European gas prices shot up about a quarter on the leading gas exchange in Amsterdam after the decision by Russian state gas group Gazprom on Friday to suspend deliveries via the important pipeline Nord Stream 1 for longer. Gazprom points to technical problems. On Wednesday, the pipeline between Russia and Germany via the Baltic Sea was shut down for three days due to maintenance.
The price for a megawatt hour of gas was about 26 percent higher at 268 euros. In mid-2021, the gas price was still around 20 euros per megawatt hour. Incidentally, the European gas price fell by almost 40 percent last week.
russian bullshit story
Oil and gas expert Ronald de Zoete calls the increase a ‘reaction to the unexpected failure of natural gas to flow through Nord Stream 1’. According to De Zoete, the closure is anything but a technical defect and is a political weapon in Putin’s hands. A team from Siemens is now on its way to Russia to assist in solving the technical problems. Russia claims that the longer shutdown is the result of a leak within a compressor, according to Siemens that cannot be a reason to stop the supply of gas – after all, there are several compressors.
For De Zoete the story is clear: ‘Putin is playing a game, he wants to make a fist against the price ceilings’. And by that, the energy expert is referring to European attempts to agree on a maximum price for Russian gas, which is a difficult ambition to achieve because the EU is not just about it.
50 more tankers to go
In the meantime, the Netherlands is stockpiling gas, building LNG terminals and importing gas from the US. Looking at the LNG ships, De Zoete thinks that the Netherlands is now at 50 percent of what it needs. ‘We can get to fifty percent. A little later, after three or four years with some extra natural gas from the North Sea: we are on the right track. But we’re not there yet. Natural gas has yet to be purchased.” According to De Zoete, this involves 8 billion cubic meters, which is equivalent to 50 LNG tankers. ‘Other countries have to supply those ships to us, I think the price will remain high for a long time to come.’
There are fears that Gazprom will not resume gas deliveries via Nord Stream 1 at all. Moscow previously cut gas supplies to 20 percent of maximum capacity. Gazprom also cited technical problems as the reason for this. Russia still sends gas to Europe via a route through Ukraine, but that is not enough to compensate for the halted deliveries by Nord Stream 1.
Political arm squeezing Putin
European leaders see turning off the Russian gas tap primarily as a political means of pressure. The European Union has imposed numerous sanctions against Russia over the war in Ukraine, and this would be in retaliation.
The earlier announcement that Nord Stream 1 had to close due to necessary maintenance was received with skepticism in Europe. Klaus Müller, the boss of the German energy supply regulator Bundesnetzagentur, found that explanation incomprehensible from a technical point of view.
“An end to Russian gas supplies to Europe means that the German economy and that of the eurozone will immediately fall into recession,” said an analyst with investment bank Liberum Capital. European stock markets are expected to open with significant price losses on Monday due to concerns about the energy crisis.
European countries are taking measures to help households and businesses with soaring inflation and energy prices. For example, Germany announced on Sunday that it would allocate more than 65 billion euros for additional support measures. Measures were also taken this weekend in Sweden and Finland to deal with the energy crisis.
The Amsterdam stock exchange seems to start the new trading week with a significant loss on Monday. Concerns over Europe’s energy supply have resurfaced after Moscow’s decision to shut down a major gas pipeline between Russia and Germany for longer than planned. According to the Russian state gas company Gazprom, this is due to a technical defect and because Western sanctions are making maintenance of the pipeline more difficult. The European gas price shot up more than 30 percent on Monday morning.