The Nordstream 1 gas supply saga took another turn on Friday. Canadian newspaper Globe and Mail reported that German foreign minister Annalena Baerbock has warned Ottawa that if Canada kept sanctions in place that could effectively block the delivery of a missing gas turbine to Gazprom, Berlin could be forced to suspend military and economic aid to Ukraine. Baerbock reportedly indicated that a full stop of Russian gas flows via Nordstream1 could lead to popular uprisings in Germany. German media outlet RND quoted Baerbock on Wednesday stating that domestic political repercussions played an important role in negotiations with Canada. Berlin seems to have put a direct link between its support for Ukraine and the return of the gas turbine to Gazprom, which is remarkable, to say the least. Baerbock repeated that if no Russian gas was flowing via Nordstream1, Berlin would need to concentrate on possible internal uprisings, and may not be able to support Ukraine any further. Baerbock also reiterated to the German press that Germany will continue to need Russian gas in the future. In a reaction to the Globe and Mail article, German Ambassador Sabine Sparwasser said that Germany has never been threatening Canada. The German diplomat also stated to the press that Germany and the rest of Europe are working to wean themselves off Russian natural gas but do not want to see gas flows “cut off immediately” in order to guarantee the functioning of the economy in the short term. She said this is important to preserve their ability to protect Ukraine “for as long as it takes.”
The above issue is maybe more diffuse than presented in the press but shows the leverage Russia still holds over the largest European economy. German industry and consumers are still very much dependent on Russian hydrocarbons, with no direct available options to completely wean themselves off Russian gas. The sigh of relief in Berlin, and other European capitals, about the partial resumption of natural gas, flows in Nordstream1 has been clearly heard in Moscow. Gazprom reopened the Nord Stream 1 pipeline on Thursday after a ten-day scheduled maintenance shutdown, but it was still operating at a 40% capacity.
It is clear that Canada’s government has been put in a tough situation by Germany’s position. The only possible reason for the current approach taken by Canada’s PM Justin Trudeau is to preserve unity in NATO. Putin’s “gasmailing” politics have put domestic energy security in another light, and Germany’s direct communication to its NATO-ally Canada makes that clear.
This week’s meeting between Iran, Russia and Turkey, has again also shown that the relations between Moscow and its perceived allies or compatriots are still good. The high-level meetings between Russia’s Putin, Iranian leader Raisi and Turkish president Erdogan have raised not only eyebrows but concerns inside of NATO and the EU. A continuation of the Turkish-Russia energy alliance is expected, as Ankara will need to keep the lights on. However, the meeting of Erdogan with two outcasts Putin and Raisi is not going down very well on all other fronts.
Another remarkable event is the current visit of the Hungarian foreign minister Peter Szijjarto to Moscow. The Hungarian official has asked during a meeting with his Russian counterpart Sergey Lavrov for more Russian gas. The Hungarians have taken an independent, pragmatic approach towards Moscow after the Russian invasion of Ukraine. Budapest is for 85% dependent on Russian gas for its energy needs, and Hungary has been opposing EU calls for sanctions on Russian gas imports. Szjijarto indicated in Moscow that Hungary needs an additional 700 million cubic meters of gas on top of an existing long-term supply deal with Russia. He also stated that talks are underway between Budapest and Moscow about the additional purchases. The need for additional volumes is clear, as Hungarian gas storage volumes are at only 27% of annual consumption. In 2021 Gazprom and Hungary signed a 15-year supply deal, which will bring Budapest 3.5 BCM per year via Bulgaria and Serbia, and 1BCM via Austria.
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The Nord Stream saga (1-2) will continue for another couple of months, as Putin sees the advantage of using his natural gas pipeline flows as a means to disrupt European energy strategies further. The next date to note is July 26, when the EU energy ministers will convene for an emergency meeting to discuss the proposed 15% gas usage cuts. It can be expected that new “technical issues” will emerge around Nord Stream, potentially blocking even more flows or new issues in other pipelines. Turkstream and other pipelines have until now been left alone but could become the next target in the Kremlin’s game of blackmail.
The ongoing high energy price levels, and uncertainty on energy supplies, combined with high inflation, are a strong deck of cards in Putin’s hands. Europe’s resolve will be tested, especially if the Ukraine war drags on.
By Cyril Widdershoven for Oilprice.com
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Must be really hard to have to pay the Russians in their own currency.