Gas, clash between the EU and Russia: prices higher and higher

Gas prices continue to run, and relations between the European Union and Russia worsen with the Nord Stream 2 gas pipeline at the centre of increasing tensions.

The run of natural gas continues, now at record levels. The spot contract on the Dutch market TTF, one of the largest and most liquid in continental Europe, reached 130 euros per megawatt/hour (MWh) this morning, a level never reached before.

Gas is traded on the markets for the equivalent of about two hundred dollars a barrel of oil, thanks to this growth, and it will have a significant impact on bills in the coming weeks.

In this situation, relations between the European Union and Russia worsen due to the disputes over the Nord Stream 2 gas pipeline, at the centre of an international conflict.

The gas confrontation between Russia and the European Union

The old continent continues to run low gas stocks while approaching a winter that could be colder than expected, and Russia is reducing its supplies to boost its stocks.

The Russian choices were at the centre of the words of the President of the European Commission, Ursula von der Leyen, who stressed that Norway is increasing production but then pointed the finger at Russia, guilty of “not following the Norwegian example “.

Russia is continuing its diversification strategy of gas transport routes to Europe, as shown by the contract for the supply to Hungary, which since October 1st bypasses Ukraine, with which the Russians are in conflict time ago.

It is a “diversification aimed at commercial advantages“, according to the words of the Kremlin spokesman to the Tass agency.

The Nord Stream 2 gas pipeline

Another “hot spot” is represented by the Nord Stream 2 gas pipeline, which connects Russia and Germany via the Baltic Sea, already at the centre of discord due to the opposition of the United States and the countries of Eastern Europe.

Furthermore, some legal issues in Germany make the role of this pipeline even less incisive on supplies to Europe for the coming winter.

Gazprom, a Russian gas supply company, defended itself by reaffirming compliance with all existing contracts with EU countries and being ready to sign new ones.

Additionally, Russia is receiving strong demand from Asian markets as it said it expects a cold and snowy winter for the 2021-2022 season in the country.

In the face of facade declarations, volumes delivered to the EU via Belarus have dropped by more than 70% since September, and those passing through Ukraine have been reduced by 22%.

In September 2020, Gazprom was supplying around 105 million cubic meters of gas every day, but last month this dropped to 70 million cubic meters, indicating a fairly noticeable drop in supplies.

The move has often been seen as a form of pressure on the European Union to renounce any form of opposition to the entry into operation of the Nord Stream 2 gas pipeline.

The International Studies Center hypothesize that beyond the official reasons, it is “plausible that Russia wants to turn the EU’s difficulties in its favour in a sector in which it is particularly susceptible since gas could become an important geopolitical tool with which Russia could leverage on European states to promote its interests, first of all, the definitive approval of Nord Stream 2“.

According to the calculations of the Russian state giant, today, there are around 20.5 billion cubic meters of gas in the European storage facilities compared to a year ago—the lowest figure in the last decade.

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