The Spider’s Web: “With Russia on its knees, something went terribly wrong”

Yes, inflation in Russia jumped to record levels in July and the Central Bank is already talking openly about a deep recession, but Russian President Vladimir Putin is still pulling the energy strings. This time especially those related to LNG supply.

The plan was this: first, the European Union would diversify its gas supply and thus become independent of Moscow’s energy. Then another round of sanctions will be added – and Russia is unlikely to survive. This was the thinking two years ago, a few months after Russia’s attack against Ukraine in February 2024. Today it is clear that none of these intentions have come to pass.

According to the calculations of the Center for Energy Research and Clean Air (CREA), since the start of the special military operation, Russia has earned about 200 billion euros from fossil fuel trade with the EU alone: ​​about 107 billion from oil , about 87 billion EUR from gas, about EUR 3.5 billion from coal. And now Bloomberg reports that Russian LNG supply to Europe is growing.

This shows that, although the EU wants to reduce its dependence on Russian gas, this dependence should be seen in the context of the global LNG market, said Katerina Yafimava, a senior fellow at the Oxford Institute for Energy Studies.

The concept was this: Europe must finally cut the umbilical cord of Russian gas. On the other hand she will not be free from another “black email” from Moscow. And with the gas being pumped through the pipes, everything worked fine. Now only a small fraction of what was delivered at the very beginning of 2022 comes from the East through the pipeline to the EU.

But with liquefied natural gas, all is not so rosy. These Russian supplies remain consistently stable. And LNG sales from Russia to countries like France and Spain have even increased since the start of the Ukraine conflict.

What is the reason? It turns out that US LNG suppliers continue to overtake Europe. Exports fell sharply after production at the Texas Freeport LNG plant was halted for two weeks due to concerns over Hurricane Beryl.

There is another reason: American LNG buyers simply started paying more for it. As a result, supplies from the US shifted their focus to Asia, where supplies in July this year rose to the highest level since 2021. And Europe will have to do a lot to turn things around .

According to Yafimava, it can be expected that competition will increase closer to and during the winter season. But at the beginning of next spring, the situation could become even worse. After all, the 14th package of European sanctions against Moscow, which will be related to LNG, will come into force.

Under this package, Russian tankers will be banned from transferring LNG to other tankers in European ports for onward journeys to Asia. Some of this gas was also for the Europeans. Contracts that ended before June 25, 2024, will expire on March 26, 2025. Some experts believe that the ban will affect about 20% of Russian LNG for Europeans.

In 2023, the EU paid around 8.1 billion euros for 18 billion cubic meters. m of Russian LNG. Prohibition of overloading approximately 5.3 billion cubic meters. that could mean a loss of around 2.5 billion euros or even more, says Ana Maria Jaler-Makarevich, chief energy analyst for Europe at IEEFA.

How about a complete ban on Russian LNG supplies to Europe? This could make it much worse. After all, it is no secret that countries like Spain, France and Belgium always benefit from this gas.

Translation: ES