European gas prices continue to soar this Tuesday, July 26. They have reached their highest level since the historic record of March 2022. Around 11 a.m. in Paris, the Dutch Title Transfer Facility (TTF), the benchmark for natural gas in Europe, was trading at 189.75 euros per megawatt hour (MWh), little after having exceeded 190 euros per MWh, thus returning to its levels at the start of the Russian invasion of Ukraine, launched on February 24.
This increase is recorded the day after the announcement of new drastic cuts in deliveries through the Nord Stream gas pipeline, announced by Gazprom. The Russian gas giant has indeed made public Monday, July 25 its desire to drastically reduce, to 33 million m3 daily, deliveries of Russian gas to Europe through Nord Stream, arguing the need for maintenance of a turbine. This new cut, effective from Wednesday, reduces the capacity of the gas pipeline to around 20%, against some 40% currently, as European nations strive to replenish their reserves as winter approaches.
The day after Gazprom’s announcement, the energy ministers of the European Union, meeting in Brussels, agreed on Tuesday to reduce their gas consumption in a coordinated manner and thus fly to the aid of Germany. Since the start of the war in Ukraine, gas has been used as an economic weapon repeatedly brandished between Russia and Europe.
On February 22, 2022, German Chancellor Olaf Scholz announced the suspension of the Nord Stream 2 gas pipeline linking Russia to Germany in retaliation for Moscow’s recognition of separatist territories in eastern Ukraine.
Nord Stream connects Russia to the north of Germany, thanks to two pipelines passing under the Baltic Sea of ??1224 kilometers and with a total capacity of 55.5 billion m3 per year. In 2021, around 40% of Russian gas exports to the EU passed through Nord Stream. Operational since 2011, it belongs to the Russian Gazprom, which holds 51% of the shares. European energy companies – Eon, Wintershall, Gasunie and the French Engie – share the rest of the capital.
At the heart of geopolitical and economic battles since its conception, this pharaonic project has opposed the United States and Germany but also Europeans among themselves, as well as Russia and Ukraine, worried about losing the income it derives from transit of Russian gas on its territory.
Faced with the risk of possible supply disruptions, the prices of natural gas and oil soared shortly after the start of the conflict in Ukraine. On February 24, the Dutch TTF is trading at 118.10 euros per megawatt hour, 33% higher than the previous day. On March 4, the megawatt hour was at 213.8 euros and, on March 7, the price of natural gas reached a new historical record on the European market, at 345 euros per megawatt hour.
A little earlier, on March 2, the European Union (EU) “disconnected” seven Russian banks from the Swift international financial system, while sparing two large financial establishments closely linked to the hydrocarbons sector, due to the heavy dependence of several European states with Russian gas, including Germany, Italy, Austria and Hungary.
On March 8, Brussels presents solutions to cushion the impact of soaring energy prices and reduce Russian gas imports from the EU by two-thirds from 2022.
On March 23, Russian President Vladimir Putin decided to prohibit Europeans from paying for Russian gas in dollars or euros, in response to the freezing of some 300 billion dollars in foreign currency reserves that Russia had abroad.
He announced on March 31 that consumers of Russian gas from “unfriendly” countries – especially European ones – would have to open accounts in rubles in Russian banks to settle their bills, under penalty of being deprived of supplies. The measure is rejected by the European Commission, which sees it as a violation of international sanctions against Moscow.
On April 27, Gazprom thus suspended all its deliveries to Bulgaria and Poland, ensuring that it had not been paid in rubles. Denouncing “gas blackmail”, the President of the European Commission Ursula von der Leyen affirms that these two countries, very dependent on Russian “blue gold”, will now be supplied “by their neighbors in the European Union”.
On May 21, Russia cut off the gas to neighboring Finland, which refused payment in rubles, and provoked its anger by asking to join NATO. The Netherlands and Denmark are also deprived of Russian gas on June 1.
On June 14, Gazprom, citing a technical problem, finally cut its deliveries by 60%, particularly to Germany through Nord Stream 1, causing an explosion in prices. On June 23, Germany activates the “alert level” on its gas supply, which brings the country closer to rationing measures. On July 11, Gazprom shut down Nord Stream 1 for ten days for maintenance.
As Europeans strive to shed their dependence on Russia in the midst of the war in Ukraine, on July 18 the EU announces an agreement with Azerbaijan to double its imports of natural gas in “a few years” since this Caucasus countries.
The announcement was made during a trip to Baku by the President of the European Commission, Ursula von der Leyen, who signed a memorandum of understanding with the Azerbaijani leader, Ilham Aliev, to this effect. Azerbaijan is a former Soviet republic that is strengthening its ties with the West and Turkey while sparing Russia.
The EU is currently importing 8.1 billion cubic meters of natural gas through the Southern Gas Corridor, a series of gas pipelines from Azerbaijan to Europe via Georgia and Turkey. With the July 18 agreement, “we want to expand its capacity to 20 billion cubic meters per year within a few years,” Ursula von der Leyen announced in a joint press statement with Ilham Aliyev, with an objective intermediary of 12 billion cubic meters from 2023.
The Twenty-Seven are also turning to other countries such as Qatar, Norway and Algeria. On July 20, Brussels proposes a plan to reduce European gas demand by 15% to overcome the drop in Russian deliveries.
On Tuesday July 26, EU Member States also agreed on a plan to reduce their gas consumption. As announced by the Czech Presidency of the Council of the EU, EU member states are indeed approving a plan for the coordinated reduction of their gas consumption in order to reduce their dependence on Moscow, after the new drastic drop in Russian deliveries announced by Gazprom through the Nord Stream gas pipeline.
“It was not an impossible mission! The ministers (of the Energy of the 27 meeting in Brussels) reached a political agreement on the reduction of the demand for gas in anticipation of next winter”, announces the Twitter account of the Czech Presidency.