There are power problems across Europe right now, and a major part of the problem is a low supply of Liquefied Natural Gas (LNG). European countries have come to rely on Russian output, especially as the United States has lowered its production in recent months.
But as the market for LNG in Europe tightens, it’s becoming increasingly clear that Gazprom, the Russian state gas conglomerate, isn’t a passive actor in the tightening of the market. Russian President Vladimir Putin has intentionally allowed Gazprom stores in Europe to deplete and is pinching the supply.
The European supply has been constricting for months, in mid-October, Gazprom signaled that the pattern would continue by not bidding on any pipeline capacity through the Ukraine, and taking only 35 percent of the available capacity through Belarus and Poland for November. Because of this, it comes as no surprise that Russian LNG exports to Europe fell precipitously over the weekend.
The flow of the Yamal pipeline which carries Russian natural gas through Poland and into Germany has reversed with Germany now exporting to Poland. The customer demand for gas in Germany is there, but the actual flow in the pipeline is not. Demand on November 4th had risen to 6,948,767 kilowatt hours/hour, but gas flow into Germany was non-existent.
This is only one pipeline example. Throughout Europe, the situation is much the same supply struggling to keep pace with demand.
In early October, Putin assured Europe that Russia would be able to supply enough natural gas capacity to meet its demand, saying that “We will increase by as much as our partners ask us. There is no refusal, none”. But when set against the reality of Gazprom’s pipeline capacity reservations, these promises fall flat. Despite high demand, they have reserved no additional pipeline capacity in the first quarter of next year.
Russia has claimed that through November 8th it is limiting exports in order to replenish domestic stock, but there are no guarantees that supply will be able to rise to meet European demand even after that date.
Although Russian President Vladimir Putin has made clear that he thinks Russia would be capable of solving Europe’s supply problems, Russia’s current export efforts tell a very different story. Putin has his own geopolitical motives, and it’s in his interest to maintain a constricted natural gas supply and keep prices high so long as there’s not much competition in the space. For Europe, relying too heavily on Russia’s natural gas for energy and heating purposes is a risky gamble as winter approaches.
