Why has Russia stopped gas supplies to Europe? | Inside Story

europe's energy crisis gets worse russia has shut down the north stream one pipeline once again it says it's because of maintenance reasons but european leaders have rejected that so how will europe cope with this unprecedented gas shortage this is inside story [Music] [Music] hello welcome to the program i'm hashem much of the continent of europe is facing a difficult winter ahead russia has once again shut down the crucial north stream one gas pipeline to germany it's raised fears of shortages and possible blackouts in the coming months russian authorities say the pipeline was shot to repair a leak but european leaders have rejected this accusing russia of weaponizing energy in response to the ukraine sanctions russian state-owned firm gas probe says a german company is ready to carry out repairs but siemens energy has denied this saying it has not been approached german chancellor olaf schultz insists his government is doing all it can to avoid the crisis we will survive the time until then because we have made timely decisions in the past months to store gas because we are putting coal-fired power plants back into operation and this is why we can say now and at this point we will get through this winter the north stream one carries russian gas by supplies to europe it stretches a thousand two hundred kilometers under the baltic sea from the russian coast to northeastern germany russia had already significantly reduced gas exports through the pipeline it prompted a nearly 450 percent jump in european gas prices compared to this time last year but the kremlin has repeatedly blamed western sanctions for the crisis let's bring in our guests in moscow stanislav mitrovic a leading expert of the national energy security fund and a researcher at the moscow-based financial university in paris and sophie cobo global research scholar at the center on global energy policy and the former head of gas analysis at british petroleum in berlin ben harris founder and editor-in-chief of bne in telenews and the former moscow bureau chief for the daily telegraph welcome to the program stanislav by turning off the tap is russia weaponizing gas to retaliate against western sanctions i think this is the retaliation against western sanctions because from the position of moscow authorities and authorities in russia they see that previously trade with russia was weaponized by the west russian reserves of central bank were basically nationalized or stolen as it is considered in moscow then the european union decided to impose trade embargo on russian coal after that there was a decision to put embargo against russian oil and this embrago will come and pray into practice on the face of december 2022. so from the point of view of russia this trade was already weaponized and especially when full of honduran head of european commission just couple of days ago mentioned that european union needs to impose price cap on russian gas and price cap goes completely against the contract the contract you cannot see how european union really follows the contract if european union really wants to pose a price tag on russian gas so from russian position it's like yo we are doing the same thing that you have done you have weaponized the trade now we are doing the same thing why we should honor the contract if you don't honor the contract as well and so do you see this link between the fact that the decision to shut down the north stream one uh coincide coincides with the g7 decision to agree on a price cap for uh russian uh oil supplies do you see the inter connection between both of them i think this is the case and i think this is also a retaliation or trying to maintain pressure on gas prices because uh gas prices have been coming down a little bit since the peak that we observed last week last week we went to 100 the last perimeter btu which is equivalent of 580 dollars per barrel which is extremely high so i think there has been a strategy from the russians point of view to always maintain pressure on gas prices in europe in order to inflict pain economic pain to the european union and i think this has been visible since the beginning since the invasion of ukraine by russia we have seen first uh the episode of the request to pay uh in rubble and then some countries have been cut in particular poland and bulgaria and then some other consumers were cut then there has been in june the progressive reduction of flows of natural gas from nursing one because it's very important to explain that this further reduction of norsken one flaws that we are seeing now this is just the last episode of an episode which has been lasting over the past three months it started in june and since june we have seen a progressive reduction just before this episode we were already at an 80 reduction so what has been shot over the past few days is just the last 20 percent okay of just one pipeline which was still flowing towards europe ben anyway the gas flows through the north stream one were at somehow 20 of what they used to be before which was about 55 billion cubic meters a year still we're getting a sense of panic which starts to reverberate across europe particularly in germany indeed um i mean to follow up on on ann's point this is um i think designed to keep the the prices up uh and that's the weapon that putin has here is inflicting economic pain on europe um the interestingly gastro made the announcement that it was shutting down north stream one completely after the markets closed and the prices had been falling last week but when they open again tomorrow i'm sure that they'll bounce up again and that's been the strategy is to keep the prices high and ironically although north stream one has been shut down and has led to fears of uh shortages in uh in europe particularly here in germany um it should be noted that the gas tanks reached 80 full uh already last week a full month ahead of schedule so there's not actually a shortage of gas in fact we're slapping the middle of what average the um there should be going into the the heating season but the threat is that the north stream one stays off that there's no imports throughout the winter that the tanks themselves are too small to get through the whole winter without continued imports that germany will run out of gas after two months if there's no more imports and so putin is just literally turning the gas on and off to keep the tensions extremely high because at any point you can turn them off and keep them off and then precipitate huge energy prices you know at his choosing we're completely over the barrel on this one um and they just shut them off again with no date for when they're going to resume but um they're going to have to resume if europe is not going to go into a massive crisis that will involve rationing that will involve industry slowing down that will involve huge costs to the consumer stanislav using gas as a weapon to further extract more concessions from the europeans isn't this something that could backfire on the russian government on putin in particular because you're getting a sense that many people now are saying russia could not be taken seriously in the near future as a genuine partner when it comes to gas and oil supplies well let's see the line of events here first of all it was said by european union officials that they don't see russia as a partner anymore in energy sphere they already imposed embargo on russian coal embargo against russian oil is on the way and it was said officially that european union will not be buying russian gas soon it was not there was not a specific date announced but still it was understandable that europe doesn't really want to be dependent on russian gas and frankly it started even several years ago because of the whole green agenda and because reliance of american lng and stuff like this so i suppose after all this was said by european union in moscow in kremlin people said that basically we have already lost to this market we are not welcome to there anymore in this case why should we help europe to pass through uh winter time just to wait until the union adopts a new package of sanctions and stops gas flow from its phone side in this case why should we wait i think that's kind of a game strategy and if you look back at the previous sanctioned packages they really didn't seem to work out as was intended by the uh by the west because they ended up creating this uh crisis prices were skyrocketing and putting ended up having massive energy uh revenues if you look at the new decision the new push to move forward with the price cap which means that if you sign up to this agreement then you have you can only purchase the russian oil at or below the price cap is this something that could work do you see many countries going with this this is this is very uncertain because i think a lot of countries are currently benefiting from access to cheaper russian oil i mean you have to understand that you know the oil that is coming from russia right now is not sold at market prices at brent prices for example but it's sold at a discount so therefore the prices are already lower but let me take a step back i mean the reasons for the sanctions at the very beginning where in order to lower the revenues that russia is getting on oil on gas and on coal in order to basically not give the impression that the west was financing uh the war in ukraine because you know the the revenues from all these cells are being used to in order to basically manufacture or sell weapons in order to basically bombard ukraine so this is exactly the point of the sanctions lower the revenues that russia is basically using and therefore maybe at the end of the day i mean it's a question of stopping the war this is what you know the west wants to do now i agree with only one thing which is that western leaders have been a little bit naive in thinking that by saying that you know they would put in place all these sanctions russia would just continue to deliver the gas per the contracts and in fact russia has done completely the inverse and has taken the lead because right now russia is in the driving seat in terms of deciding how much gas it wants to send to europe and there is always a good excuse not to actually respect the contracts i mean either there is a problem with the north stream one pipeline or people have not wanted to pay in rubble so they are very eager to actually shift the blame towards the west for the problems that they are creating with the cells or the deliveries of natural gas towards towards europe so this is very important to remember that because why is europe particularly in pain and other countries as well this is because the markets global gas markets are extremely tight and this is why we are seeing these completely crazy prices of natural gas and also power i mean we have also a power crisis because the high gas prices are translating into very high power prices as well as naturally as is at the margin and that's why european leaders are trying to change the power price mechanism in order to basically decouple the price from you know cheaper resources such as nuclear renewable hydro forms a very expensive price of resources like coal or natural gas ben it seems that this is a an uncharted territory for everyone the europeans in the west in particular would like to put more sanctions more restrictions to see that putin does not benefit more from the revenues to direct those revenues towards the war in ukraine but at the same time with the new price cap any importer who is looking forward to have or seeking some services like insurance cover in europe will have to abide by the price cap but do you see countries like china india and many others who enjoy what is happening right now adhering to this agreement the oil price cap mechanism will not work unless china and india in particular come on board and every indication so far is that they're not going to um in so much as the first process in getting this insurance is you need a safety certificate and there's an international organization a group of 11 sub-national organizations that offers these certificates and india explicitly not only ignored the rule uh to not issue these certificates it went out and certified the entire russian fleet of comflex and they have said that india said this week that they would only come on board with the oil cap uh price scheme if everybody else did which is to say that um they're suggesting very strongly that they're not going to get on board so you know you talk to the industry people they're they're very skeptical that it can be made to work however even our partial implementation of this um this uh mechanism would put india in a position where they can go to russia and say well look the you're getting less than market prices from other countries um if we're going to buy crude from you then let's talk about the price again and as and said they're already getting uh russia is already selling at a discount and so that discount may get even deeper which will cost russia money but my take on this is actually putin doesn't care about the profitability of the business he just wants to make sure that his revenue comes in sufficient in order to keep his budget balanced and in order to give some goodies to the russian people to stop them becoming unhappy and then him facing domestic political problems so i i think it's going to be um a budge job but i mean all said and done we have to admit that the sanctions regime has not worked i mean it was as ann said designed to take away russian revenue and so he couldn't fight the war and exactly the opposite happened and now we're in a stage where the west is trying to come up with you know sanctions on the sanctions and secondary sanctions they're basically a bunch of band-aids trying to make sanctions that's already gone into place work and to deprive russia of that revenue and as i say i think that this is um this oil price cap scheme is exactly that and it's not going to work very well because the danger here is that you actually cause a new spike this time in oil prices jp morgan said prices could go to 308 dollars a barrel which is twice the all-time record so this one could backfire as well and the finance ministers when they released the details on friday basically said very little and moreover they said specifically they said nothing about what price the cap is going to come in at okay russians have just said anybody who joins that scheme we're simply going to stop oil deliveries and then we have a oil crisis on top of the gas prices stanislav what's next for president putin because for many years russia by positioning itself as a clean energy supplier for europe had massive political and financial leverage that leverage could be lost now with what is happening with turning off the tap yes i think this market can be lost and it was again it was said officially by the european union officials they said we are saying goodbye for russian gas we will not be dependent on russian gas we will stop buying russian gas and frankly speaking that started several years ago and the events in ukraine only has accelerated this trend nothing more as for what putin is going to do next i think he will still try to game with not stream one and possibly there will be an intrigue concerning transit via ukraine because this transit via ukraine can also be stopped but in this case russia will have difficulties in sending gas to transnistria you know the autonomous region of moldova that is for russian region and if this transistor loses gas in this case there could be some military events from ukrainian side and moldovan side so this is still an intrigue what's happening with with ukraine route as for torque stream route and then that goes through belkan countries it's also an intrigue here because russian authorities decided to support hungary and particular prime minister victor orban in selling more gas to hungary with lower prices but hungary definitely decided to resell this gas to its neighbors primarily to austria and slovakia so again it's intrigued well putin allows this gas to flow to hungary than to be reselled towards the country okay and germany as we speak now its storage facilities are now 84 full which means in theory they should be fine for the time being what about the mid-term and long-term implications i mean first of all you don't get through winter with just storage i mean this is very important you need to have certain amount of imports and then on top of that you are using storage because you need to cover the heating demand during winter which is essentially coming from the residential sector and then during the period april october you are going to refuel storage so if we are reducing natural gas from russia further rather if russia reduces its exports to europe even further there will be a problem going going after 20 the winter 2020 to 2023 because we will need to refuse the storage even if we are fine this winter the problem is that the global gas market is going to be tight until the end of 2025 2026 why is it tight because there is relatively little lng export capacity coming to the market and russia is putting pressure on europe right now precisely because it knows that there is relatively little alternative sources available besides what europe has already managed to secure so there is a lot of energy coming to europe right now at a very expensive price but it's very doubtful that you can get even more and on top of that there is a constraint in terms of the infrastructure ben one of the one of the uh fallouts from the war in ukraine and you have the sky rocketing oil prices compounded with the inflation now the german chancellor has agreed on a 65 billion dollars relief package would it be enough to tackle those problems particularly in inflation which is becoming more of a global uh issue here this is the big problem and i think it's one people are not paying enough attention to is the cost of this war it's proving already to be enormously expensive the the germans just put through a new 65 billion euro package of support for industry and the people but this is on top of the 60 billion they've already spent italy too has already spent 52 billion dollars if you look across europe the bill is already up to about 300 billion dollars euros and this is before the winter starts because they're gonna have to start subsidizing these heating bills for the population or as bear brock the foreign minister said there's going to be demonstrations protests in berlin about the rising costs i mean in the uk um heating bills have gone up tenfold and on top of that you've got the inflation now inflation in the uk in the uk just went over 10 for the first time in 30 years and the rest of europe are all just about to go into double digit and this is going to get worse as these heating bills go up and i think this is uh putin's strategy he's just going to inflict so much pain to make the prices of the consumers that much painful to the point where they protest and just yesterday in prague there were 70 000 people on the streets protesting against the energy prices the cost of living demanding cheap cash and they're going to put pressure on the government in order to come to some sort of arrangement to come you know a ceasefire with russia and as i say i think as as the winter goes on um this is going to get worse and we're looking at oh it's going to cost by the end of the easy season maybe a trillion euros and i'm not sure europe has the money to pay for that certainly doesn't want to it's going to be extremely painful stanislav isn't putting in a way or another pushing people to look for alternatives renewables and for the europeans in a way or another to move forward to new suppliers they could do business with for the longer run it was already announced by european union that european union is trying to find another supplier the european union is going to turn for renewables which was already set so what we mean for putin is just a particular time to act right here right now because in several years from now maybe from in in five years from now there will be plenty of gas in the world and free lng not so expensive lng this white necessary to move right here right now why wait these five years why stop this gas cooperation with europe when it is convenient for europe probably it's better to stop this cooperation when it is less convenient for europe in order to gain some uh political results probably putin really thinks that could become a kind of amendment of political courts in different european countries especially after social unrest like what happened in prague just recently probably people will just call for their politicians to find uh find a compromise with russia probably based on the laws of ukraine something like this just fascinating the way the geopolitics of energy are trying now to play out globally stanislav mitrovic and sophie kobo ben harris i really appreciate your insight but unfortunately we'll have to leave it there and thank you two for watching you can see the program again anytime by visiting our website al for further discussion go to our facebook page that's facebook.com forward slash aj inside story you can also join the conversation on twitter our handle is at aj inside story from hashim albara and the entire team here in doha bye for now [Music]

Channel: Al Jazeera English

Views: 405,389

Keywords: Al Jazeera, Al Jazeera English, EU latest news, Europe energy crisis, Europe gas supplies, Germany, Nord Stream 1 gas pipeline shutdown, Russian gas, al jazeera, al jazeera english, al jazeera live, al jazeera video, aljazeera, aljazeera English, aljazeera english, aljazeera latest, aljazeera live, aljazeera live news, aljazeera news, eu sanctions on Russia, europenews, inside story, ukraine war, european union

Id: ZNAhwYkW48o

Length: 24min 30sec (1470 seconds)

Published: Sun Sep 04 2022

Reddit Comments

[u/TheRamJammer]

Winter is already here, just waiting a few more months for it to freeze over.

[u/Flat_Difference3782]

Europe are run by complete morons.

[u/[deleted]]

Oof now Russia is in a position to impose sanctions huh