US Warns Putin That Weaponsing Gas Supplies Will Backfire

Europe hit by a gas crisis with supplies running low as economies reopen post-Covid, driving prices up

  • EU has turned to Putin, sitting on the world's largest reserves, to help - but supplies have been held back 

  • Russia's energy minister has now suggested opening the Nord Stream 2 pipeline could get the gas flowing

  • But experts say current pipes could carry extra supply, and Europe is being held to ransom over the pipe which would mark a major economic and political victory for Putin - handing him more clout on the continent

  • Pipe was only completed because Joe Biden lifted sanctions on the company constructing it earlier this year 

  • > >

    Joe Biden gave the green light to a controversial gas pipeline that Vladimir Putin is now using to hold Europe to ransom by threatening to withhold supplies and push up the price of energy - unless European regulators grant the link final approval.

    In a move that confounded critics and supporters alike, the US President effectively green-lit completion of the $11billion Nord Stream 2 pipe to Germany back in May when he lifted sanctions that had halted construction work through 2020.

    ADVERTISEMENTi-amphtml-sizer">>

    Before Biden's intervention, the US under Donald Trump had been bitterly opposed to the project - fearing it would hand influence and money to Putin, while hurting the West's ability to retaliate against him.

    template type="amp-mustache"">

    Nord Stream 2 has been enthusiastically backed by Angela Merkel who wanted the pipeline to increase Germany's natural gas revenues - but it has been bitterly opposed by Eastern European nations who fear it will embolden Russia to act more aggressively on their borders and in Ukraine. 

    Gas shortages have caused wholesale prices to increase across the UK and in Europe eight times this year, sparking warnings that household bills could soon soar while raising the possibility of blackouts. 

    Russian engineers finished work on Nord Stream 2 last month and now only need EU leaders to give final approval to start pumping gas - a bargaining chip that Moscow has wasted no time in using to threaten the continent.

    Aleksandr Novak, Russia's energy minister, has explicitly linked easing the gas crisis - caused when demand outstripped supply as economies reopened post-Covid - with the opening of the Nord Stream 2 pipe, saying it would send a 'positive signal' that would help 'cool' the market. 

    But experts say that Russia already has the means to pump more gas into Europe through four existing lines, and is withholding supplies for its own political ends

    Britain last night accused Russia of 'choking' supply to win approval for the pipeline, which Boris Johnson warned would have 'significant security implications' for the continent. 

    ADVERTISEMENTi-amphtml-sizer">>

    In a string of other developments:

    • Ofgem boss Jonathan Brearley warned UK customers face 'significant' price rises from next year, as he signalled a change in the way prices are calculated which could help businesses but expose homeowners
    • An explosion and fire at a Russian gas refinery in the far east caused it to shut down and threatened to further limit supplies, though the exact impact was not immediately clear 
    • The National Grid prompted fears of blackouts with a warning over electricity supplies this winter, and more energy firms were expected to collapse, with customers being switched to suppliers charging higher tariffs; 
    • Experts warned that Britain faced an inflation shock that would squeeze family finances and could derail the economic recovery; 
    • The National Energy Action said up to 1.5 million more households could be plunged into fuel poverty if the energy cap soars;
    i-amphtml-sizer">>
    Russia's energy minister has linked easing Europe's gas crisis with approving the Nord Stream 2 pipeline (top), but experts say the Kremlin already has plenty of capacity to boost supplies without bringing the new route online (pictured)
    i-amphtml-sizer">>
    As the crisis grew, a state-controlled Russian Twitter feed published a bizarre image of Putin alongside a bear - claiming he is 'one of the most popular world leaders'
    i-amphtml-sizer">>
    Experts claimed Vladimir Putin was using the crisis as leverage over the disputed Nord Stream 2 pipeline project, which is run by the Russian state-backed energy giant, Gazprom
    i-amphtml-sizer">>
    Joe Biden

    Why is Nord Stream 2 such a big deal? 

    Despite their talk of renewable energy and a greener planet, European leaders remain reliant on fossil fuels for around two thirds of their energy.

    Natural gas makes up the second-largest chunk of the EU's 'energy mix' - second only to oil - and was responsible for more than 20 per cent of power generation in 2020.

    Almost all of that gas - around 90 per cent - is imported from outside of the bloc, with 40 per coming from Russia, which is the single-largest contributor.

    Nord Stream 2 is an $11billion pipeline that runs from Russia to Germany underneath the Baltic Sea and promises to roughly double the capacity of the already-existing Nord Stream pipeline, one of four major routes through which Russian gas reaches Europe.

    Begun in 2011, the line was only completed earlier this year after getting caught up in a political tug-of-war between Washington and Moscow.  

    The Kremlin is eager to open the line because it will allow it to sell more gas into Europe, a huge money-spinner for an economy which gets a third of all its revenue from the oil and gas sector.

    It would also be a major political victory for Putin, allowing him to bypass lines that run through Ukraine and Poland - depriving both countries of large sums of money they collect for maintaining those lines.

    This is seen as payback for the pair splitting from Russia's sphere of influence by joining the EU.

    Putin also hopes it will increase European reliance on Russian gas, giving him increased clout over the continent while limiting retaliatory actions - such as sanctions - that western leaders can take against him.

    Several European countries - most notably Germany, which gets 75 per cent of its energy from fossil fuels and would become a major gas distributor to its neighbours once the line is open - are in favour.

    But it is vehemently opposed by others, with Ukraine and Poland - perhaps unsurprisingly - being the most outspoken.

    The US has historically opposed the project, fearing it will make it harder to get European leaders to take a tough stance against Russia while handing more money and power to its long-time foe.

    But in a surprise move, Joe Biden effectively green-lit the completion of the project earlier this year by lifting sanctions on the company that was building it.

    The sanctions had stopped construction through all of 2020, and prompted the likes of Ted Cruz to brag that the line would never pump gas.

    Biden scrapped the measures in May, and the line was finished not long after. The move was seen as a sweetener to US ally Germany, but was blasted by Biden's critics as short-sighted.

    NS2 now only needs the approval of European leaders to start pumping gas, something Putin's energy minister suggested would end the current crisis - leading to accusations that Russia is holding Europe to ransom. 

    Stephen Pifer, an affiliate of Stanford's Center for International Security and Cooperation, said: 'Let's be clear: Russia has lots of unused pipeline capacity to Europe. Moscow is not exporting more gas for some other reason.'

    ADVERTISEMENTi-amphtml-sizer">>

    Jake Sullivan, Joe Biden's national security adviser, issued a warning after meeting with EU chiefs in Brussels - saying that Russia has 'a history of using energy as a tool of coercion'.

    He added that the US has a 'real concern' that supply is not meeting demand - suggesting that the Kremlin is meddling in the market - warning the move would ultimately 'backfire' by accelerating moves towards alternative energy sources and renewables. 

    Biden's decision to lift the sanctions on the company  building the pipeline Nord Stream AG was intended to mend ties with Europe after tensions under the Trump administration.

    Now the final say on turning on the supply rests with the EU and Germany's likely new centre left leader Olaf Scholz who has threatened to block Nord Stream 2 if Putin does not 'play by the rules'.   

    Russia has denied using underhanded tactics and instead blamed European leaders for failing to plan ahead, leaving them reliant on short-term gas markets. 

    UK regulator Ofgem has warned the annual price cap which sets a benchmark for consumers will need to be revised from April next year - as analysts said it could hit £2,000-a-year for the first time, up from £1,277.

    Jonathan Brearley, chief executive of the regulator, acknowledged the price cap is designed to protect consumers against unfair price gouging but added that 'legitimate costs do have to be passed through'. 

    He also signalled a change in the way the price cap is calculated, which could help businesses but expose households to rising costs.

    It comes after manufacturing industries warned that rising prices will drive up the cost of everyday goods - from bricks and chemicals to food and toilet rolls. 

    The multi-billion dollar NS2 pipeline, which was completed earlier this year, would be used to bring gas into Europe through Germany - bypassing Ukraine and Poland and depriving both countries of large amounts of money they currently make for maintaining pipelines that run through their territory.

    The move is seen as a 'punishment' for their leaders for pulling away from Russia's sphere of influence and allying more closely with the West, and both countries are strongly opposed to it.

    America was also strongly opposed - arguing that it will make Europe, which currently depends on Russia for some 40 per cent of its gas, even more reliant while handing the Kremlin leverage over continental politics.

    But in a shock move earlier this year, Biden effectively green-lit the completion of the project by lifting key US sanctions on Nord Stream AG - the company building the pipeline - which had brought building work to a halt.

    The move was seen as a concession to Germany and outgoing leader Angela Merkel, who is strongly in favour, but was blasted by Biden's critics. 

    Germany is reliant on fossil fuels for around 75 per cent of its energy and would become a major gas distributor to neighbouring nations if the pipeline is turned on.

    Britain - which imports less than half of the gas it uses and relies on Russia for only a tiny proportion of that  

    Aleksandr Novak, Russia's energy minister, said during a call with Putin on Wednesday that granting approval for Nord Stream 2 'as fast as possible' would give 'a positive signal' and allow the current gas crisis to 'cool down'.

    Sergei Pikin, a Russian energy analyst, was even more blunt in his assessment. Speaking to the New York Times, he said: 'Do we have an obligation to deliver additional new volumes of gas? No. 

    'Where should Europeans be getting new volumes of gas from? Nord Stream 2.'

    Viktor Zhúkov, the chief executive of Gazprom - the world's largest supplier of natural gas - denied that supplies were being choked when pressed on the issue by the BBC.

    Asked whether Gazprom is a 'reliable' energy company, he replied: 'The most reliable. Those countries that have long-term contracts with Russia have no trouble, those that buy gas on the spot market that are having problems.'

    But underlining just how vulnerable gas markets are to the whim of the Kremlin, prices whipsawed late Thursday - weeks of alarming rises suddenly followed by a price drop after Putin suggested he could increase supplies.

    > Click here to resize this module

    Source : https://www.dailymail.co.uk/news/article-10071975/amp/US-warns-Putin-weaponsing-gas-supplies-backfire.html

    2160