ENERGY SECURITYGermany Responds to Putin's Weaponization of Russian Gas
Germany is pumping Russian gas back into Poland as Gazprom cuts supply to the EU. As Russia plays its hybrid war games with an increasingly divided EU, the new front appears to be the Yamal-Europe gas pipeline.
Yamal-Europe, Europe’s longest gas pipeline, usually transports Russian natural gas overland to — rather than from — Germany. Now it has spent the last week sending mainly Russian gas from Germany back to Poland. The purpose? To meet a shortfall as temperatures drop to -10 degrees Celsius (14 F) and Russia cuts gas supplies.
Observers have warned that Russian President Vladmir Putin could use energy as a weapon should the troubled gas pipeline Nord Stream 2 (NS2) go ahead. He is, in fact, already doing so.
On December 21, Russia halted the supply of gas via Yamal-Europe, immediately spooking markets. The wholesale price in the benchmark Dutch TTF contract for January deliveries rocketed to €160 ($185) from €100 on December 9. High gas demand in Asia is also fed the spike in prices. Consumers in Europe will feel some of the increases in 2022, adding to rapidly rising inflation there.
According to the Germany Network Agency, two-thirds of the gas imported into Germany comes from Russia and former Soviet countries via the Yamal pipeline, which runs across Russia, Belarus, Poland and Germany. Its capacity is 32.9 billion cubic meters of gas per year. In 2020, 23% of Russian gas reached Germany via Belarus and Poland along its 4,107-km (2,552-mi) length.
Worryingly, the gas price on futures markets is also rising. January 2023 prices are up to €90 per megawatt hour, a clear signal that the market expects European gas supplies to be low by the end of this winter and that little gas will come from Russia over the summer to replenish supplies before winter next year.
Putin accuses Germany
Russian President Vladimir Putin put the blame for Gazprom’s lowered transits on importers in Germany and France and their failure to sign long-term supply contracts. They could, he said, ease the price pressure by ending delays to the Nord Stream 2 (NS2) gas pipeline that runs from Russia to Germany under the Baltic Sea. The pipeline has been caught up in strong geopolitical headwinds.
“They are sawing the branch they are sitting on,” he told Russian media.
Gazprom is meeting long-term contracts, but has virtually stopped selling gas on the spot market and has not been reserving additional capacity in the pipelines or fully using what it has already reserved.
Why it is doing this is open to speculation. On the one hand, a sympathetic observer might point to the fact that, with Russia in a cold snap, Gazprom may prefer to keep its gas for domestic needs.
