According to some of the more cynical elements out there, the entire Ukraine war as orchestrated by Victoria Nuland and various energy-tied elements in the deep state, was meant to do one thing: replace Russia with the US as the primary supplier of European gas (and the recent sabotage of the Nord Stream pipeline, only seems to validate this particular “conspiracy theory.”)
And if indeed it is the case that the war was meant to replace one European energy supplier with another, then we have bad news: the war has been for nothing. According to the FT, Europe’s gas imports from Russia once again overtook supplies from the US for the first time in almost two years in May, despite the region’s efforts to wean itself off Russian fossil fuels since the full-scale invasion of Ukraine.
While certain one-off factors contributed to the reversal, it highlights the difficulty of further reducing Europe’s dependence on gas from Russia, with several eastern European countries still relying on imports from their neighbor while others are actively skirting their own sanctions in hopes of obtaining cheaper energy.
“It’s striking to see the market share of Russian gas and [liquefied natural gas] inch higher in Europe after all we have been through, and all the efforts made to decouple and de-risk energy supply,” said Tom Marzec-Manser, head of gas analytics at consultancy ICIS. Actually it’s not, and it shows that for all the rhetoric and posturing, nothing has changed in Europe and Moscow still looms large as an anchor source of European energy.
Following Russia’s full-scale invasion of Ukraine in February 2022, Moscow slashed its pipeline gas supplies to Europe and the region stepped up imports of LNG, which is shipped on specialized vessels with the US as a major provider. Sure enough, a few months later in September 2022, the US overtook Russia as a supplier of gas to Europe and has since 2023 accounted for about a fifth of the region’s supply.
But last month, Russian-piped gas and LNG shipments accounted for 15% of the total supply to the EU, UK, Switzerland, Serbia, Bosnia and Herzegovina, and North Macedonia, according to data from ICIS. LNG from the US made up 14% of supply to the region, its lowest level since August 2022, the ICIS data showed.
The reversal comes amid a broad uptick in European imports of Russian LNG despite several EU countries pushing – and failing – to impose sanctions on them.
As the FT notes, Russia stopped sending gas through pipelines connecting it to northwest Europe in mid-2022 but continues to provide supplies via pipelines through Ukraine and Turkey.
Flows in May were affected by one-time factors, including an outage at a major US LNG export facility, while Russia sent more gas through Turkey ahead of planned maintenance in June. Demand for gas in Europe also remains relatively weak, with storage levels near record highs for this time of year.
Some are hoping to make this seems like a one-off event, and that things will quickly get back to normal as Europe pretends to follow strict sanctions on Russian commodities. One among them is Marzec-Manser of ICIS, who said that the reversal was “not likely to last”, as Russia would in the summer be able to ship LNG to Asia via its Northern Sea Route. That was likely to reduce the amount sent to Europe, while US LNG production had picked up again, he said.
“Russia has limited flexibility to hold on to this share [in Europe] as demand [for gas] rises into next winter, whereas overall US LNG production is only growing with yet more new capacity coming to the global market by the end of the year,” he added.
Additionally, the transit agreement between Ukraine and Russia also comes to an end this year, putting at risk flows through the route. Of course, that just means that the pushback against sanctions will become far more vocal, and soon Europe will be torn even more along its pro/anti-Russia axis.
Meanwhile, the European Commission is supporting efforts to establish an investment plan to expand the capacity of pipelines in the Southern Gas Corridor between the EU and Azerbaijan, but a senior EU official said supplies through the route were not currently sufficient to replace the 14bn cubic meters of Russian gas that currently flowed through Ukraine to the EU each year.
The EU’s energy commissioner Kadri Simson said she had raised concerns about LNG being diverted from Europe to meet demand in Asia on a trip to Japan this month. She said Tokyo and Brussels had established an “early warning system” to monitor LNG shortages and had agreed both should pursue energy-saving measures.
“The EU is prepared to buffer any negative supply or demand events in global gas markets,” she added. “Our gas storage remains at record high levels [and] our gas demand stabilised at record low levels, down 20% compared with 2021.”
And, it turns out, Europe has Russia to thank for its record-high gas storage.
By Zerohedge.com
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