It all started with a turbine. A huge steel colossus that pumps gas through pipelines. One such device used in the now infamous Nord Stream 1 pipeline was sent to a factory in Canada for repair earlier this year. But as a result of subsequent Western sanctions against Russia, Ottawa refused to return the turbine.
And so, nearly a month and a half ago, on June 14, Gazprom said it had no choice but to cut gas supplies sharply. Overnight, that supply dwindled by nearly two-thirds. Much to the concern of the EU countries, which are heavily dependent on that gas. The last stream dried up two weeks ago. This time because of “annual maintenance”. One of the lifelines of European society seemed to have been cut off.
On ration
fast forward to last week. On Thursday, the continent breathed a sigh of relief, deliveries have resumed. European politicians feared that Putin would keep the pipeline closed even after July 21, when the maintenance had to be officially completed. In order to take further hold of Europe in the economic war that Russia has been waging with the West since the invasion of Ukraine. Without Russian gas, Europe would inevitably be in serious trouble this winter. Many companies are then obliged to ration and possibly even households will be left out in the cold.
That disaster scenario has been averted – for the time being, at least. However, the gas crisis has awakened European leaders. On Wednesday, the European Commission launched a plan that can oblige member states to save gas if necessary. Even if they themselves will be warm next winter.
Member States therefore have to give up some of their sovereignty in the field of energy supply – a big taboo in Brussels.
How did it get this far? Has the danger really passed? And how is it going? NRC list the most important questions.
1 Is Europe again assured of gas supplies?
It keeps biting nails. According to the Nord Stream operator, 40 percent of normal volumes now flow through the pipeline. This brings Europe back to the level it was before the annual maintenance. Whether the other 60 percent will ever make it again is highly questionable. The turbine is now on its way to Russia, after Canada granted a temporary sanction waiver at Germany’s request. But he won’t be officially reinstated until September. According to Putin, it also depends on how well the maintenance has been done. In addition, according to him, the manuals are missing.
It is even questionable whether the current 40 percent will continue to flow. Putin said this week that another turbine will be sent to Canada for maintenance at the end of this month. Pesterig added that if Europe doesn’t want all that uncertainty, it should give it permission to open Nord Stream 2. The opening of that brand-new pipeline, which follows the same route as Nord Stream 1 and was intended to double the gas supply to Europe, was previously announced by the German government. on hold as punishment for Russian invasion of Ukraine.
2 Will energy prices finally fall?
On the day that the gas supply of Nord Stream was resumed, energy minister Rob Jetten (D66) kept an eye on the price. “I look about every half hour,” he confided to journalists during a briefing on Thursday. But the price did not fall much, and there was no sign of great relief on the part of the minister. “You can say there is no acute gas shortage now, but due to the high prices, the social effects remain very significant.”
Gas remains shockingly expensive, about 150 euros per megawatt hour (1,000 kilowatt hours). That is five times as high as a year ago and thirty times as high as two years ago. “The gas price is expected to remain high for a long time to come and the restart of Nord Stream will not change that,” he said energy specialist Hans van Cleef of ABN Amro. For all deliveries up to and including April 2024, more than 100 euros per megawatt hour must already be paid in futures contracts.
An important alternative to Russian natural gas is liquid LNG, which is delivered by tanker. “Asian demand for that gas is now somewhat lower. The economy is growing less rapidly and China is using more coal. If it starts running again there, supply and demand will not immediately rise. It takes years before the production and transport of LNG is scaled up.”
Not only taking a hot shower and heating the house remains expensive for gas customers. The oil price also seems to remain high, which is noticeable at the pump. “The world is doing less well economically and the oil price used to fall immediately,” says Van Cleef. “Now you can also see that decline, but due to the relatively low supply of oil, it will soon stop. Russian exports are much lower, other major gas producers cannot scale up and countries like Libya, Venezuela and Iran are sidelined for various reasons.”
3 Why is Russia still supplying gas via Nord Stream?
Russia insists it is a reliable supplier. In Putin’s eyes, Gazprom is still fulfilling its contractual obligations despite the cut back on deliveries – although Gazprom has now informed its largest customers that it is introducing a so-called force majeure clause in its contracts. This is a legal provision that allows you to keep potential claims for damages for breach of contract at bay in the event of force majeure.
But Europe no longer trusts Russia. Ursula von der Leyen, president of the European Commission, and the German government called Putin’s turbine story “an excuse”. According to them, Putin uses energy as a weapon to pressure Europe. Von der Leyen on Wednesday: “There are plenty of other turbines that can be used. That turbine from Canada is really not the only one that fits.” Moreover, Russia could also take care of the missed deliveries via Ukraine. Pipelines also run along it.
Gas experts therefore think that Putin would benefit little from shutting off Nord Stream completely. If he does, he forfeits his trump card for when the most difficult period for Europe arrives: the heating season. It is better for him to turn off the tap slowly but surely in the run-up to winter.
In addition, a partial gas stop now earns him a lot of money. Gas prices have risen extremely, so that Russia, even if it sells less gas, still earns billions. The International Energy Agency calculated that since the February invasion, Gazprom has earned three times as much from oil and gas sales as it normally would in an entire winter.
4 Is the urgency to save gas now diminishing?
That’s not likely. On Wednesday, European Commissioner Frans Timmermans emphasized the importance of being prepared for every scenario. “It is not easy to predict what Putin’s next move will be. But it is clear that he will continue to try to divide us and hurt us.”
At the same time, the partial reopening of Nord Stream does not make the discussion about the savings plan for Brussels any easier. On Wednesday, the Commission came up with the plan to oblige Member States, if necessary, to save at least 15 percent in gas.
The initial reactions to it were extremely negative. Especially in southern Europe, which is hardly dependent on Russian gas. “Spain, unlike other countries, has not lived beyond its means in the field of energy,” Spanish climate minister Teresa Ribera said on Wednesday, with a thinly veiled sneer at Germany. Poland, which has been fiercely critical of the German-Russian gas romance for years, is also not in favor of forced austerity measures.
A first discussion will take place next Tuesday, when European energy ministers come to Brussels. But the fact that a direct deficit has been eliminated for a while makes the chance that Member States will already agree now is small. Tricky EU discussions are traditionally only settled when Europe is really up to scratch. Fresh Russian gas, some EU diplomats fear, is now, in the middle of summer, putting skeptics back to sleep. There is a considerable chance that painful procedures will still be necessary in the autumn.
5 Will the gas crisis lead to new insights in The Hague?
Preparations for “the most extremist scenarios” continue, energy minister Jetten emphasized on Thursday. “It is completely unpredictable how long these deliveries will last, so the pressure on the European gas market remains high.”
In preparation, the Netherlands must store as much gas as possible. According to Jetten, this is going well, both in Norg in Drenthe and Bergermeer in North Holland. “In the coming weeks we will see whether we can fill Norg to 100 percent and how far we can fill Bergermeer further.”
Part of that storage room is reserved for Gazprom and that part remained empty last year. “We still have sufficient subsidy available to also fill the Gazprom part, so that we can exceed the now planned 68 percent.”
But if the Russian power goes completely off, some countries will be in trouble. Does European solidarity mean that the Netherlands, with its full storage facilities, must supply a lot to other countries? According to Jetten, that is not too bad. According to the agreements, the Netherlands must show solidarity with Ireland, Belgium and – the biggest headache file – Germany. “Belgium and the Netherlands are already supplying plenty to Germany. We meet the obligations to the maximum via the LNG terminals in Zeebrugge and Rotterdam and also from the gas field in Groningen. The infrastructure to Germany cannot handle more than we supply now, so that solidarity is in order as much as possible.”
A version of this article also appeared in the newspaper of July 23, 2022