imports about 90 percent of its natural gas needs. Prices are lower in the United States, which produces its gas.

Sharp price fluctuations

Speaking during a Wednesday government meeting on energy issues, Putin said that Russia could sell more gas to European spot buyers via his country’s domestic exchange, noting that sharp price fluctuations are bad for Moscow, too.

But he added that Russia’s state-controlled gas giant Gazprom also needs to fill its own stores to serve domestic needs in anticipation of winter.

Putin said that rapidly growing demand amid the global economic recovery from the pandemic has driven Europe's rising gas prices. A cold winter and less power generation by alternative sources also were factors, he said.

Gas prices in Europe rose to a record of over 116 euros per megawatt hour ($134 per MWh) in Europe on Tuesday, more than six times the price at the start of the year.

Prices came down to $120.7 per MWh on Thursday, still painfully high, following Putin’s remarks.

Reasons aside from the Russian supply issue include strong demand from Asia for available supplies of liquid natural gas, which can move by ship instead of fixed pipeline, and a cold winter that left European reserves depleted.

The tight gas market combined with low reserves has led to concerns that Europe will see shortages if the coming winter is colder than usual.