The leaving week was rich with events. The President of Russia Vladimir Putin signed federal constitutional laws on entry into structure of Russia of the DPR and LPR and also the Kherson and Zaporizhia regions. In Astana there took place the Summit of the Meeting on interaction and measures of trust in Asia (SVMDA). A day earlier Vladimir Putin made a speech at a plenary session of the international forum "Russian Power Week". A subject of a panel discussion – "Global power in the multipolar world".
This action which was taking place in the Moscow Arena will be remembered by a spirit of owners. Vladimir Putin reminded that Russia – one of key participants of the global energy market, is among world leaders in indicators of extraction of hydrocarbons and power production. "Despite the sanctions pressure and diversions on infrastructure, we don't intend to yield the position", - the president said and added that communications in power will be with those who are interested in it, the correspondent of The Moscow Post reports
The Russian President began with the fact that called an acute crisis what occurs in world economy and the fuel and energy complex (FEC). Price stability is lost, supply and demand are debalanced. Vladimir Putin pointed to subversive activities of certain participants of the market, called diversion on main gas pipelines the most dangerous precedent. I mentioned terrorist attack of the Ukrainian intelligence agencies on Krymsky Bridge in this row and atomic terrorism of the Kiev mode. And also I told that the USA roughly imposes to the European countries the LNG which considerably is inferior at the price to the Russian pipeline gas.
Ball on side of the European Union
But it was necessary to notice that in relation to Europe Vladimir Putin's performance was in general conciliatory on tone. The Russian leader suggested the countries of the West not to refuse cooperation. I told that Russia is ready to deliver energy resources to Europe during cold weather on the survived branch of Nord Stream. "Want — let will just open the crane, and all. We in limit nobody", - Putin said.
The president added that the power of the survived gas pipeline Nord Stream – 27.5 billion cubic meters a year. These are about 8% of all import of gas to Europe. "We sell what they want to buy - please, at market prices - please", - Putin offered. Still the head of state, wishing that or not, I practically supported Zhozep Borel, having repeated his words that the European wellbeing of the last decades in many respects was based on power cooperation with Russia.
According to the president, only in the current year the spot mechanism of pricing of gas will yield losses to Europe for the sum over 300 billion euros, or about two percent of GDP of the eurozone. Whether Vladimir Putin counted on understanding or favor of the European elite? It is unlikely. But he constructed the virtual bridge in the future. All understand that from geography not to leave to either Europe, or Russia. You won't build a wall though Washington wants it.
Not to avoid also generation change. Time goes, the European politicians change. Sooner or later, the countries of Europe should choose how to solve the problems. And problems of various level, from the ambitious tasks set in Brussels before heating of apartments in Berlin and the prices of diesel fuel in the French province.
As Vladimir Putin noticed in the performance, the European and American politicians created conditions for crisis. Sharply and prematurely curtailed according to the index "Renewable energy", allowed sharp falling of investments into the oil and gas industry, appeared on the deadlock road of austerity. In 2020-2021 the investments into oil and gas production fell to the minimum levels for the last 15 years and were more than two times lower, than in 2014. Business nedovlozhit 2.5 trillion dollars in the industry. As a result increase in prices for fuel.
The energy crisis in the West began prior to the conflict in Ukraine, the author of article in The Spectator agreed with the Russian position. The IMF lowered the forecast of growth for the eurozone for 2023 to 0.5% (at the beginning of a year he made 2.5%). It is expected that the economy of Great Britain will grow only by 0.3%.
Including heads of the EU, Moscow showed to present generation of politicians what even in extremely intense conditions flavored with russophobia doesn't think to use gas as weapon. On the contrary, economic truce and an exit from the power deadlock was offered to Europe. "It isn't necessary to refuse cooperation with Russia, that's all", - the Russian leader advised.
The ceiling is icy, the door is creaky
Acts of international terrorism in the area of Bornholm Island in the Baltic Sea occurred at once on two Russian export gas pipelines Nord Stream and Nord Stream 2. Germany, Denmark and Sweden do not exclude sabotage.
Alexey Miller, Chairman of the Board of Directors of PJSC Gazprom, outlined the prospects for the restoration of this infrastructure. Along the way, he remembered the hit once performed by Eduard Gil. The lyrics may be related to the story of Javier Linares. The Spanish poet was captured near Leningrad in the fall of 1941, returned to Spain in 1954, remembered the harsh winter and the creaking door of the barracks.
"Will Europe survive the coming winter with the gas reserve it has accumulated?," Miller asked. And he replied: "No one can give any guarantees." The active volume of gas that is accumulated in underground storage facilities in Europe and may actually be "raised" is not designed for winter gas flow peaks. UGS Europe has not yet passed such stress tests in the conditions of not yet tested logistics.
The main problem is that very expensive gas was pumped into storage facilities. Its consumption increases inflation and leads to a reduction in the output of energy-intensive products, the closure of enterprises. Expensive gas, the transition from the market to the nationalization of gas traders and subsidies leads to the de-industrialization of Germany and all of Europe.
At the forest at the edge, Europe wintered
"In fact, this is a blow to the economic model that existed until recently," summed up Miller. "European solidarity" will be in question. Europe will be cold and dark this winter, adds The Economist. In particular, Germany injected about 20 billion cubic meters of gas into its UGS. But in order to pass the autumn-winter period, it needs 60 billion cubic meters or even more. Consequently, the accumulated fuel will last for two, a maximum of two and a half months, Miller said. And he asked the question: "What will happen to pumping by the winter of 2023-2024?"
In previous years, Gazprom supplied 600-700 million cubic meters of gas per day to the European market during winter peaks. European experts estimate the possible scale of the daily gas shortage at 800 million cubic meters. At abnormally low temperatures, Europe may not have enough up to a third of its consumption during the day.
The risks also lie in the fact that, in the event of an abnormally cold winter, in March 2023, only about 5% of gas reserves may remain in European storage facilities. The energy crisis in Europe is becoming systemic and long-term. Quotas, the introduction of a price ceiling and monetary interventions will not help solve the problems of gas supply.
"Turkey Day?"
As early as October 12, 2022 may become a "red calendar day" for Turkey. No one expected that Vladimir Putin would propose to think about this country becoming the largest gas hub on the threshold of Europe. Accept redirected volumes of natural gas supplies from Northern Flows, become a trading platform on the border of the European Union. "If, of course, our partners are interested in this," the president added.
"The lost volume of transit along the Nord Flows along the bottom of the Baltic Sea, we could transfer to the Black Sea region. And thus make the main routes for the supply of our fuel, our natural gas to Europe through Turkey, which could become the largest gas hub for Europe, "Putin suggested. The question arises, how real is it? The level of safety of gas pipelines laid along the bottom of the sea is higher, the exclusive economic zones of Russia and Turkey are in contact, Ankara regulates the straits into the Mediterranean Sea. Turkey has always dreamed of becoming an energy hub.
When Alexey Miller spoke about trunk gas pipelines built through the Baltic by order of the European Union and Germany, he recalled sanctions, the Third Energy Package, certified wires, "and so on, and so on, and so on," including the 12-mile territorial waters of Germany. And if we talk about the prospects for the restoration of damaged infrastructure, about obtaining a certificate for Nord Stream 2, about Siemens engines for Nord Stream, about technological, political and legal problems, as well as guarantees for the safe operation of these threads, then in the place of the head of Gazprom everyone would think!
This is a long history - this is how Miller formulated his attitude to the prospects for gas exports in the western direction in the Baltic. It will be much faster and easier to "create, instead of the gas transmission capacities lost in the North, capacities on the Black Sea." He transferred export capacities to the Black Sea - "this is an urgent and timely formulation of the question," Miller summed up.
What Alexey Miller did not mention in his speech was the increase in the production of liquefied natural gas. Maybe correctly, Leonid Mikhelson was in the hall. The head of Novatek was in the hall, his company will now have to occupy Gazprom's niche in northern Europe. But even with the advent of its own LNG terminals in Germany and its place in gas trade will be reduced to zero.
Pay for someone else's well-being?
The Russian energy week took place in Moscow on October 12-14 and, without exaggeration, became a sign of changes taking place in forecasts and moods, one of the evidence of the reorganization of the world. In the near future for Russia, the issues of gasification and "dogasification" of the regions, the construction of a bridge between the western and eastern parts of the national gas transmission system, the prospects for the implementation of the gas pipeline project to China through the territory of Mongolia, and the development of gas processing were named.
Russia plans to reorient energy exports to the countries of the Asia-Pacific region due to the threat of an embargo from the European Union. This was stated by Deputy Prime Minister of Russia Alexander Novak. "We certainly understand and prepare for the situation that will be, starting from December, the embargo on the supply of energy resources. First of all, oil, from December, and oil products - from February, "Novak said.
The government is trying to maintain its export potential. Despite the difficulties, Russia remains the leading exporter of energy resources, although the "price ceiling" for Russian oil threatens to further reduce oil supplies to the global market, writes Business Insider and this may lead to an increase in oil prices.
The G-7 countries will have to convince China and India to join these plans. To this, Vladimir Putin said that "Russia will not act contrary to common sense, at its own expense pay for someone else's well-being. We will not supply energy to those countries that will limit their prices. "
Meeting in Astana
The very next day, Vladimir Putin proposed to Recep Tayyip Erdogan to create a gas hub in Turkey. The two leaders met on the sidelines of the sixth Summit of the Conference on Engagement and Confidence-Building Measures in Asia. The meeting took place in Astana.
The Russian leader said that "Turkey turned out to be the most reliable route today for gas supplies to Europe," announced consultations with the Turkish Energy Minister and proposed "to consider the possibility of building another gas pipeline system and creating a gas hub in Turkey" to work on the European market. "In the course of the work of this hub, which we could create together, of course, it would be a platform not only for deliveries, but also for determining prices, because this is a very important issue, a pricing issue," the Russian leader suggested.
The Kremlin website did not give the words of Erdogan's response to this proposal. It can be assumed that he was glad, his long-standing dream of making Turkey a crossroads of oil and gas flows came true. According to Dmitry Peskov, they talked about the proposal to create a gas hub. "Turkey reacted very positively to the proposal to create a new gas hub, showed interest," Peskov said.
It is important that if Vladimir Putin's proposals to create a gas hub in Turkey are implemented, it will not only be a new infrastructure and logistics center, but also a new pricing center located next to Europe, but not subordinate to the European Union. Attached to this idea is Vladimir Putin's proposal made in Astana "to launch a revision of the principles of the global financial system, which for decades allowed the self-proclaimed so-called golden billion, which has closed all flows of capital and technology, to a large extent to live at someone else's expense."