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WHO’S TO BLAME FOR THE GAS SHORTAGE & RISING PRICES IN EUROPE – IT’S THE EUROPEAN UNION STUPID

Translated and introduced by John Helmer, Moscow
  @bears_with [1]

In official testimony to the European Parliament last week, the European Union Commissioner for Energy Kadri Simson [2], attacked Russia for “exacerbating the tight [supply] balance” and thus causing “the rising prices”.

Responding to allegations against Gazprom, Simson promised an investigation. “We are looking into this claim, through our competition angles…. Better response to any type of speculation and market manipulations is another area where I believe we should assess our options for action.”

Simson is an Estonian politician who has made a public career of drawing votes from Russian-speaking Estonians. She has failed in efforts to replace her party’s leader and former prime minister, Edgar Savisaar.

Simson is a wealthy politician. The current report to the European Union (EU) of Simson’s financial interests,  dated this [3]past January, is a near-total blank,  except for three apartments she owns  in Tallinn, plus a garage, in which she and her family do not live themselves; they live elsewhere, but not with her former husband,  Priit Simson. He is a journalist at an Estonian daily newspaper; he specializes in the study of what he calls [4]“extremist movements in the Russian-speaking population in Estonia.”   

For an expert Russian response to Simson’s report to the EU, Vzglyad, the online Moscow analytical newspaper, published this piece by Olga Samofalova yesterday. Read on.

Left: Kadri Simson; right, Olga Samofalova. 

Source: https://vz.ru/ [5]

Brussels has refused to admit energy mistakes [5]

“The European Commission [EC] has presented its recommendations on combating the energy crisis that has erupted in the European Union [EU]. From the speech of the European Commissioner for Energy Kadri Simson, it is clear that Brussels did not admit any mistakes which led to the current crisis. What is the recipe for saving Europe?”

European Commissioner for Energy Kadri Simson spoke, firstly, about accelerating the transition to wind and solar power. Secondly, [she spoke of] the fact that Brussels will not now  take into consideration the role of Nord Stream-2, but will think about it only after Germany makes a decision to issue a permit for commissioning. All this may drag on until next year.

The third point is that the EC will soon travel to the Persian Gulf countries to discuss gas supplies to the European Union.

Fourth, the EC will study the possibility of optimizing gas reserves in the EU and the possibility of joint gas purchases by EU countries acting together.

Fifth, the reason for the surge in gas prices in the EU has so far been called the global growth in demand. Gazprom has not been accused directly. However, Simson promised to study the situation with uncompetitive or speculative behavior in the gas market.

Thus, the European Commission’s recipe for combating the crisis, in fact, has been reduced mainly to long-term solutions which will be unable to affect the situation this winter in any way. The only solution declared by the EC that can be implemented here and now is social assistance to the population. But the responsibility for that is to be borne by the European countries by themselves.

Brussels believes that EU countries can spend on subsidies and benefits for energy-poor Europeans the proceeds from rising prices for carbon quotas. In 2021, European countries managed to earn an additional 10.8 billion euros on these quotas. But it’s the very rise in the price of these quotas that has become another reason for the increase in the cost of gas.

According to the European Commission estimates, electricity bills for citizens of many EU countries will have increased by €400-€500 for the year; growth and instability in these energy prices promises a general increase in food prices, and for all other types of goods in the future. However, the European Commission does not recognize its own mistakes which led the EU to all of this.

Foremost, it was the EC which insisted on avoiding long-term contracts for the supply of gas and the creation of gas exchange trading. At the same time, in the already existing gas contracts (in most cases), the Europeans have succeeded in replacing the crude oil peg with a gas spot market peg. As a result, instead of more predictable and predictable gas prices, the European Union has gotten uncontrolled and volatile price fluctuations on its gas exchanges. The European Commissioner did not say a word about this. She said only that the EC is studying situations of  uncompetitive or speculative behavior in the gas market, as well as in the market of carbon emission quotas.

The EC does not directly lay its accusation against Gazprom. However, dissatisfaction with Gazprom is heard in the Commissioner’s response to a question about Poland’s allegations  against Gazprom. Simson admitted that Gazprom ‘fully fulfills its long-term contracts for gas supplies to the EU.’ But immediately she introduced the Russian fly in the ointment: ‘In practice [Gazprom] does not supply additional volumes of gas to the European market or it supplies them at a minimum volume level.’

‘At the same time, the EC thanks Norway for
increasing gas supplies,’ says Stanislav
Mitrakhovich (right), a leading expert of the
National Energy Security Fund (NSF) and a
researcher at the Financial University under the Government of the Russian Federation
[FinU]. ‘But Norway has only increased its  
supplies by a small margin, while Russia has increased supplies by almost 20% compared to last year. And this is [Simson’s response] to the point of who holds the gas and who
does not.’

Why didn’t Brussels praise Gazprom? It is reserving the possibility that in the future there will be an opportunity for the EC to expose Gazprom to blame as a result of another investigation.

The EC is still careful with Gazprom: now is clearly not the time to be quarreling with a gas supplier. However, an investigation against Gazprom may start.

‘This is not a zero scenario’, says the FinU expert. ‘But what claim exactly can be presented to Gazprom? After all, the contracts are being fulfilled. The EC understands that it will be difficult to prove Gazprom’s alleged manipulation. But I see they are reserving their potential —  they can try.’

Another of the EU’s mistakes has been the adoption by the European Commission of the Gas Directive [2009/73/EC [6]], according to which Brussels prohibits Russian gas pipelines from pumping gas at full capacity even in the physical absence of an alternative gas supplier. That is, Brussels has created rules which  artificially restrict gas supplies from Russia. As a result, the OPAL gas pipeline [7]  can only operate at half its capacity, which reduces the possibility of pumping through the Nord Stream-1 pipeline. For the limitations of the Nord Stream-2 pipeline, the EC had to change the rules of the game once again during the implementation of the project. Now this gas pipeline will be able to work only half-heartedly.

OPAL, NORDSTREAM AND OTHER RUSSIAN GAS SUPPLY PIPELINES TO GERMANY

Source, with text backgrounder: http://digitalnewsservice.net/ [8] 

Another mistake which the EC will never admit is that the artificial transition to wind and solar generation is too fast, with the abandonment of reserve energy capacities, primarily coal and nuclear generation. The existing nuclear reactors must be closed before the end of their service life. A vivid example of this is in Germany, which wants to withdraw them by 2022. Coal-fired power plants were shut down much faster because the EC was raising fees for greenhouse gas emissions, making coal-fired plants unprofitable for operation.

Simson not only did not admit these mistakes; on the contrary, as expected, she  advocated an even more accelerated transition to wind and solar generation. ‘The logic is this: if the medicine doesn’t work well, let’s take even more medicine. I think this is a mistake. It is necessary to move in an evolutionary, not a revolutionary way,’ says Stanislav Mitrakhovich. ‘It seems to me that by contrast Europe should be discussing not the acceleration, but the deceleration of energy transition efforts, in order not to face the catastrophe.’

‘The European Union should take a pause, and
conduct scientific research into how global
warming is affecting renewable energy. Because
if what happened [last month]  in the North Sea
— when the wind turbines stopped for two weeks
due to the absence of wind [9] — is not a one-time phenomenon, but will become a permanent occurrence in the future, then it is dangerous,’ warns Sergei Kondratiev (right), deputy head of the Economic Department of the Institute of Energy and Finance Foundation.

In this case, huge investments in wind turbines and solar panels will be not be compensated and repaid.   ‘It’s frightening if the Europeans, having closed traditional coal and gas power plants, will be left alone with the  windlessness, because then no one will be able to help them. If you don’t have electricity, it’s much worse —  if social networks and applications don’t work, it means virtually a complete shutdown of the economy,’ the source warns.

According to Kondratiev, in addition to slowing down the energy supply transition, the EU should reduce pressure on coal and gas generation, as well as abandon the withdrawal of nuclear power units before their operating life expires, instead extending their useful term, just as Russia and the United States do, for example. Even Japan, where there was an accident at a nuclear power plant, is not ready to abandon nuclear generation. In addition, Eastern Europe, instead of leaving the UCTE electrical grid [10],  should, on the contrary, increase electricity flows and expand intersystem connections with the Russian energy system within the UCTE, because Russia has quite large volumes of spare capacity which o can be reloaded. And this does not require very large investments in the clearing of bottlenecks in the grids. But Europe, as you can see, is taking precisely the opposite course.

It is significant that the European Commission has said almost nothing about the real recipe for saving Europe from the crisis here and now – not to delay, but to launch Nord Stream-2 as soon as possible. This is, in fact, the only thing Europe could do quickly to combat the crisis.

The second thing the EC can do is to hope for a warm winter in order to skip the severe blackouts of light and heat, as well as the shutdown of industry in order to provide the population with energy.

But instead the EC has promised to go to the Persian Gulf countries for negotiations on gas supplies within a few weeks. This option will be of little use. ‘Pipeline supplies from the Middle East are limited by capacity. The revival of the Nabucco gas pipeline project [11]  from the ashes is still an abstraction. LNG can be bought to Europe, but it is expensive. Or is Europe willing to pay more for it than Asia will pay?’  says Mitrakhovich.

At the end of September, even the British Minister of Economy, Energy and Industrial Strategy,  Kwasi Kvarteng, spoke in support of Nord Stream-2, although London is less dependent on Russian gas supplies than other European countries. He explained that he supports the diversification of gas supply routes. But the European Commission has put so much effort into killing Nord Stream-2 that even in the current conditions of the energy crisis it cannot launch it.

As for the idea of the EC to create joint gas purchases, it will be extremely difficult to implement this.  It is clear that the more fuel the consumer buys, the stronger his negotiating position with the seller and the greater the discount and the better conditions he can strike. ‘The offer to buy gas together [for the EU] was made ten years ago. It was the idea of creating an energy union to buy gas through Brussels. But this failed. The reason was that the countries of the EU are too different from one another; there is a differing pattern consumption from one to the other; there are different existing gas supply contracts,’ Mitrakhovich points out.

The idea of creating a strategic gas reserve in the EU is more reasonable, but again it cannot be implemented quickly enough. The increased demand this year was formed, among other things, because the winter of 2020-2021 turned out to be frosty and long, and the underground storage facilities were emptied to a record low. So by the time the new heating season began, the EU had managed to pump less gas into its storage than usual. If there had been more underground storage facilities initially, and they would all have been filled with gas, then the situation with gas prices this year would clearly have been easier. But in some European countries, there are no storage facilities at all.

‘But will the EU be able to force them to invest, and then also to pump gas into storage for reserves? Building such infrastructure and storing gas cost money. ‘Not all the poor countries of the EU will want to lay out this money. If it’s a warm winter, they say, then why store extra gas? Gas storage is not a cost-free pleasure,’ Mitrakhovich adds.”