Gasprom Can Put the Relations with Europe on Hold

Gasprom Can Put the Relations with Europe on Hold

The dialogue on gas issues between Russia and Europe is in deadlock. According to the head of Russia's Energy Ministry, Alexander Novak, the dialogue between Russia and the EU in the energy sector has entered a crisis stage. Novak also said that the energy package has already been prepared. At the present moment, everything depends on Europe. According to the head of the Ministry of Energy, the same applies to the «Turkish Stream» project. «We presented the project in January. The EU is considering possible variants. We are waiting».

The South Stream experience should teach Europeans a lesson. Gasprom inserted changes into its policy. The following comments regarding the move in December 2014 by Gazprom CEO Alexei Miller clearly showed this shift: «The principle of our strategy in relation to the European market is changing. The decision on stopping South Stream is the beginning of an end to our operation model of the market within which we oriented ourselves toward supplying gas to the end consumer … But you can’t win love by force. If the buyer doesn’t want the purchase to be delivered home, perhaps he needs to get dressed and go to the store; if it happens in winter, perhaps he needs to get dressed more warmly». 

Energy blackmail practiced by Brussels is a typical example of cards bluffing. Supply and demand is the basis of market economy. Russia has all aces up its sleeve. Infrastructure, geography and costs make it possible to export energy to Europe and Asia. The European Union is not the only Russia’s energy consumer (no matter how attractive it is from point of view of transit capabilities). Today Europe depends on Ukraine. It does not meet its interests but this factor is used for geopolitical games played by Brussels and Washington. Alexey Miller shed light on the EU energy policy. In his speech at the conference at conference «Europe and Eurasia: Towards the New Model of Energy Security» (the Valdai Club) he said, «It’s not true that we had to give up on the South Stream project because we were not able to comply with the Third Energy Package and the European law. We aimed to keep our status quo on the gas transits via Ukraine and there are no hidden pitfalls in cancelling the South Stream project». 

The Moscow’s decision to stop transit to Europe across Ukraine after 2019 is explained by political chaos and technical reasons. Miller explained, «The Ukrainian gas transmission network is the today’s weakest link in our relationships. Ukraine’s gas transmission network has an explosive confrontational potential. It’s important to understand that 90 per cent of Russian gas transits to Europe via Ukraine – I mean this precise transit amount – was actually a nice gift to Ukraine made by the USSR back in the early 1990s. When a gift becomes a manipulation tool, peace will not last long». He added, «If some people think that by blocking the Turkish Stream project they will hit their target – well, I’m afraid they are wrong. In fact, they are deeply mistaken, because – firstly – we can shift gas volumes to other markets and, secondly, we can take a little break and wait. This is our competitive advantage, I mean our ability to wait, and we will wait if we are forced to do so». 

Independent estimates speak in favor of Turkish Stream and pivot to Asia with its growing demand for Russian gas. Turkish Star quotes Greek Alexis Tsipras, who said the Turkish Stream would improve the complex relationship between Greece and Turkey. Milliyet expresses the same point of view. It says after the transit through Ukraine stops Turkey will become the only route for Europe in need of Russian gas. If Europe continues to hesitate, Russia can implement other projects. 

China is an alternative. It has launched two projects recently that could change the global energy outlook. First, Beijing increases its own strategic reserves. China has become a huge importer of oil, soaking up more than the U.S. by some measures. Figuring out how much it might buy is vital to forecasting prices, especially because the global slump in oil has stemmed from worry over the outlook for demand. «They’re building an awful lot of storage tanks that need to be filled,» said Thomas Pugh, a commodities economist at Capital Economics. When China will buy the corresponding oil is far from clear. Second, China's central bank reduced the amount of reserves commercial banks are required to hold, freeing up about $200 billion for lending in the latest easing measure to shore up the world's second-largest economy. The move frees up about 1.2 trillion Chinese yuan (US$194 billion) in additional funds that banks can now lend. The both measures can increase the China’s energy demand. 

No wonder, those who unleash energy wars are watching the process of growing Russia-China interaction with great concern they find hard to hide. According to Tokyo-based The Diplomat is right saying Russia-China relationship has become mature to encompass economic, political, cultural and military ties. Europeans got carried away by the idea of waging energy wars according to US scenarios. Step by step Europe becomes a hostage of Turkey and China. Brussels has nobody but itself to blame for this state of things.