Tuesday, May 24

Biden threatened to cut gas supplies. Fear of the consequences.

Fears are rising in Europe over what will happen to gas supplies if the Ukraine conflict escalates.

A Ukrainian worker works at the Volovets gas plant in western Ukraine. If the conflict between Russia and Ukraine escalates into war, there is a danger that Russian gas supplies via Ukraine to Europe will be cut.

President Biden threatened on Monday that Nord Stream 2 will be stopped if Russia invades Ukraine, melder Washington Post.

Nord Stream 2 is a gas pipeline that will supply gas from Russia to Germany. The gas pipeline has been completed, but not approved for operation.

Biden made the threat after a meeting with German Chancellor Olaf Scholz. The newly elected chancellor reiterated in Washington promises that Germany will stand with Western allies if the Russians take additional territory in Ukraine. Questions have been asked about the Germans’ willingness to oppose the Russians, since they also want Russian gas supplies.

The Germans have not said outright that they want to help stop Nord Stream 2, a project that costs 97 billion kroner.

Biden said that if Russian tanks and soldiers march into Ukraine, they will “put an end to” Nord Stream 2.

Asked how he could be so sure, since it is the leaders in Berlin, not Washington, who have to make the decision, Biden told reporters that “I promise you, we will be able to do it.”

The United States and European NATO allies are threatening to impose severe sanctions on Russia if Russian forces attack Ukraine.

If this happens, both the US and the EU fear that Russia will use its energy dominance for what it is worth, and turn off the taps – in revenge. Russia currently accounts for about a third of the continent’s gas supplies.

A cut in Russian deliveries will therefore have very serious consequences for most European countries. Europe’s own gas reserves are already critically low – and at a time of year where cold still presents major challenges. Gas prices have been at a high level throughout the winter – which has led to major consequences for both households and companies.

The think tank Bruegel believes that the EU can withstand a short-term shutdown in gas supply, but that it will have major consequences if the cuts are prolonged.

For the United States, it is important to secure supplies from alternative sources if Russia were to halt its supplies to the continent. The US is working with the EU to find alternative supplies of natural gas.

The United States has promised to help by increasing exports of liquefied natural gas, or LNG, but there are many challenges – both in terms of production and technology – associated with deliveries of liquefied natural gas.

The man with the scythe rolling past a monument symbolizing the Gazprom Yamal pipelines transporting Russian gas to Europe becomes a double symbol of the uncertainty surrounding the Ukraine crisis and possible consequences for gas supplies. Photo: AP / NTB

What is Russia doing?

In addition to the fact that what happens with Nord Stream 2 is crucial, it is also important what Russia does. Experts believe it is unlikely that the Russian authorities will close the supplies completely – because the financial consequences will be very serious for themselves. Although Russia recently signed an important agreement with China on gas supplies, Europe is the main market.

Due to the dependence, European leaders will probably also avoid sanctioning Russian energy supplies directly.

Experts therefore believe that the most likely scenario will be that Russia will stop gas supplies passing through Ukraine. Russia supplied 175 billion cubic meters of gas to Europe last year through these pipelines, accounting for nearly a quarter of Europe’s gas supply, according to S&P Global Platts.

US diplomat Dan Fried believes it is less likely that Russia will close gas supplies that bypass Ukraine.

– If they go that far, it could lead to an irreparable break with Europe, and in that case Russia will have to sell the oil and gas elsewhere in the future, he believes.

Nord Stream 2

The pipeline under the Baltic Sea and through Poland, the so-called Nord Stream 2 pipeline, will be able to transport Russian gas directly to Germany without passing through Ukraine. Nord Stream 2 will thus be able to compensate for much of what was lost. But the gas pipeline via the Baltic Sea has long been a hot potato in German and European politics. The pipeline has been completed, but not yet approved for operation.

Germany’s coalition government has given mixed signals on whether Nord Stream 2 should be opened in the event of an open conflict.

US National Security Adviser Jake Sullivan recently told NBC’s “Meet the Press” that the Biden administration has cleared with its allies that Nord Stream 2 cannot be opened if Russia invades Ukraine.

Norway exports as much gas to Europe as we can.

– We are continuously in dialogue with the EU in the energy sector and this winter gave some companies permission to increase gas production, but we are approaching maximum capacity. We export what we can, said State Secretary Amund Vik (Labor) in the Ministry of Petroleum and Energy (MPE) to NTB at the end of January.

The United States has promised to help maintain Europe’s energy supply by increasing exports of liquefied natural gas, or LNG, should Russia invade Ukraine and reduce gas shipments. But US deliveries will be far from enough. Here from the MarkWest Bluestone Gas Processing Plant in Pennsylvania.

What can the United States do?

The United States is a major gas producer and supplier. But the United States is already sending record high levels of liquefied natural gas, LNG, to ships around the world, and has only the opportunity to help Europe.

– We are only talking about opportunities for small increases in American exports, and Europe will have an enormous need if deliveries from Russia stop, says LNG chief analyst Ross Wyeno.

Therefore, US authorities have consulted with gas producers around the world about whether they can increase production and send the gas to Europe. This applies to supplies of natural gas from North Africa, the Middle East, Asia – and also the USA.

US authorities are also in dialogue with countries about whether they can wait to buy new gas supplies – and send planned deliveries to Europe instead. This applies to countries such as Brazil and some countries in Asia.

Over the past month, two-thirds of US LNG exports went to Europe. Some ships on their way to Asia changed course to Europe because buyers there were willing to pay higher prices, according to the US credit rating agency Standard & Poor’s (S&P).

Enough liquefied gas?

The question is also whether there is enough liquefied natural gas in the world to solve the problems that will arise if Russia puts up a hard fight.

Experts agree that the problem will not be solved overnight anyway.

“Even if all the import facilities for receiving LNG gas could increase their capacity to the maximum, the amount of gas they received would only make up two thirds of what Russia sends via pipelines,” emphasizes Amy Myers Jaffe, CEO of climate policy at Tufts University.

There will also be practical challenges in distributing LNG gas to several countries in Europe.

Less Russian gas

Russia has fulfilled its long-term contracts to supply gas to Europe, but has sold less on the spot market and has thus not replenished the stocks it owns in Europe. – This is a reality, says Jaffe.

The reduction in spot gas deliveries has contributed to a sharp rise in the price of natural gas in Europe. The price increase has led to major challenges for both private consumers and companies, and the authorities around Europe have found themselves forced to stack subsidy packages to ease the burden.


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