Putin reeling as EU slashes Russian gas import by half
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The rest of Europe has so far staved off the worst effects of the reduction in Russian gas so far, but countries still face as much as a 40 percent hit to consumption if the pipes were shut off completely. It comes amid threats of a three-day shut-off of the Nord Stream pipeline at the end of August.
Putin was accused last year of manipulating gas supplies to Europe to artificially raise prices, at a time when shortages had pushed wholesale energy prices to massively inflated prices.
Following the invasion of Ukraine in February, the bloc was accused of being slow to respond, and member states such as Germany and Italy were alleged to have watered down sanctions to prevent a harder hit to their economies.
The EU announced plans in May to reduce their dependence on Russian fossil fuels to zero by 2030. At the outset of the invasion, the EU was estimated to rely on Russia for around 40 percent of its natural gas supply.
Germany was among those with a heavy reliance on Putin’s fossil fuels, after decades of joint infrastructure such as the Nord Stream gas pipelines. A large portion of its economy remains industrialised, consuming a higher amount of natural gas.
It has since looked elsewhere for its fossil fuel supply, and new figures published by European gas storage operators on Sunday show it is now at 80.14 percent capacity as it braces for winter.
German news outlet Welt said these numbers were reported with a delay, and suggested that the real level was closer to 85 percent. Levels should reach at least 95 percent by the start of November, it predicted.
It follows new regulations being enforced which require a steady increase in gas storage over the next few months. By September 1, Germany’s stores are required to be 75 percent full – placing it well on target.
But there remain fears that though national targets will be attained, parts of the country may still face shortages.
Torsten Frank, managing director of Trading Hub Europe, a network of gas suppliers, told Rheinische Post: “We will be able to fill many storage facilities to 95 percent by November, but not all of them.
“There may potentially be regional shortages; unfortunately that cannot be ruled out,” he added, but noted that he was “very confident” that homes “will not have to freeze this winter”.
Russia said last week that it would shut down the Nord Stream pipeline from August 31 to September 2, citing maintenance work.
State-owned operator Gazprom said after that period, usual volumes would resume – but there are fears Putin may stop gas flowing through it all together.
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A recent IMF report warned that a full shutdown of Russian gas supplies could be “substantially more severe” for the continent than the economic woes it is already facing from a reduced supply.
It found that European infrastructure had so far been able to cope with a 60 percent drop in Russian gas supplies from June last year, and the IMF believes it could see a 70 percent reduction in the short term.
However, it stated that finding adequate supply would be made much more difficult in the event of a complete shut-off of Russian gas, owing to bottlenecks in supply. These potential shortages could instigate anywhere between a 15 and 40 percent drop in consumption.
Those most affected are central European nations such as the Czech Republic, Slovakia and Hungary, which have long relied on Russian fuel imports. The three nations are likely to take the hardest hit to their economies were pipelines shut off fully.
Its effects on Hungary in particular could cause as much as a 6 percent contraction in the country’s GDP. Germany could see a near-3 percent drop.
It is a threat that Putin has wielded repeatedly against Europe in recent months in an attempt to stifle support for Ukraine – but, along with sanctions cutting Russian fuel supplies, is backfiring on the despot.
The Russian military is widely believed to be largely funded by revenues from state-owned fossil fuel giants. Oil and gas is estimated to contribute 60 percent of the Kremlin’s revenue.
A new study by the Yale School of Management found that Russia’s economy was collapsing in isolation, with oil and gas revenues from exports dropping by about half in May, the last month the Kremlin reported such statistics.
The paper revealed that around 40 percent of Russia’s GDP is under threat of being lost due to businesses withdrawing from the country, putting 5 million jobs at risk.
Putin’s self-professed “pivot to the east” is also not going too well: its lowered exports to Europe have weakened its negotiating hand with the likes of China and India, which the study described as “notoriously price-conscious”.
While Chinese imports of Russian oil have risen sharply, Russian oil has dropped to $35 (£30) a barrel less than the US equivalent.
Additional reporting by Monika Pallenberg
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