Russia’s “Headlock” on European Gas

October 12, 2021


After Russia rode to Europe’s rescue and offered to increase gas supplies to the region amid soaring prices, experts said one thing had become abundantly clear: Europe is now largely at Russia’s mercy when it comes to energy, just as the U.S. had warned.

Natural gas contracts hit new highs in Europe this week — and regional benchmark prices are up almost 500% so far this year — with heightened demand and a squeeze in supply putting pressure on the energy sector as the weather turns colder.

Prices seesawed on Wednesday, hitting new highs before retreating after Russian President Vladimir Putin stepped in, offering an increase in Russia’s gas supplies to Europe.

Market analysts said the move showed that Europe was increasingly vulnerable to Russia, which is waiting for Germany to certify the controversial Nord Stream 2 gas 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 annoyance of the U.S. which has long-opposed the project, warning for years during its construction that it compromises Europe’s energy security and that Russia could seek to use energy supplies as leverage over the region.

The Obama and Trump administrations galvanized bipartisan opinion against the pipeline and President Joe Biden too announced sanctions against companies involved in the project, but these were waived in May in what was seen as an attempt by the U.S. to rebuild ties with Germany.

‘Energy blackmail’

“Europe has now left itself hostage to Russia over energy supplies,” said Timothy Ash, emerging markets senior sovereign strategist at Bluebay Asset Management, in a research note Wednesday, calling the situation “unbelievable.”

″[It’s] crystal clear that Russia has Europe (the EU and U.K.) in an energy headlock, and Europe (and the U.K.) are too weak to call it out and do anything about it,” he said, calling it a form of “energy blackmail.”

“Europe is cowering as it fears [that] as it heads into winter Russia will further turn the screws (of energy pipelines off) and allow it to freeze until it gets its way and NS2 is certified.”

Putin used a televised government meeting on Wednesday to offer an increase in supplies to Europe. He also chided 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 contracts for gas sales.

Many experts believe that Russia has withheld gas supplies to Europe on purpose, in a bid to speed up Germany’s certification of the Nord Stream 2 pipeline. Russia has refuted this, however, with Putin’s spokesman Dmitry Peskov denying on Wednesday that Russia has had any role in Europe’s energy crisis.

Nonetheless, Russia’s Deputy Prime Minister Alexander Novak noted on Wednesday that the expected German certification of the controversial pipeline could help cool prices.

5 Responses to “Russia’s “Headlock” on European Gas”

  1. Keith McClary Says:

    Is the US offering Europe cheap long-term LNG contracts?

    • redskylite Says:

      Seems U.S prefers Asia as the main LNG market.


      Why U.S. LNG Is Going To Asia Instead Of Europe

      Most American gas has been going to Asia, where buyers have been more generous with prices.

      U.S. LNG has never been particularly competitive in most of Europe because of the availability of pipeline gas.

      Asia’s insatiable appetite for energy and its willingness to pay a premium for U.S. LNG because of the lack of major pipeline supplies, it is likely to remain as the ultimate market for U.S. LNG.

    • rhymeswithgoalie Says:

      Is the US offering Europe cheap long-term LNG contracts?

      I’ve never really understood the international oil&gas markets: By “US” do we mean “private companies that control oil&gas sources in the US”? With the transition away from fossil fuels, I would expect private companies to go after the highest payers (China, et al) to get whatever money they can while the gettin’s good.

  2. redskylite Says:

    Is this a good time to mention the Methane cut pledge ?

    Canada, Nigeria, Japan and Pakistan are among 31 parties to join a global pledge, led by the US and EU, to slash planet-warming methane emissions by 30% by the end of the decade.

    Also for interest, Pravda’s take on the European Gas situation.

    “Europe, keep calm and pay for Russian gas to stay warm”

    “This magic may soon get dispelled in the event it is not Gazprom that comes to the rescue of Europe, but let’s say, Norway or liquefied gas suppliers, who would be able to quickly redirect gas supplies to the shores of Europe when the price situation changes”

    • rhymeswithgoalie Says:

      Is there any penalty for not meeting pledges? Countries pledge stuff all the time (usually money toward some global need), and don’t meet them.

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