New Times,
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Putin thinks he’s called Europe’s bluff – and he may be right

Amid Western sanctions, Russia’s state-owned energy giant Gazprom has suspended all deliveries to Poland and Bulgaria.

By Ben van der Merwe

Even since Vladimir Putin’s troops invaded Ukraine in February, Europe’s leaders have agonised about whether to forgo the Russian gas upon which their economies depend. On 27 April Russia took that decision out of their hands.

Russia’s state-owned energy giant Gazprom suspended all deliveries to Poland and Bulgaria. The company blamed those countries’ decision to rebuff its demand to be paid in roubles rather than euros. That major German and Austrian distributors spent the next few hours scrambling to sign up to Russia’s terms is evidence enough of who has the upper hand, but Europe’s vulnerability owes as much to politics as economics.

EU efforts to form a gas buyers’ cartel, first mooted in 2014, have come to naught. In its absence, Hungary and Slovakia (dependent on Russia for 78 and 86 per cent of their gas, respectively) were quick to signal their willingness to pay in roubles even before the latest showdown.

Without such a cartel, Europe’s threats to cut off the gas as part of sanctions on Russia were never truly credible. The EU has instead opted to approach weaning itself off Russian gas as a years-long project. An immediate cut-off, by contrast, would be calamitous. German economists estimate that a sudden halt to Russian gas would cost the country 400,000 jobs and hurl the country into a recession more damaging than the downturn resulting from the pandemic.

“This is most definitely a warning to the Germans,” says John Lough, an associate fellow at the foreign policy think tank Chatham House. “In my mind, it’s no coincidence that it happened the same day the Germans finally committed to supply heavy weapons to Ukraine.

“The Russians probably think of Germany as being a weak link, so gas is a very useful weapon. They want to disrupt the Western alliance and, if necessary, inflict enough harm on European countries that they use their weight to persuade [Volodymyr] Zelensky to put up the white flag.”

[See also: How Europe is dependent on Russian gas]

Neither Poland nor Bulgaria is likely to be thrown into an immediate crisis, despite relying on Russia for 50 and 90 per cent of their gas, respectively. Bulgaria’s gas stockpiles are currently equivalent to around three weeks of Russian imports, while Poland has enough for three months, according to the New Statesman’s analysis of data from EU regulators GIE and Entsog.

The greater challenge will be to replenish these reserves by autumn. The EU and US have trumpeted the potential for liquefied natural gas (LNG) to provide a bridge out of Russian dependency, owing to the fact that it can be transported without pipelines and therefore supplied by friendlier governments. Yet LNG requires its own infrastructure — specifically, regasification terminals at the point of import, feeding into a normal network of pipelines. These terminals can be found in abundance in Spain and France, but Poland has just one and Bulgaria none.

Bulgaria is likely to rely on gas from Azerbaijan, which began flowing last year, as well as its contract with Greece’s sole LNG terminal. That terminal has been operating at just 15 per cent of its technical capacity since the start of April. Were it to maximise its output it could make up for Bulgaria’s lost Russian gas twice over.

Poland is in a tighter spot, despite having access to its own terminal and, from 1 May, one in neighbouring Lithuania. Those two terminals can only raise production by 23 per cent, equivalent to just a quarter of the gas Poland had previously been receiving from Russia. Until October, when a gas pipeline to Norway is scheduled to become operational, Poland is likely to rely on the generosity of its EU neighbours.

That generosity, and Bulgaria’s ability to secure and pay for either LNG or Azeri gas, is neither eternal nor perpetual. That Europe has failed to co-ordinate gas purchases under conditions of relative abundance offers little hope that it will do so under conditions of much greater scarcity.

[See also: Profits from fossil fuel energy power Russia’s war machine, and Ukraine suffers]

“Gas prices are going to rise,” says Lough. “We’re going to have what we politely call in the UK a ‘cost-of-living crisis’, but it’s going to be on a much more significant scale. The Russians are well aware that it will have a disproportionate impact on those parts of our societies that are less well-off. They know that our societies are vulnerable in this respect.

“But just as they point out that our sanctions hurt us and so may not be sustainable, how sustainable is it for Russia to cut off gas? It would pretty quickly put Gazprom into an absolutely dire position, and put the Russian economy under additional stress. Russia has to hope that the pain it takes is not as big as the pain it’s inflicting on the other side.”

Tipping that balance of economic misery in the EU’s favour will require a level of intervention and co-operation that the bloc has not yet shown during this confrontation, but which was briefly glimpsed in its initial response to Covid-19. In particular, the rationing of gas and apportionment of belt-tightening measures will need to avoid the raw German power politics seen during the Eurozone crisis if similar centrifugal forces are to be avoided.

At the same time, the EU may be forced to turn its back on other values. The bloc is already courting the Gulf’s energy-rich dictatorships, complicating the war’s moral narrative and dealing another blow to the EU’s normative foreign policy aspirations. A partial turn to coal in the short-term is also unavoidable, given the mothballing of nuclear plants and the slow adoption of renewable energy in many member states.

Since the invasion of Ukraine, international sanctions on Russia have resembled not so much an economic war as a firing squad. That is all set to change. As in any war, victory will require certain values to be compromised as others are resuscitated. If there are two ideals the EU needs today, it is those on which it was founded — technocracy and solidarity.

[See also: Net zero is the energy answer to Russian aggression]

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