My CGTN TV: The growing EU v Russia asymmetry in energy trade. EU-USA nix oil/gas sanctions over Ukraine, fearing supply crisis.

I had a good live talk with CGTN TV hosts on my analysis of a growing “asymmetry” in energy relations between the EU and Russia.

Especially in natural gas, the EU is increasingly dependent on Russian supplies while Russia is decreasingly dependent on its EU market.

Under Putin, Russia and Gazprom have constantly worked not only to:

1. Build new pipelines to Europe (principally via the Baltic Sea-to-Germany) so as to detour its exports around Ukraine. This has enabled Putin to committ his present massive aggression there without risking delivery of Gazprom gas to its European markets west of Ukraine. However it has also worked to
2. Diversify its market for natural gas away from Europe. This includes 10-15-years of projects to build new major pipelines to China and Eurasia and plans for more still (e.g., Power of Siberia 2 pipeline), and to build large-scale LNG export terminals, owned mainly by Russia’s Novatek firm, in its Arctic regions and on Sakhalin Island in the far east. This gas is relatively sanctions-proofed in that it can be delivered by ship to any world market, though it mainly goes to Asia where LNG prices are generally highest.

I explain that this growing asymmetry is precisely why the USA-and-EU have NOT included energy sanctions in their package retaliating for Putin’s present war on Ukraine.

Oil is a case in point. Europe receives generally about 1.5 million barrels per day (mbpd) of Russian oil via the Baltic Sea, 0.8 mbpd via the Druzhba Pipline across Belarus-Poland and Belarus-Ukraine; and anouther 0.4 mbpd from the Black Sea region. However, unlike natural gas, in the case of oil, the EU is part of the OECD/IEA’s system of Strategic Petroleum Reserves (SPR), which, by treaty, requires each member state to retain 90-days equivalent of all its oil imports in storage for use in any supply crisis. This is the core of the “one global barrel” international cooperative oil security system centered on the open oil market. (See my blog GlobalBarrel.com).

Natural gas, is however a different story. The EU has NOT established an analogous “Strategic GAS Reserve” (SGR) system for Europe, (nor has the OECD/IEA), and this has left Europe especially vulnerable right now to any reduction in its contracted gas flows from Russia’s Gazprom.

I said, this is why myself (see: My Op-Ed | Die Ukraine als „Zentralbank“ für europäische Energie | Ukraine as “Central Bank” for European Energy) and other energy experts have proposed creating such a SGR system. Recently, President Von der Leyen has said the EU Commission will consider doing so. (see: “EU leaders will consider creating a strategic gas reserve” [TVPoland explains I proposed this in August: “Ukraine as a Central Bank of Energy”] also: EU Energy Crisis: Germany & EU long ignored US warnings that Putin can weaponize gas, attack Ukraine – On David Foster’s Roundtable, London )

When Putin cut off Gazprom supplies across Ukraine and into Europe in 2006, 2009 and 2014 for significant periods of time, the EU experienced carrying degrees of energy crises. However the EU failed to take this obvious step of establishing an SGR system. though it did carry out various needed energy-security measures such as market liberalizations, establishing reverse-flow capacities for existing gas pipeline systems to aid in re-distribution of gas to the neediest states during any crises, and etc.

In the event of any complete cutoff of absolutely needed Russian gas flows in the current Russian was on Ukraine, US and Qatari LNG would make a big contribution to mitigating the effects; however perhaps 1/3 of supplies simply could not be replaced, sparking a need for EU-wide gas rationing. There would not only be soaring prices but a physical energy-shortage crisis.

I explained, further some of my analysis that, in the interview, Germany’s poorly planned, ideologically driven “Energiewende” (green Energy Transition) is a case of “renewables fundamentalism” that included the continued, irrational permanent closing soon of the last three of its 17 nuclear plants. Germany has no way to substitute for these, plus for coal plants it has promised to shut by 2030 except by increasing natural gas supplies. In my view, the plan of Habeck, the current Green Party Energy and Economy minister, to cover fully 2% of the entire land mass of Germany with wind mills is not only patently impossible, but is also no solution. There is, as I explained, no currently existing, generalizable (universally applicable) “grid-scale storage” technology. Hence, the German Green Party knows it needs natural gas as the flexible backup to generate electricity when the wind does not blow. Meanwhile, the SPD party of Chancellor Scholz, has for decades been addicted to Russian gas supplies, such as the infamous Nord Stream 1 and Nord Stream 2 pipelines it has championed to allow Russian gas to go directly to Germany instead of via Ukraine to the EU market.

For more on these topics, and my analysis of the Ukraine and EU energy crises, visit my blog http://GlobalBarrel.com and my twitter @twodtwod and LinkedIn sites.

By: Tom O’Donnell 23-24 February 2022, from Berlin twod@umich.edu