Putin’s Big Chill in Europe
Russia threatens to punish support for Ukraine by cutting the gas supply. The West must not be blackmailed.
For 10 days in mid-July, Russian gas stopped flowing to Europe through the Nord Stream 1 pipeline. At the end of last week, the flow briefly resumed, though slower than usual. On July 25, the flow was disrupted again, falling to about 20 percent of usual seasonal volumes.
Russia has offered technical reasons and excuses for the shutdown: These were maintenance issues, according to the state-owned Gazprom. Those explanations may not be wholly false: Just as the Russian army turned out to be a much more broken-down organization than advertised, so the Russian natural-gas industry may be more broken-down as well.
But the interruptions and disruptions to gas supplies over the past weeks represented an ominous foreshadowing of what Russia might do to Europe this winter.
European countries use much more gas in the winter than they do in the summer. Through the warmer months, they buy gas to stockpile. Major European gas importers store the gas in natural caverns and cavities underground and offshore, then draw down the reserves as needed during colder weather.
As Russian President Vladimir Putin planned his invasion of Ukraine in 2021, he honored Russia’s long-term contracts—but found excuses to stop selling into European short-term spot markets, despite the lucrative opportunities presented by last fall’s soaring prices. The supply squeeze in the summer and fall of 2021 left Europeans with dangerously low reserves over the winter of 2021–22. Putin seems to have expected that low reserves of gas would intimidate European governments into accepting his aggression.
Now Putin is constraining supply again, this time apparently intending to push European countries into outright shortages over the winter ahead. The European Union Commission’s president, Ursula von der Leyen, warned last week that a total Russian cutoff was “likely,” and she urged member countries to plan to reduce their gas consumption by 15 percent (from their average level of use over the past five years). Last winter, Putin brandished Russia’s gas weapon. In the one ahead, he seems likely to launch it.
The International Monetary Fund has modeled the effect of a Russian gas embargo. It predicts a surge in inflation and outright recession in many countries in Central and Eastern Europe. The threat of Russian embargo explains the sharp decline in the value of the euro, now trading at close to parity with the U.S. dollar.
Germany ranks high among the countries most at risk. A generation of German politicians bet their country’s energy security on faith in Russia as a reliable supplier. That bet is a bust, and Germany must now scramble through the warm-weather months to prepare for Russian economic warfare.
I spoke this week with several German energy and economic experts to assess how those preparations are going. The mood, to quote one of them, is “tense.”
Gas moves to homes and factories via networks of pipelines. Those networks commit countries to patterns of distribution that are not fast, easy, or cheap to change. For example, Spain imports much of its natural gas from North Africa through underwater pipelines. Spain also has large facilities for receiving liquid natural gas by ship, but it has only a few small pipeline connections to the rest of Europe. An ambitious project to build a major new pipeline from Spain to France was abandoned in 2019. If work resumed today, the project would take at least three years to finish.
Germany’s network could receive more gas from neighbors nearer than Spain via France. It has some capacity for receiving more liquid natural gas by sea and is rushing to provide more. A new facility at Wilhelmshaven, on Germany’s North Sea coast, might be ready late this year or early next.
The EU is hastening to sign new contracts with Azerbaijan, moving the gas via a pipeline across Turkey to Southern Europe. Gas might also someday come from farther afield in Central Asia. Turkmenistan has built a pipeline to the Caspian Sea. An underwater pipeline across the Caspian could bring that gas to the Azerbaijan network.
Perhaps the most dangerous point of vulnerability is within the German network itself. Gas is pushed through pipelines under pressure. If the network doesn’t contain enough gas, the pressure drops and the gas cannot move. A big enough shortfall going into the pipe can translate into a 100 percent shortage at the other end. So any rationing plan is likely to be very unequal: In order to sustain pressure in high-priority pipes, the gas may have to be turned off altogether to lower-priority pipes.
The political risks of the decisions here are obviously high. Put industry before consumers? Electricity before heating? Big cities before small towns?
Another agonizing dilemma: Much of German industrial production is outsourced to nearby EU partners—Hungary and Slovakia especially. Those countries depend even more on Russian gas than Germany does. How much of Germany’s gas should be shared with them?
The United States is helping its European partners by redirecting American liquid natural gas from Asian to European markets. Over the past decade, the U.S. has emerged as the world’s top producer of natural gas. It produces so much, in fact, that despite its large domestic consumption, the U.S. now ranks second only to Russia as a gas exporter.
Unfortunately, increasing the volume of those exports as rapidly as needed will not be easy. U.S. gas exports to Europe must be compressed into liquid form to be loaded aboard ships. Building new liquefaction plants is a complex and costly undertaking: A rule-of-thumb calculation suggests a cost of $5 billion over five years, maybe four years if regulatory approvals are sped up.
The balance of energy power between Europe and Russia is not all one-sided. Over the medium and long term, Europe can find new sources of gas more easily than Russia can find new customers. The most economic way for Russia to sell gas to China would require a vast pipeline-building project across Siberia. The distances and costs are mind-boggling and likely prohibitive, given the competition from liquid natural gas shipped across the Pacific from North America. Russia risks a post-Ukraine-war future as an isolated energy pariah—and its energy behavior this winter will determine whether that risk becomes an enduring reality.
The Western alliance has a gathering energy emergency on its hands; now is the time to talk and act accordingly. The Biden administration too often tells Americans childish stories about price-gouging by energy companies as the cause of high prices for fuel. One of the world’s largest energy producers is using its oil and gas as a weapon against its formerly best customers. World markets are disrupted as a result. That hurts, but blaming false scapegoats will not lessen the pain or produce useful solutions.
The global crisis triggered by Putin’s war is the culprit. The sooner that war is won by Ukraine, the faster the crisis will ease.