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HomePoliticsEuropean PoliticsPutin promises gas to a Europe struggling with soaring prices

Putin promises gas to a Europe struggling with soaring prices

Russian President Vladimir Putin on Wednesday promised that his country is ready to boost natural gas shipments to Europe at a time when the Continent is battling the political and economic impacts of soaring energy prices.

Russia is the largest gas supplier to the EU, and Putin insisted it was “flawlessly” fulfilling its contracts with European customers, adding, “we are ready to … even increase” sales.

“We will increase by as much as our partners ask us. There is no refusal, none,” he said.

Although Russia hasn’t broken any contracts, its European storage facilities have less gas than usual, contributing to market turmoil.

Putin’s comments at the Russia Energy Week Conference in Moscow came on the same day that the European Commission came out with a series of measures aimed at calming member countries’ outrage over soaring gas and power prices.

The Commission’s response was largely a list of existing policy options that capitals can use to lower energy bills without violating EU law. Energy Commissioner Kadri Simson said the so-called “toolbox” was Brussels’ answer to Europeans asking, “Can I pay the next bill? How long will this last? What can be done?”

“The current situation is exceptional, and the internal energy market has served us well for the past 20 years. But we need to be sure that it continues to do so in the future,” she said, adding: “The only way to fully decouple gas from electricity is no longer to use it to generate power.”

That wasn’t enough for Spain, where the government is under fire for not reining in prices.

Spanish Minister for the Ecological Transition Teresa Ribera said the Commission’s toolbox “did not address the exceptional nature of the situation we are in.”

The price squeeze is due to an unexpected sequence of events — a strong economic recovery from the COVID pandemic, a slump in wind power production, soaring global demand for natural gas, lower-than-expected gas deliveries from Russia to fill depleted gas storage facilities, combined with steadily increasing prices on the EU’s Emissions Trading System. EU natural gas prices are more than five times higher than a year ago, while electricity prices are more than twice as high.

“Rising global energy prices are a serious concern for the EU,” Simson said.

Economic impacts

The pain is being felt across the Continent. On Wednesday, Bohemia Energy, one of the Czech Republic’s leading energy suppliers, announced it was terminating supplying gas and electricity to its customers.

“We have been forced to take this drastic step by the continuing extreme rise in energy prices on wholesale markets,” the company said.

Sidenor, one of the largest steelmakers in Spain, announced on Monday that it would shutter its facility for at least 20 days. “The exorbitant price of electricity has increased overall costs by 25 percent,” the company said, adding that it was now “impossible for Sidenor to maintain its current production rate.”

Ribera accused Brussels of failing “to stem the hemorrhage that will affect the entire European economy if measures are not taken.”

Putin had a simple explanation for the EU’s problems: the bloc’s shift to short-term gas contracts. The move is part of a long-running effort to make its gas market more liquid and also reduce its reliance on Russian energy supplies. However, that has made the EU more vulnerable to international price swings.

“What is happening today in the energy markets of Europe is, to a certain extent, a man-made result of short-sighted policy,” Putin said.

He called long-term contracts “beneficial for the supplier and for the consumer.”

The Commission is under growing pressure from member countries to explore the possibility of joint gas purchases — using the EU’s market power to reach better agreements. Although Simson committed to exploring the option of voluntary joint gas purchases ahead of December’s revamp of the bloc’s so-called Third Energy Package, there was no firm indication of how such a scheme would operate.

“There will be ongoing work on what exactly we will propose in our December package,” Simson said. “It is a matter of fact that different member states have different time frames for their long-term contracts, and they also have different storage capacities … We have to take this into consideration when we propose an upgrade of the gas package.”

With the EU increasingly desperate for energy price relief, Putin took the time to poke at some of the sore points in Russia’s energy relationship with the bloc.

He warned that the pipelines now carrying Russian gas across Ukraine to the EU aren’t fit to carry much increased capacity, saying doing so would be “dangerous.”

“The gas transit system there has not seen repairs for decades. If we increase the pressure, the pipe will probably just burst. Europe will be left without this route at all,” he said.

Ukraine insists that its pipelines are properly maintained and accuses Russia of trying to undermine gas transit to increase pressure on the EU and Germany to rapidly approve the newly built Nord Stream 2 pipeline to quickly bring more gas to the European market. It will take at least four months for the pipeline to get regulatory approval, and the Commission has underlined that the pipeline has to meet the bloc’s competition and gas rules.

Putin denied charges that Russia is using its gas sales as a geopolitical weapon, calling it “just politically motivated chatter, which has no basis whatsoever.”

Despite the impact of high energy prices, Simson insisted that there are no plans to backtrack on the bloc’s Green Deal, which aims to make the EU climate neutral by 2050.

“We are not facing a surge because of our climate policy,” she said. “Fossil fuel prices are spiking. We need to speed up the green transition, not slow it down.”

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