Does the war in Ukraine have an impact on the supply of Russian gas to Europe?

Despite the cascade of Western sanctions against Russia in response to its invasion of Ukraine, one thing has not been affected so far: Russian gas flows to Europe and the funds to pay for it.

Europe remains heavily dependent on Russian gas, which provides around 40% of its needs, and now fears that Russian President Vladimir Putin will use it in retaliation against sanctions. But Russia, which pumps gas through pipelines that cross Ukraine and other Eastern European countries, needs revenue, perhaps more than ever.


What is the status of this mutual dependence?

WAS THERE A GAS SUPPLY INTERRUPTION DUE TO THE WAR?

So far no. Russia has delivered gas to Europe to fulfill long-term contracts, according to buyers such as Uniper and RWE in Germany and traders in the Baltics.

But since last year, Russia has delivered only the contracted volumes, saying no buyer has requested additional volumes and that it itself does not have much reserve gas. This caused prices to spike as, in the past, Russia usually delivered additional supplies. Prices also rose because other major producers struggled to deliver more gas amid tight global markets and growing demand due to the economic recovery from the pandemic.

WAS THE RUSSIAN GAS THAT CROSSES UKRAINE TO EUROPE AFFECTED BY THE WAR?
No. Volumes of Russian gas delivered to the Slovak border, after traveling about 800 miles through Ukraine, have actually increased since the start of the war, according to data from the Slovak gas transmission company Eustream. Spot market gas prices have risen sharply, making Russian gas, which is largely sold through long-term contracts, more attractive to European buyers, analysts said.

Ukraine has banned some cross-border gas trading activities, but said it would not restrict the flow of Russian gas to Europe. Inside Ukraine, however, some secondary distribution pipelines for domestic consumption suffered damage from shelling and airstrikes, according to the country’s gas pipeline operator, Gas TSO of Ukraine. In a statement, it said it had been forced to cut off supplies to several regions, leaving hundreds of thousands of people without gas.

WHAT WILL HAPPEN TO THE RUSSIAN NORTH STREAM 2 PIPELINE PROJECT NOW THAT GERMANY HAS FREEZED IT?
Courthouses are likely the next step for Nord Stream 2 promoters, who may try to challenge German Chancellor Olaf Scholz’s decision last month to suspend certification of the pipeline. The project would have doubled the delivery capacity of the massive existing Nord Stream 1 undersea gas pipeline between Russia and Germany. The $11 billion Nord Stream 2 project is an offshore conduit along the same path between Russia and Germany. It’s finished, but unless it’s certified by Germany, it’s likely to sit unused, slowly rust away in the Baltic Sea, and turn into a loss for its owner, Russian energy giant Gazprom, as well as for the five Western energy companies that shouldered its costs.

Resuscitating the project would require rebuilding trust between its main sponsors – the Russian and German governments – which German officials say is unlikely as long as Putin remains in the Kremlin. In what would amount to a dramatic about-face, Germany’s economy ministry is working on a new pipeline assessment that could conclude it endangers, rather than contributes to, security of supply German energy.

WHAT ABOUT NORTH STREAM 1? WHY WAS THIS PIPELINE PROJECT NOT TARGETED WITH SANCTIONS OR STOPPED?
Nord Stream 1, which has been delivering Russian gas for more than a decade, is currently the lifeline for German gas. The lion’s share of Russian gas comes into the country through this pipeline, so stopping it would be a blow to the German economy. Nord Stream 2 was different because it was not yet in operation and so far Germany has not needed additional gas supplies. Gazprom has argued that it wants to build Nord Stream 2 to supply all German gas directly under the Baltic Sea rather than dealing with transit pipelines through Poland and Ukraine. He has repeatedly accused Ukraine of stealing gas, which Kiev has denied.

WESTERN NATIONS IMPOSED SANCTIONS ON RUSSIA. WHY DIDN’T RUSSIA FIREBACK BY CUTTING OFF WESTWARD GAS SHIPMENTS?
The Kremlin said it would react to Western sanctions, but did not specify how. But he has no immediate interest in cutting off gas shipments, as that would deprive Russia of much-needed revenue and accelerate moves by Western countries to wean themselves off Russian gas. For decades, the Kremlin has sought to present itself as a reliable gas supplier. Late last year, when Belarus threatened to cut pipelines crossing its territory in response to Western sanctions against Minsk, Moscow was quick to reassure European customers that it would honor all present and future deliveries.

IS GERMANY PLANNING TO EXTEND THE LIFE OF SOME OF ITS NUCLEAR POWER PLANTS?
Germany’s three remaining nuclear reactors, which provided 12% of its gross electricity output in 2021, are expected to be shut down this year. The country had decided to abandon nuclear energy after the Fukushima disaster in Japan in 2011.

But German Economy Minister Robert Habeck recently raised the possibility of letting the remaining reactors operate longer.

The technical, legal and political obstacles would be formidable and nuclear could not completely replace Russian gas. Extending the operation of nuclear power plants would force the German parliament to change the existing law, which would be opposed by the Green party.

Two German nuclear power plant operators – E.ON and RWE – have expressed skepticism about operating beyond December 31, telling Reuters their plants will run out of fuel by the end of 2022. However, a Another operator, EnBW, said it was open to considering the possibility.

In the meantime, Germany is considering ways to reduce its dependence on Russian gas, including speeding up the construction of terminals to receive non-Russian liquefied natural gas, or LNG, and postponing the dismantling of coal-fired power plants whose closure was planned. . In recent months, it has increased its use of coal.

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