Will Russia no longer be able to sell gas?

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What happened to gas pipelines and why is it important?

The Nord Stream 2 gas pipeline was completed only in 2021 - it has not yet been launched, so its damage will not affect export volumes in any way. Gas was supplied to Europe via Nord Stream 1: in 2021, Russia exported 38% of all gas sold to Europe through it.

Before the start of the war, about 5 billion cubic meters of gas went to Europe through Nord Stream every month (to understand how much it is: last year, Russian enterprises and households consumed about 565 billion cubic meters of gas, which is about 47 billion per month. - Note. "Cold "") . After the introduction of sanctions, European countries began to purchase gas more actively in order to have time to fill their storage facilities before the final ban on imports. Now, due to leaks, gas pipelines are almost completely out of order.

“It won’t be possible to fix the leak quickly, first you have to wait until the gas comes out into the water: before that, it’s simply dangerous to go down to the gas pipeline,” says Stanislav Roginsky. - When the water has already filled the pipes, specialists will be able to go down under the water and establish what really happened and how the damage can be repaired. With a high degree of probability, it will not be possible to carry out repair work at the bottom: if an explosion occurs, then the damage there is serious.”

According to Roginsky, it can be assumed that the damaged areas will need to be replaced. “For their laying, ships are needed that can do this. Russia has only two of these: one of them, Akademik Chersky, is located in the Far East, where it services the development of the Kirinskoye field. The second vessel, the Fortuna pipe-laying barge, is located in the Murmansk region. Both ships have yet to come to the Baltic, and it will take time. Given the current situation, the risks of such a transition [of vessels] have also increased significantly compared to last year. If there had been an understanding of the possibility of a terrorist attack in advance, then the ships would have been based in the Baltic, Roginsky is sure. “Besides, new pipes still need to be ordered, manufactured, logistics must be organized with the involvement of auxiliary vessels - the repair will take at least six months, and then if extra efforts are made, which we do not see yet.”

And what, now Russia will not be able to sell gas to Europe?

Russia will be able to supply gas, but in much smaller volumes. “If the information is confirmed that one string of the Nord Stream has remained in operation, it could potentially operate at 20% of the entire capacity of one string of the gas pipeline – at about 5.5 billion cubic meters per year,” says Roginsky. “But the problem with the repair and return of old turbines that arose during the preventive maintenance of Nord Stream has not gone away. If the situation with the turbines remained unresolved and the energy crisis continued to worsen, the Europeans could switch to Nord Stream 2 after the completion of the certification procedure. But now there is no such option.”

In total, there are several highways for the supply of Russian gas to Europe: through Turkey, through Ukraine and through Belarus with Poland. The first route provides gas to the countries of southeastern Europe, while the northwestern countries received gas through the Nord Stream and Yamal-Europe (this gas pipeline has now been stopped). Therefore, the situation with these deliveries is now difficult.

“In addition to fulfilling the 2019 contract for gas supplies to Europe through Ukraine , which expires in 2024, most likely Russia can return to gas transit through the Yamal-Europe gas pipeline. This means that Russia will pay Poland a high monthly tariff for its transportation,” explains Roginsky. - Another option is to increase supplies through the Ukrainian gas transportation system, but this, of course, will not be done in the current conditions: the Ukrainian side will spend the money received from this on the war. And here comes the question of military planning.”

How could this even happen?

If Nord Stream is so important to Russia, it is logical to assume that under military conditions, its condition should have been closely monitored, and in case of damage to the gas pipeline, there was a mitigation plan. But none of this, apparently, was done, and Stanislav Roginsky sees this as a problem with making strategic decisions in the gas industry.

“It is worth directing your question to the management of Gazprom — to those who, in their official duties, should have seen the likelihood of such a risk and report it to the top,” says Roginsky. - Really, in the seven months of hostilities, no one predicted that this [disabling the gas pipeline] could happen? Didn't it occur to any of the heads of Gazprom divisions responsible for risk management? If it doesn't, then it's criminal negligence. And if it did, why didn't anyone write a memorandum to the company's management? Nobody warned the Germans, Danes, Finns and Swedes that it was necessary to protect the area of ​​the pipes?

Will the inhabitants of European countries suffer from what happened?

According to Stanislav Roginsky, Europe became the third victim of the war after Ukraine and Russia. “The energy crisis is leading to the death of European industry. Its competitiveness at a price of $2,000 per thousand cubic meters of gas is declining: such prices will inflict enormous damage on it,” Roginsky believes. - At the beginning of 2021, $800 per thousand cubic meters was seen as the ultimate dream for gas exporters, now some experts are talking about $4-5 thousand per thousand cubic meters this winter - precisely due to the speculative component that exists on the modern gas market even in the face of declining demand . If we are not talking about industry, but about people, then they will survive the winter, [governments] subsidize gas for them. But how much will it cost?

When in 2005-2006 the Russian side discussed the future of the gas contract policy, it tried to convince European partners to keep the formulas for determining the price of gas to the price of oil products, and not to the exchange, because the exchange is unstable.

“Then we were told that in the future there will be an excess of gas supply and it is more profitable for them to abandon these mechanisms. They believed that the market itself would regulate everything. But if you look at the oil crises of 1973, 1980 and the situation in 2000, you will see that demand at that moment exceeded supply against the backdrop of various political events,” says Roginsky.

According to him, there is now a panic in the gas markets, and in such a situation, the price on the stock exchange becomes very unstable and changes depending on the news. Europe has already begun to fill storage facilities with gas - Stanislav Roginsky says that this will help smooth out the decline in direct supplies for some time. At the same time, private European companies can now buy gas for a conditional $1.5 thousand per thousand cubic meters, but in 2-3 months at the peak of prices they will seek to sell it at the maximum price so as not to trade at a loss.

“To avoid this, European states will have to subsidize consumption or nationalize the gas industry to help with gas purchases. In this case, the costs of ensuring consumption will be borne by the state, Roginsky explains. The Germans are already discussing the nationalization of three companies. But in any case, it will be difficult for them.”

If there was a crisis, then what is the problem?

Undermining Nord Stream 1 will exacerbate this energy crisis in Europe. Gas supplies will not be interrupted, but will decrease and rise in price. In the context of the overall economic damage from the sanctions, this sabotage is not the worst shock for Russia. However, this will change the alignment of forces in the gas market not in its favor - and definitely not in favor of Europe, according to Roginsky.