EU/UK self-sabotage again
UK energy prices have risen again. UK households collectively owe energy suppliers £3.8bn, with the average household owing more than £1,500 for electricity and £1,300 for gas.
And things are getting worse. Ukraine’s de facto President Volodymyr Zelensky - his term ended May 20th 2024 - failed to reauthorise the 5-year gas transit agreement with Russia which will compound the misery in the UK and throughout the EU.
Russian gas has flowed to Europe via Ukraine since 1968 but the amount has dramatically fallen. At its peak, Russian gas made up 35% of Europe’s imports. Today, it’s 8%.
Russian state producer, Gazprom, paid Ukraine a fee for the transit of gas, money a bankrupt Ukraine desperately needs but will no longer receive.
The gas was pumped through the Urengoy-Pomary-Uzhgorod pipeline from Siberia into Ukraine and on to Slovakia where the pipeline split into branches taking gas to the Czech Republic and Austria. This was one of the last pipelines for Russian gas exports to Europe. Poland shut down the Yamal-Europe pipeline from Russia through Belarus in 2022 and the Nordstream 1 pipeline under the Baltic Sea that supplied gas to Germany was blown up by the CIA in September 2022.
There are two remaining pipelines. The Turkstream pipeline on the bed of the Black Sea supplies gas to Hungary and Serbia so they’ll be unaffected. And there’s Nordstream 2 which was built to double the supply of cheap Russian gas to Germany to lower energy prices but which Berlin halted in 2022.
Who gets hurt the most? Austria, Slovakia and Moldova all relied on Russian gas from the Urengoy-Pomary-Uzhgorod pipeline. Moldova, a candidate for EU membership, will suffer most and has declared a state of emergency. Austria received the majority of its gas from this route and Slovakia got 2/3 of its annual gas supply from this pipeline and will pay an extra 177m euros for gas from other sources.
Meanwhile, the EU Commission says it has everything under control. Really? Energy prices and demand are rising, gas reserves are falling and Europe’s economic crisis is deepening.
What explains this latest act of European self-harm?
Ideology, not economic interest. It’s no secret the EU Commission has been intent on ending Russian energy imports for years. It was always hostile to the Nordstream pipelines, it has investigated Gazprom, forced it to renegotiate contracts and has even tried to regulate Russia’s gas industry.
It’s highly likely the EU Commission ordered Zelensky not to renew the contract in line with its geopolitical goal of eliminating Russian gas imports. Zelensky doesn’t act without orders from his EU sponsors.
There’s another big geopolitical player we can’t ignore - the US. The EU has been remarkably subservient to US interests, ignoring its own. Several American administrations have opposed energy and thus economic integration between Russia and Europe and have worked hard to undermine it. Biden and Nuland bragged about blowing up Nordstream 1. And the US is keen to sell Europe LNG at premium prices to replace cheap Russian gas, undermining the competitiveness of European companies. It’s working.
In provoking the Ukraine conflict, the US had two main objectives: to weaken Russia and the EU. It failed in the first - Russia has the world’s 4th largest economy and signed a 30-year gas deal with China and 10-year oil deal with India worth billions. But it succeeded beyond its wildest dreams in weakening Europe’s economy because Europe simply rolled over.
The irony, of course, is that Russian gas will still reach Europe, albeit by far more expensive routes. Indeed, Russian LNG imports to Europe have actually risen because some EU countries allow their terminals - Zeebrugge, Belgium, Montoir-de-Bretagne, France, and Bilbao, Spain - to transship and/or re-export Russian LNG. These cargoes aren’t included in official import figures and so policymakers can pretend they don’t exist.
So the bottom line is that the EU is paying more for Russian LNG gas than it would be if it were receiving it straight from a pipeline. LNG prices are determined by futures contracts and LNG needs to be shipped with refrigeration and incurs port and storage charges.
This makes zero economic sense but the EU can claim that it has succeeded in cutting off imports of pipeline gas from Russia even though it’s still receiving large quantities of Russian LNG. The EU Commission is untroubled by the fact that this is inflicting pain on its member states. Inflation will rise and European industry will suffer even more from a lack of competitiveness. The people making these catastrophic decisions are unelected and unaccountable bureaucrats who are ideologically fixated on harming Russia but are harming the EU.
And Ukraine’s energy situation is dire. It’s importing electricity from Hungary and Slovakia. Slovakia’s Robert Fico has said that Ukraine’s refusal to renew the gas transit agreement means Slovakia won’t supply electricity to Ukraine. So Ukraine will face both gas and electricity shortages. It used to siphon off the gas it needed from the Urengoy-Pomary-Uzhgorod pipeline but with the flow now stopping, so does the supply.
What will the EU Commission do? Supply expensive LNG to Ukraine and ask European consumers to pay for it? The sensible course of action would be for the EU to admit defeat in Ukraine and turn the gas back on, reducing European energy prices and saving hundreds of thousands of Ukrainian lives.
This is, of course, unlikely. When more European businesses fail and Europeans lose their jobs, the EU will blame Russia.
As for the failing UK, when Europe sneezes, it catches a cold and Scotland catches pneumonia.
It doesn’t take a genius to figure out that if Scotland controlled its vast energy resources, its people would pay far less, live in warm homes and have a strong and thriving economy. It’s a mystery why the Scottish administration is failing to communicate this simple fact to the People.
Yet another informative article by LGB, using her investigative journalism skills! 👏
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