To the Surprise of Nobody: Russia to Cut European Gas Supply

July 25, 2022

New York Times:

On the eve of a European Union emergency meeting on cutting natural gas consumption, Russia’s state-owned gas monopoly said Monday that it would slash gas deliveries to Germany, as President Vladimir V. Putin once again showed his unpredictability and his power to inflict pain on the bloc for backing Ukraine.

E.U. energy ministers are set to meet Tuesday to weigh a 15 percent reduction in gas use, specifically because of fears that the Kremlin could create artificial shortages threatening heat and power generation over the winter. As if to confirm such worries, Gazprom, the Russian company, on Monday said it would cut by half the flow through its North Sea pipeline to Germany to just 20 percent of capacity — less than a week after resuming limited flows following a maintenance shutdown.

Western officials dismissed the Russian explanation of equipment troubles — coincidentally or not, with German equipment — as nothing but a cover for its manipulation. “Based on our information, there is no technical reason for a reduction in deliveries,” the German Economy Ministry said in a statement.

Ursula von der Leyen, president of the European Commission, the E.U. executive branch, said last week, “Putin is trying to push us around this winter,” as she proposed that member countries cut gas use by 15 percent through next spring. The reduction is aimed at building up depleted stores and better positioning themselves for a possible Russian squeeze.

“This is exactly the sort of scenario that President von der Leyen was referring to last week,” her spokesman said on Monday. “This development validates our analysis.”

Below, Cartoonist Bill Mauldin in 1982, as concerns were growing over German dependence on Russian gas.

But as Western countries attempt to curb the flow of fossil fuel revenue that supports Russia’s government, its war machine and much of its economy, their moves have required a daunting combination of agreement among each other, placating public opinion in their democracies and steering global markets. News of Gazprom’s latest supply cut drove the price of European gas futures up 12 percent on Monday; the price, previously below 30 euros per megawatt-hour, has soared in the past year, at times topping €180, or $184.

The autocratic Mr. Putin has shown since invading Ukraine in February that he has plenty of leverage on his side, particularly in tightening or loosening the energy spigot, and can use it at his sole discretion. He has also demonstrated his knack for keeping adversaries guessing and off-balance, with his government often sending contradictory signals.

Deutsche Welle:

Russia supplies gas to countries throughout the EU, and many in eastern Europe are even more dependent than Germany, which acquires roughly 50% of its gas from Russia.

But the German market has long been the jewel in the crown for the Russian gas industry. According to Russian customs data, Germany took just under 20% of all Russian gas exports in 2020, comfortably making it its biggest customer.

Pipes for gas

In 1955, West German Chancellor Konrad Adenauer visited Moscow to establish diplomatic relations between the new Federal Republic of Germany and the Soviet Union. A trade agreement followed in 1958 and by 1960, bilateral trade between the countries was booming.

In the 1960s, the astonishing wealth of Russian oil and gas resources was becoming apparent. Demand for German-made large diameter pipes soared as a mammoth energy business dawned for the Soviets.

West Germany had started providing pipes for the Druzhba pipeline (“Friendship Pipeline”), the world’s longest oil pipeline linking Russia with much of eastern Europe, which eventually came into operation in 1964. However, the Kennedy administration in the US was spooked by the Soviet Union’s growing energy sector and managed to push through, via NATO, an embargo on pipe exports from Germany to the Soviet Union.

However, by the end of the decade, West German Chancellor Willy Brandt’s Ostpolitik policy was opening up the country’s relationship with its eastern neighbors. That paved the way for a historic deal between West Germany and the Soviet Union in 1970, which saw West Germany agree to extend Transgas, an extension of the Soyuz gas pipeline, through what is now the Czech Republic into the southern German state of Bavaria.

In exchange for the gas, West Germany would supply pipes as part of a much wider arrangement known as “pipes for gas.” Gas imports from the Soviet Union were paid with steel pipe exports in the other direction.

By 1973, Russian gas had begun to flow to West Germany, the same year as it began coming to East Germany, which was part of Europe’s East bloc and a satellite state of the Soviet Union.

Several commentators, business leaders and academics have identified that 1970 deal as a significant fork in the road of the Cold War, as it established a mutual basis for economic cooperation between Russia and western Europe.

German imports of Soviet gas rose steadily throughout the 1970s, as various more deals were struck to increase supply. The oil crisis of the mid-1970s caused countries like Germany to further diversify towards natural gas as a source of energy, and the Soviet Union profited.

Germany’s relationship with Russian gas has been a perennial source of controversy in the US.
 Starting with the embargo on pipe exports in the early 1960s, several US presidents were concerned by Europe’s growing dependency on the energy source. In the 1980s, President Ronald Reagan repeatedly tried to convince Germany and other European countries to reduce the amount of Russian gas they imported.

It was to little avail, however, as the business relationship was clearly seen as beneficial for both sides. By the time the Berlin Wall came down in 1989, the Soviet Union accounted for around one-third of all gas demand in West Germany. In terms of volume, Russian gas supplies to Germany had increased from 1.1 billion cubic meters in 1973 to 25.7 billion cubic meters in 1993.

Geopolitical tension

In the 1990s, Gazprom, the Russian state natural gas company, became increasingly interested in gas deliveries to Europe that bypassed Ukrainian territory, both because of Ukraine’s poor gas infrastructure but also for geopolitical reasons. The Yamal pipeline, which hit full capacity in 2006, connects Siberian gas fields with Germany via Belarus and Poland.

Then came Nord Stream 1, a pipeline that would transport gas directly from Russian territory to German territory via the Baltic Sea, bypassing all countries in between. The agreement was signed in 2005 by then German Chancellor Gerhard Schröder and Russian President Vladimir Putin, and it opened in 2012.


2 Responses to “To the Surprise of Nobody: Russia to Cut European Gas Supply”

  1. It would be better for Europe to assume that Russian gas no longer exist and make plans how to go on if it really never existed at all. It is a problem that Russia is cutting of gas but it is not the end of the world. It will hurt Russia more then it will hit us. Without the export of gas Russia will be without a major source of foreign currency it needs to survive.

  2. gmrmt Says:

    Isn’t Putin just making it more desirable for Europe to ally with Ukraine and do a quick massive stomp on Russia to make any possibility of a Russian victory out of reach? Putin likely won’t survive such a loss and a new government would be more biddable.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: