The big picture was clear to anyone who bothered to keep their eyes open: back in August, when we first reported that Russian supplies of nat gas via the Yamal pipeline had collapsed and when the first stirrings of the upcoming surge in nat gas prices were emerging, we said to "call it a perfect storm of declining supplies, lack of sufficient inventories and ongoing geopolitical posturing as Russia piles pressure on EU authorities to approve the dual-pipeline Nord Stream 2 project through the Baltic Sea and into Germany, while gas shippers are running low on time and, indeed, options to keep Europe adequately supplied this winter."
Specifically, we also warned that "a worst case scenario could see European gas prices explode to suborbital levels that would make Jeff Bezos proud should the continent fail to stock up on sufficient nat gas amounts."
Indeed, that's precisely what happened in the ensuing two months
But more importantly, even though Europe is now facing a devastating cold winter with widespread blackouts, Europe's unelected bureaucrats still refuse to accept the reality in which Putin calls all the shots.
So perhaps to make it very clear what it would take to avoid a miserable, freezing winter, today Russia signaled that it won’t go out of its way to offer European consumers extra gas to ease the current energy crisis unless it gets something in return: regulatory approval to start shipments through the Nord Stream 2 pipeline.
In exchange for upping supplies, Bloomberg reports citing people close to state-run gas giant Gazprom and the Kremlin - that Russia wants what was clear to anyone - i.e., to get German and European Union approval to begin using the pipeline to Europe.
“We cannot ride to the rescue just to compensate for mistakes that we didn’t commit,” Konstantin Kosachyov, a top pro-Kremlin legislator in the upper house of parliament, said in an interview, without specifying what Russia is seeking. “We’re fulfilling all our contracts, all our obligations. Everything on top of that should be a subject for additional voluntary and mutually beneficial agreements.”
Well, Russia clearly has good lawyers to find all the loopholes that allow it to ship far less gas than it has recently while remaining in compliance with its contractual terms.
To underscore the point, Nord Stream 2 said Monday its first line is full of so-called technical gas and ready to begin operation, though it can’t ship it until regulatory approval is granted. That announcement came hours after European gas prices spiked on news that Gazprom had again bid for only a small amount of capacity to ship the fuel to Europe via other routes.
Amusingly, Bloomberg spins the narrative as if it is somehow Moscow's responsibility to keep Europe warm saying that "as surging fuel costs have caused increasing economic havoc, pressure has grown on Russia, Europe’s largest supplier, to pump more. Extra Russian gas is seen as the main way to avoid an even deeper supply crunch in the middle of the winter."
Actually, the truth is that if energy prices don't plunge - and soon - the pressure will grow on Europe's politicians to find gas at any price or meet an angry mob. As for Russia, as long as it complies with its contract, if it is willing to forego on marginal profits for additional gas exports well that's entirely it's decision.
Meanwhile, amid deep sanctions targeting the Kremlin which has emerged as the "biggest western enemy" as a distraction for Hillary Clinton's catastrophic failure to win the 2016 presidency, the Kremlin has zero appetite to do any favors. Although exports to Europe are up this year from last year’s depressed levels, they lag those seen in 2019, according to the Oxford Institute for Energy Studies. Daily flows have dropped in October and Gazprom has been slow to refill storage facilities it owns in Europe, adding to upward pressure on prices. Russia has blamed an overly hasty shift to relying on spot markets and alternative energy sources for the crisis.
Mocking the gullible Europe, last week President Vladimir Putin suggested at an energy conference that Russia could offer more gas. But he also lamented the slow progress on getting approval for Nord Stream 2, a process that could take until well into next year. German regulators are currently reviewing its application for certification but have said their initial decision could come only in January, after which the European Commission would also have to give the go-ahead.
“If we could increase deliveries through this route, this would substantially ease tension on the European energy market,” Putin said. “However, we cannot do this so far because of the administrative barriers.”
In other words, if Europe freeze this winter it has nobody to blame but itself... and the ESG lobby of course, whose impact has led to a collapse in traditional fossil fuel investments and a decimation of Europe's legacy energy infrastructure.