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How Putin despatched EU vitality costs rocketing – POLITICO

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Russia’s invasion of Ukraine prompted many of the EU to get up to the hazard of relying on the Kremlin for its pure fuel.

However shifting away from Russian fuel, which final yr accounted for 40 p.c of EU demand, is a painful course of — and Russian President Vladimir Putin is not pulling any punches.

Even earlier than the invasion of Ukraine, his state-backed export monopoly Gazprom slowly started promoting much less pure fuel to European consumers, draining storage and slowing pipeline flows to a trickle.

These provide modifications — coupled with Putin’s bombastic statements, false guarantees and periodic jokes at Brussels’ expense — brought about vitality costs to spike, plunge, recuperate and dip once more, as anxious merchants tried to foretell how a lot fuel they may rely on come winter.

Here is a take a look at how Russian vitality video games — and reactions to them within the West — made EU markets go haywire.

Late 2021: Run-up to the Ukrainian invasion

In response to the European Fee’s official fuel market reviews, in 2021 Gazprom equipped 137 billion cubic meters (bcm) of fuel by way of pipeline to EU nations. That is 7 p.c extra than in 2020, which was a yr of unusually low demand attributable to lockdowns — however represents a 16 p.c drop in deliveries in comparison with 2019, the final regular yr pre-COVID. A lot of that decrease 2021 provide was attributable to a extreme pullback from October to December, when Gazprom despatched 24 p.c much less to the EU than in the identical interval in 2020. The uncertainty forward of winter brought about never-before-seen worth spikes on EU fuel buying and selling markets, going from lower than €15 per megawatt-hour (MWh) in January to a year-end report of €180/MWh.

AUGUST 6: Gazprom dramatically reduces fuel flows by means of the Yamal pipeline — which runs by means of Belarus and Poland — citing a hearth at a fuel processing facility in western Siberia. Gazprom as a substitute begins withdrawing fuel held in underground storage within the EU to satisfy contractual deliveries to shoppers, exacerbating an already-existing drawback of low storage ranges.

AUGUST 16: Gazprom solely books 4 p.c of accessible fuel transit capability supplied by Ukraine for September, inflicting fuel costs to spike in anticipation of the decrease flows.

SEPTEMBER 10: Gazprom’s Russia-to-Germany Nord Stream 2 pipeline is absolutely constructed, ready just for certification from German regulators to start working.

OCTOBER 1: Gazprom stops sending fuel by means of Ukraine to Hungary, as Moscow and Budapest signal 15-year contracts to ship provides by way of Russia’s TurkStream pipeline as a substitute.

OCTOBER 5: Putin blames the “hysteria and confusion” in European vitality markets on “ill-balanced choices” like local weather change and vitality transition coverage. EU fuel costs spike to a report €165 per megawatt-hour.

OCTOBER 6: Gasoline costs fall when, a day later, Putin says: “Growing fuel provides … can and needs to be executed.” He additionally calls for fast German approval of Nord Stream 2.

OCTOBER 8: The Romanian Vitality Suppliers Affiliation warns that its members’ requests for added fuel provides for winter are being refused by Gazprom.

OCTOBER 13: Gazprom sells so-called spot volumes of fuel to the European market — which means gross sales at open public sale exterior of multi-year provide contracts — for the final time. Since then, solely long-term shoppers have been in a position to obtain pre-agreed deliveries by way of pipeline, resulting in a decline within the quantity of Russian fuel piped to Europe.

OCTOBER 15: Ukraine’s fuel grid operator warns Gazprom is barely sending a fraction of the booked quantity of fuel by means of Ukraine.

OCTOBER 19: Poland warns EU competitors officers that Gazprom is “limiting flows by means of routes aside from Nord Stream 1” and asks for an investigation into Gazprom for market manipulation.

OCTOBER 21: Putin ridicules the European Fee for discouraging long-term fuel provide contracts in favor of spot trades, and provides he can ship the EU the additional fuel it wants if regulators would solely approve Nord Stream 2.

OCTOBER 26: The EU proclaims it’s gathering proof for a contest probe to see if excessive fuel costs are attributable to manipulation by main suppliers like Gazprom.

OCTOBER 28: Putin orders Gazprom to start filling its abnormally low underground storage within the EU forward of winter, prompting EU fuel costs to fall beneath €80/MWh for the primary time in September. That storage replenishment does not find yourself taking place.

NOVEMBER 16: Germany’s infrastructure regulator says it cannot certify the Nord Stream 2 pipeline till possession is transferred to a subsidiary in Germany.

DECEMBER 16: German regulators announce that Nord Stream 2 will not be licensed earlier than at the very least summer time 2022.

DECEMBER 21: Russian fuel flows by means of the Yamal pipeline cease then unexpectedly start flowing in reverse, carrying fuel east away from Germany. Gasoline costs hit a report excessive of €180/MWh. Ukraine’s Naftogaz responds by calling for a probe into doable market manipulation by Gazprom. Putin as a substitute blames grasping Western merchants for reselling low-cost Russian fuel acquired by way of contract at a large markup and parking it in tax-friendly Ukrainian storage.

2022: Invasion, sanctions and fuel shut-offs

Preliminary Gazprom knowledge from January to July 2022 reveals exports to its so-called far overseas — which means nations exterior the previous Soviet Union are down about 35 p.c in comparison with final yr. That determine takes into consideration larger deliveries to China, which means the true discount to Europe is extra extreme. Since Russia invaded Ukraine in February, Gazprom has engaged in a sequence of provide disruptions to EU-based shoppers following a mandate to settle funds in Russian forex, which the European Fee has forbidden as a possible violation of EU monetary sanctions.

FEBRUARY 21: Putin acknowledges two separatist areas in jap Ukraine and orders in Russian troops.

FEBRUARY 22: In response, Germany halts administrative certification of Nord Stream 2.

Putin says that “Russia, for its half, intends to proceed uninterrupted provides of this uncooked materials, together with [liquefied natural gas], to world markets.” Dmitry Medvedev, former Russian president and deputy chair of Russia’s safety council, tweets: “Welcome to the courageous new world the place Europeans are very quickly going to pay €2,000 for 1,000 cubic meters of pure fuel!”

FEBRUARY 24: Russia launches a full-scale invasion of Ukraine. Brent crude, the worldwide oil benchmark, exceeds $100 a barrel for the primary time since 2014. EU fuel costs hit €128/MWh.

MARCH 2: U.S. oil and fuel main Exxon proclaims it’s going to halt new funding in Russia and pull out of a serious fuel mission, Sakhalin 1. Gasoline costs hit €157/MWh.

MARCH 7: Leaked paperwork from the European Fee present a proposal to scale back EU reliance on Russian fuel by two-thirds, notably by means of the obligatory filling of EU underground fuel storage ranges to 80 p.c by October. Costs for usually low-cost summer time fuel briefly hit €345/MWh.

APRIL 26: Gazprom halts shipments to Poland and Bulgaria over a refusal to pay in rubles.

APRIL 27: Kremlin spokesperson Dmitry Peskov warns any consumer refusing to pay for fuel utilizing a ruble-denominated checking account dangers seeing provides reduce off.

MAY 11: Ukraine proclaims unauthorized fuel withdrawals from a pipeline passing by means of “territories underneath Russian navy occupation” and warns Gazprom to make use of one other route. Since then, Russia merely sends much less fuel by means of Ukraine.

MAY 16: Russia halts electrical energy deliveries to Finland, in a transfer broadly perceived as a response to Finland’s software for NATO membership on Could 12.

MAY 21: Gazprom stops deliveries to Finland’s Gasum.

MAY 31: Gazprom “utterly suspends fuel provides” to Dutch firm GasTerra “attributable to failure to pay in rubles.”

JUNE 1: Gazprom stops deliveries to Ørsted, Denmark’s largest vitality firm, “attributable to nonpayment in rubles.”

JUNE 15: Gazprom proclaims flows will fall to 40 p.c capability on Nord Stream starting June 16.

JUNE 17: France and Italy obtain much less Russian fuel than anticipated days after French President Emmanuel Macron and Italian Prime Minister Mario Draghi go to Kyiv to help Ukraine’s bid to affix the EU.

JULY 11: Nord Stream goes offline for annual 10-day upkeep.

JULY 18: Gazprom sends retroactive authorized discover to Germany’s Uniper and different European shoppers, claiming diminished fuel deliveries since June 14 are attributable to elements past the corporate’s management. Italy’s Eni, Austria’s OMV and France’s Engie additionally report diminished deliveries.

JULY 20: Putin dangles a risk to spice up fuel flows to Europe whereas Nord Stream is underperforming: “Now we have one other route prepared — it’s Nord Stream 2.”

JULY 21: Nord Stream resumes deliveries, however at 40 p.c capability. Putin warns flows may dip once more because of the delayed return of a fuel turbine from Canada.

JULY 27: Deliveries by way of Nord Stream drop to twenty p.c capability. Putin blames the dearth of a Siemens turbine wanted to push extra fuel by means of the road, however Kyiv factors out that Moscow remains to be paying for transit area by means of Ukraine and never utilizing it.

JULY 30: Gazprom stops supplying fuel to Latvia “attributable to violation of the situations for fuel withdrawal,” after information that Latvian vitality agency Latvijas Gaze discovered another provider of Russian fuel which didn’t require cost in rubles.

AUGUST 3: Gazprom says EU, U.S. and U.Okay. sanctions in opposition to Moscow are “making it not possible to convey” the Siemens fuel turbine again to Russia to spice up flows by means of Nord Stream. German Chancellor Olaf Scholz counters that “nothing stands in the best way of additional transport.”

Former German Chancellor Gerhard Schröder says he met with Putin in Russia to debate the potential for a peace cope with Ukraine — concurrently urging Berlin to restart certification of Nord Stream 2. “The excellent news is that the Kremlin needs a negotiated settlement,” he says. “[But] in the event you don’t wish to use Nord Stream 2, you need to bear the implications. And they are going to be large in Germany.”

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