How the West, harming Russia, brings it closer to the East | Latest news The Moscow Post
31 January 2023

How the West, harming Russia, brings it closer to the East

The collective West this year by all means undermined energy security on a global scale.

The Anglo-Saxons chose a strategy of "hydrocarbon revenge" in order to slow down the process of degradation of their global influence. Fortunately, Australia, Canada and the United States are self-sufficient in terms of hydrocarbon reserves and are even exporters of natural gas, oil and energy coals.

In Europe, they are adjoined by a prosperous Norway and a chronic dependent London, for which those countries that are located across the English Channel have never been as expensive as partners. Germany has been a bitter enemy and remains a competitor. The story is not forgotten, despite the G7 hoops pulling Europe together.

Russia is knocked out of the Anglo-Saxon "equation" of energy self-sufficiency, being the largest independent player. In particular, the source of hydrocarbon raw materials in the German direction. Sanctions and sabotage on the Northern Flows gas pipelines are only one example of how the Anglo-Saxons, trying to harm Moscow, undermine the well-being of both Germany and continental Europe. About what is happening today in the world energy markets - in the material of the international columnist The Moscow Post.

Political shards in the form of rising prices for gas, electricity and gasoline fly to other countries and even to Washington. But what you cannot endure for the sake of a good goal - the destruction of the influence of Vladimir Putin.

Fatih Birol, director of the International Energy Agency (IEA), said that in 2023 the European Union will have to spend an additional 100 billion euros to ensure its energy needs without Russian gas next winter. In his opinion, 2023 will be much more difficult for the European Union, and in the history of the world there has not yet been such a large-scale energy crisis.

Having lost the head, on gas don't cry

Looking in December, 2023, it is necessary to recognize, as current month to call a situation in the gas market of the EU safe language won't turn. Having refused the Russian gas, the leading countries, including Germany and France, endure serious crisis. For example, Germans pay for import gas about 180 dollars in terms of development of one megawatt-hour of the electric power that approximately is seven times more than average value for 10 years till 2020.

According to the Japanese data, for the first nine months of this year Europe imported 75.3 million tons of LNG, a half of these volumes arrived from the USA. Volumes of export of the American LNG grew during this time by 11%, the share of Europe in the American export of LNG increased from 29% to 66%. According to MEA, this year the import of LNG in the EU increased by 65%. It cost much, even on concepts of Brussels.

The observer of Bloomberg Javier Blas believes that Russia has chance to return itself leadership in supply of gas and again to become the key supplier of fuel in the EU. "Kind of the European leaders swore that upon termination of the Ukrainian crisis they won't return to a habitual order of things, inevitable geographical and market realities can overpersuade even the most resolute politicians", - he writes and cites words of the regional German politician who said that to refuse the Russian gas - "historically ignorantly and geopolitical incorrectly".

"If the EU wants to keep competitiveness in the sphere of the chemical, food and heavy industry, cheap gas is necessary for her", - Blas notes.

Perhaps, it so, but not at this geostrategic deal. To help the European economy to increase a mobilization resource, and steel industry of Germany to melt armor for tanks and the IFV hardly will be for the benefit of Russia.

Europe directed by Brussels and which is urged on by "green" politicians like Annalena Berbok lost Russia as the factor ensuring energy security. For the foreseeable future as the permanent representative of Russia to the international organizations in Vienna Mikhail Ulyanov believes, Europe lost Russia as supplier of energy.

It is remarkable that the share of the Russian LNG in the Japanese import of liquefied gas grew from 8% to 10%. The European Union together with Great Britain in a year was increased by purchases of the Russian LNG by 21%.

On a war threshold for LNG

Consequences of this gap gain global value. The world is on the threshold of war for LNG, the Japanese NHK reports. One of the reasons – "fight" of the West against the Russian gas. The European Union, seeking to leave from dependence on the Russian gas, I aggravated excessively the competition in the world markets of liquefied gas.

Obligations of the countries for decarbonization also conduct to the fact that demand for natural gas grows. In particular, investments into fossil fuel, including natural gas, are reduced under pressure of ecological moods and political decisions, braking new projects and the offer of additional volumes of gas.

The role of Russia in the gas market can't be overestimated. In 2021 the volume of world trade of LNG was about 370 million tons. Europe bought from Russia on pipelines 110 million tons of gas in terms of LNG. These balances are broken. Across the whole Europe, terminals for intake of LNG are under construction.

Next year the European import of LNG under spot contracts will continue to grow, supporting the high prices of the LNG free parties. It harms the interests of "old" consumers of LNG as China and Taiwan, Japan and South Korea and also to "young importers", including India, Pakistan, Bangladesh.

Japan, for example, imports approximately the third part from 76 million tons of the LNG by means of purchases on a spot. Recently it was considered as rational and favorable for logistics reasons. This year forced to reconsider these approaches. Growth of the spot prices of LNG led to growth of costs of the generation companies, caused a wave increase in tariffs for the population and the industry, caused the necessity of the state support of the industry. In Japan, about 40% of the electric power of the country are developed by steam-gas power plants.

The deficiency forced LNG to resort to "non-market" methods. The Japanese government, for example, decided to be directly involved in financing of purchases of LNG and coordination of measures for energy saving, use of all opportunities of the NPP and renewables.

But the fact remains: the prices of LNG spot parties in January-March, 2023 are estimated at 34-36 dollars for 1 million British thermal units (mmbtu). These 1250 dollars for 1 thousand cubic meters approximately by three-four times exceeded the prices of LNG in 2018-2019.

Europe harms world economy

In July, 2022 the Japanese steel company Nippon Steel Corp., the second in the world on volumes producer of steel, bought the LNG most expensive lot in the history of the country. For 1 million British thermal units (mmbtu) it was necessary to pay 40 dollars / mmbtu or about 1400 for 1 thousand cubic meters, that is is 4 times more in comparison with the prices of 2021.

On the other hand, under pressure of obligations to reduce emissions of greenhouse gases the Japanese government made the decision, strange for the consumers, not to prolong the long-term gas contract with Qatar. As an explanation served that long-term contracts don't allow maneuver by volumes and delivery time, though guarantee the stable prices. An alternative then purchases of LNG at reduced prices in the free market seemed. It is that market where in 2022 the whole Europe came.

Though the spot prices of LNG fluctuate depending on seasonal factors, in new conditions they remain record-breaking high, and depend on demand for LNG from the EU more and more. In these conditions the importers try to provide supply of LNG under contracts from the largest exporters, including Qatar and the USA, but available volumes for this purpose won't be up to 2026, Bloomberg writes.

Return to long-term contracts notes also the OilPrice edition. So, the Chinese state company SINOPEC in November signed a 27-year long-term agreement on LNG with Qatar as though sneering at Japan. Germany announced on November 29 the contract with Qatar for supply of LNG for a period of 15 years.

Contracts can be not prolonged with ease, but to conclude new long-term agreements on deliveries becomes more difficult. Long-term contracts provide to buyers the stable prices and reliability of deliveries during the long period. It what the European Union consciously and persistently refused in the relations with Gazprom.

On the way to the Eurasian gas Union

Now, when the system of pipeline deliveries from Russia is destroyed, and the balance of supply and demand in the LNG markets is broken too, restoring the balance in both systems will demand great efforts. After recovery of the Chinese economy and liberalization of the mode of "zero tolerance" to COVID demand for LNG from China will grow, putting pressure upon the spot markets.

What the European Union made, having broken gas links with Russia, will disturb the rest of the world, not to mention Europe for a long time. According to forecasts of the US Energy Information Administration, by the end of 2024 of power of Europe on import of LNG will increase by 30% in comparison with 2021, or by 50 million tons per year. Great Britain plans to increase LNG import volumes more than twice in comparison with 2021 too. By estimates, by 2025 the world will lack about 80 million tons of LNG a year, approximately so much liquefied gas annually consumes China.

Japan and Europe at least can buy superexpensive LNG, and at the developing countries of Asia the situation is more difficult. The high prices forced Pakistan, Bangladesh and Thailand to reduce LNG import considerably. In these countries there are long power outages. Increase in prices for gas causes damage, returns region economies to combustion of coal that crosses out their "green" obligations.

What can return the natural gas markets in Asia, including LNG, to approximate balance of supply and demand at which LNG will be is made and to be on sale in enough at reasonable prices?

Success in the solution of these problems will depend in many respects on Russia and Iran which are under the western sanctions. The developing countries of Asia, Russia, India, China and Pakistan in new conditions of the high prices have a unique opportunity to organize production and trade in pipeline gas and LNG in scales of Eurasia, having created for this megaregion something like the Eurasian gas community.

The first steps are already taken in this direction. The head of Gazprom Alexey Miller and the Deputy Prime Minister, the Minister of Energy of Uzbekistan Zhurabek Mirzamakhmudov discussed on December 13 topical issues of cooperation, it is said in the statement of holding. Earlier, Presidents of Russia and Kazakhstan discussed creation of "the tripartite gas alliance" with Uzbekistan. At the first stage it is about interaction in processing and supply of gas, including on the new export directions.

Photo: AA/Star

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