The Russian deterrent gas trap


While Europeans’ perception is that Europe needs Russian gas, actually it is exactly the other way around.

So far, Putin has cleverly played: last spring, he agreed to sell gas to China at $350 per thousand cubic meters and provide new pipelines infrastructures, which will cost $50bn. Definitely, a good deal for China and in general for the Eastern gas market, which is likely to get generally lower prices. On the western side, Europe pays about 50% more for the same gas. Actually, it is not exactly the same gas, as the gas fields that will supply China are located in eastern Siberia, too far from Europe to serve EU market (at current technology and reasonable costs). So, why did Putin sign such a unprofitable deal? Actually, it pretended to be a threat: if Europe keeps sanctioning Russia, than Russia will cease its gas export to the West and will sell it to the Eastern market. Europe should not fall into the Russian deterrent trap.

Europe should develop a sound European energy policy beyond national interests, which would also positively affect its political stature in the international arena.

First, diversifying gas suppliers is the key to reduce risks and get a lower price in the gas market. At this regard, Europe is already strengthening its commercial network with Libya, Algeria, and also with Azerbaijan through the TAP (trans-Adriatic pipeline).

Second, diversification of gas would help: the EU has enough capacity to import 104 billion cubic meters (BCM) of liquefied natural gas (LNG), which is a good substitute for traditionally supplied gas through pipelines.

Third, the EC should ensure all natural gas storage facilities in EU member states to be full. This could provide a reserve of 85 BCM, more than half the 163 BCM that Russia supplied Europe in 2013, which – added to the LNG –  would allow Europe to afford political crises with its Eastern neighbor without fearing a cold winter…

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