Europe in Ostrich Pose | Latest news The Moscow Post
25 September 2022

Europe in Ostrich Pose

The West is increasingly becoming morally stagnant on the cusp of a cold winter and a global economic crisis.

Deep contradictions in Europe, the screaming incompetence of the central figures of the European Union and a number of leading countries of this peninsula of Eurasia lead to degradation and disintegration. This is especially noticeable against the background of unification processes with the center in Moscow. Following Crimea, the republics of Donbass and other liberated territories west of Lugansk and Donetsk are preparing for referendums and reunification with Russia as a historical Motherland, a correspondent for The Moscow Post reports.

The European Union, meanwhile, is collecting the fruits of its anti-Russian policy. Sanctions are costly for the European economy, admitted the head of the EU diplomatic service, Josep Borrell. Economic losses are followed by changes in political sentiment that threaten the very existence of a united Europe.

Disintegration is already underway. The UK left the EU in 2021 and became poorer, losing markets. The countries of continental Europe, which are members of the EU, also faced a sharp increase in energy prices and inflation due to the imposition of sanctions against Russia and the rejection of Russian fuel. Sharply increased gas and electricity prices are undermining the industries of Germany and other countries. The exchange price of natural gas on the German trading hub Trading Hub Europe (THE) has increased tenfold compared to the level of September 2021.

The gas crisis is dragging along with electricity prices, leading to an increase in household spending. Expensive energy is the path to inflation, unemployment and the loss of industrial muscle. The competitive advantages of a number of large European companies are disappearing before our eyes, which is destroying Europe as an industrial competitor to Asia.

Together with the fall in income, Brussels' ability to keep depressed economies and regions of the European Union afloat, such as the Baltic states, to help countries in Southern and Eastern Europe, like Greece and Poland. "The Brussels elite cannot even understand that the EU sanctions have made Europe poorer and Russia richer," the Daily News Hungary quoted Hungarian politician Mate Kochish as saying. Moreover, the Russian economy, on the contrary, turned out to be resistant to the current crisis and sanctions.

The European governments, which have been entrusted with many of their powers by European governments, show blatant incompetence in dealing with the energy crisis they themselves have created. The head of the European Commission (EC) Ursula von der Leyen in her hearts suggested that the dissatisfied send electricity bills to Putin. All this came after her keynote speech to the European Parliament. Brussels is nervous, and with it Germany and other countries of a once prosperous Europe.

Well-being threatened by "General Winter"

But the "Brussels minds" occupying the offices in the offices of the European Commission mask their mistakes, blame Vladimir Putin for their problems. The Russian President, speaking at a meeting with journalists following the SCO summit in Samarkand, retorted the attack "send bills to Moscow," pointing to another attempt to "shift the headache from a sore head to a healthy one."

And Europe has yet to experience the hardships of the energy crisis in winter conditions. Winter threatens the well-being of Europeans, the resilience of governments and the reputation of parties. Self-harm within the national borders of European countries is now supplemented by cracks in relations between partners, as well as the outright stupidity of the top of the European Union.

The reasons should be sought in the mistakes of the EU, the Russian leader continued. Europe refused to import Russian gas on the basis of long-term contracts, which assumed stable prices and guaranteed sales. Under pressure from Brussels, the price of gas began to take into account not only a basket of oil products and oil, but exchange quotes that are recorded on the free market in real time.

"Spot is starting to rise and long-term contract prices have risen. But is that what we have to do with it? "Putin asked. In 2021, EU states paid about $30 billion more for natural gas than if they adhered to the system of contracts and price indexation that they had previously worked with Gazprom.

The Nord Stream gas pipeline was stopped for repair. Maintenance of turbines made by Siemens depends on its subsidiary in the UK, which requires the lifting of sanctions. Canada returned the turbine at the request of Germany, but refused to transfer it to Gazprom, sent it to Siemens Germany.

One of the two lines of the export gas pipeline passing through the Lugansk region was blocked by Ukraine on May 12, 2022. The Yamal-Europe gas pipeline was stopped by Poland in December 2021. Warsaw refused to renew the contract with Gazprom and buys Russian gas through the Polish-German section of the Yamal-Europe pipeline on the reverse. German gas companies received Russian gas under long-term contracts at a contract price and resold it to Poland at a premium.

But Europe can lift sanctions on Nord Stream 2 if it wants to solve the problems of gas shortages, the Russian president suggested. The Nord Stream-2 gas pipeline could double the capacity of the sea route to 110 billion cubic meters per year, replace the volumes of gas pumped through Ukraine. But the European Commission and the German government, under the influence of the United States, slowed down the certification of the project, and on February 22 imposed sanctions in response to Russia's recognition of the LPR and DPR.

The shortage of gas in the coming winter, taking into account savings and accumulated reserves, may amount to 12-20 billion cubic meters, depending on weather conditions and the state of the LNG market. In 2023, the rejection of Russian gas will mean a deficit of 40-60 billion cubic meters for European countries. This is comparable to the annual gas consumption by France and Poland, combined, or the annual needs of such industries as fertilizer production, petrochemicals, ferrous and non-ferrous metallurgy, and mechanical engineering.

In 2021, the share of large industrial gas consumers in the total gas demand in Germany was about 37%. Germany reduced the share of the Russian Federation in gas supplies from 55% at the beginning of the year to 35% percent in May 2022. And everything that households and businesses have to do is made by their own decisions to create a competitive market.

From petrodollars to gas exchange

The deregulation of the EU gas market was pushed by the EC. Initially, the idea of ​ ​ "liberalization" was proposed by the largest banks and hedge funds. The world's leading oil suppliers, with the leadership of Anglo-American oil companies, have created a global system for pricing oil in dollars.

The market for "paper oil," or futures and derivative trading in oil contracts, was controlled by a handful of banks in New York and the City of London. They also worked to create a global market for "paper gas," which could also be controlled. The creation of a "paper market" of gas was especially hindered by Russian pipeline gas and Gazprom, as the main protagonist of long-term contracts.

By 2019, EC directives made it possible to fully deregulate gas trade, although Russia remained the largest source of its imports. Some countries, including Poland and Holland, have built terminals for receiving LNG, but its share in gas imports by the European Union in 2021 was only 20%. Contrary to this, the EU began to insist on a radical change in natural gas pricing.

To trade futures contracts, a number of virtual trading gas "hubs" were created in several countries. By 2020, the Dutch TTF (Ownership Transfer Mechanism) has become the dominant or "benchmark" gas trading hub. It is also a virtual platform owned by the Dutch government.

Against Gazprom, which supplied about 40% of gas imported by the European Union, restrictive rules were introduced under the guise of antitrust measures. The Russian supplier was required to open pipelines and gas distribution networks for competitors. By using sanctions or closing gas supplies under long-term contracts, exchange speculators prepared to make good money and succeeded in doing so.

"Green" and gas illusions of the European Union

The green transition program has become part of a pressure campaign against Gazprom and, accordingly, Russia. "The energy crisis did not begin with the beginning of Russia's special military operation in Donbass.... It began with a green agenda "and Western countries," to achieve a momentary political situation, they went to curtail hydrocarbon energy in general, "Russian President Vladimir Putin recalled, speaking in Samarkand.

The condition for obtaining funding for oil and gas and coal energy projects was compliance with new environmental, social and management standards. The application of ESG principles (Environmental, Social, Governance) in the field of mining, including oil and natural gas, has slowed down investments in production projects. "The fetishization of these principles has turned into a cudgel for imposing new rules on international trade, introducing quotas and a cross-border carbon tax," said Vasily Vysokov, head of the ESG-banking project group of the Association of Russian Banks.

Investments in the oil and gas industry increasingly began to be called "unethical," investment funds and banks "turned green" in the wake of demand for "sustainable investment." They even began to talk about the "new protectionism" of the European Union. For corporations whose shares are traded on the exchanges, the ESG format has become almost mandatory.

There used to be times, now predictions

Recall that in 2020, the European gas market experienced a decline, gas prices fell sharply. In September 2019, the average price at the TTF hub in the Netherlands decreased to $117 per 1,000 cubic meters. Against the background of low prices, the companies did not plan to build new gas production and liquefaction facilities. Russian Energy Minister Alexander Novak said then that global investments in the industry will decrease by a third.

Gas consumption in the world in 2020 decreased to 3.840 billion cubic meters. Gas in Europe then became so cheap that importers refused batches of American LNG, despite penalties. But there are also long-term forecasts and they should be very unpleasant for Europe. Global demand for gas is expected to grow by a quarter to reach 4.9 trillion cubic meters by 2040.

The demand for imported LNG in 2040 will reach 736 million tons. By this time, according to forecasts, LNG consumption may be ahead of production by 64 million tons, which will raise prices even higher. Demand growth will be influenced by consumption in China, India, Pakistan, and other Asian countries with which Europe has to compete. Japan and South Korea will also be involved in competition for LNG. There will be no more such prices for natural gas, which Gazprom once agreed to.

The situation with oil is no better and the crisis may come as early as early 2023. The Permian Basin - the most productive shale region in the United States, providing growth in production volumes, is experiencing stagnation. Lower oil prices, rising interest rates, inflation and the threat of recession are weighing on investors in shale production.

The Biden administration's fossil fuel policies and public statements from the White House are also not conducive to a supportive investment environment. When the EU embargo on Russian oil comes into force, American shale oil companies will not be able to fill this niche.

Political contradictions

Political contradictions are also breaking through to the surface of the European Union, like swamp bubbles of methane. The increase in the number of EU participants led to an increase in contradictions between the "core" and the periphery. Problems in relations with the UK around the protocol on Northern Ireland and disagreements on fishing have not been resolved. Southern European countries, especially Italy, Spain, Greece, can return to national currencies. Donor countries may refuse to pay the bills of Estonia, Latvia, Lithuania.

Germany and France remain the main donor countries. They will suffer the greatest losses from sanctions and conflict, writes China Daily. Dependent countries overloaded the EU, deprived it of economic flexibility. In its policy, the EU found itself in the fairway of the United States and NATO, which contradicts the goals stated at its founding.

Brussels has soured relations with Moscow. Germany destroyed relations with Gazprom, took its shares in three oil refineries from Rosneft because. As Olaf Scholz said, "Russia has ceased to be a reliable energy supplier." Ursula von der Leyen promised to maintain sanctions until the Russian economy "is torn apart" and announced her support for Kyiv.

Hungary declares disagreement with the approach of Brussels to the problems of managing the economy and the policy of sanctions against Russia. In response, the EU executive body proposed to suspend the allocation of 7.5 billion euros from the budget for Hungary. Orban's government was accused of corruption, the country received the label of "hybrid regime of electoral autocracy"! The Polish Prime Minister allowed a split in the European Union into those who stand for peace and those who want to continue the conflict in Ukraine.

The internal problems of the EU include the crisis in relations with Poland, which refuses to recognize the supremacy of European legislation over national. According to Warsaw, EU member states have the right to independently decide how to build their own justice system. The most radical observers argue that the protracted conflict may end with Polexit - Poland's withdrawal from the community.

Warsaw intends to demand reparations from Berlin. The Germans indicated that they saw no reason for any payments, since in 1953 Poland refused reparations. This topic has been discussed since July 2018, when Yaroslav Kaczynski said that the country had never refused compensation.

Europe loses from the conflict in Ukraine. Amid the resource shock, the European economy is estimated to lose at least about fifteen percent of its GDP over the next tri‒pyat years. We are talking about the economic collapse of most of the "golden billion." Europe will face a path of impoverishment of the population, - predicts "Expert."

One Europe, like an icicle of ice, can fall and break, melt like ice in spring, disappear like Ukraine. The European bureaucrats, who have gained power over Europe, lead it to disaster, political chaos and economic decline. And once after all, Brussels was declared the capital of Belgium and its first king was Leopold I, the general of the Russian army and the favorite of Alexander I. Therefore, Europe has a chance to remain a museum of history!

Photo: rbc.ru / ЕРА/UPG

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