Russia’s energy influence over Europe ‘is nearly over’

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Germany is currently ahead of schedule in its race to fill underground gas storage facilities for the winter.

Bloomberg | Bloomberg | Getty Images

Europe’s reliance on Russian gas appears to be coming to an end, energy and political analysts say, potentially reducing the risk of further supply disruptions at a time when many fear Russia could cut supplies completely over the winter .

Europe has seen a sharp decline in gas exports from Russia, traditionally the largest energy supplier, in recent months.

It has deepened a bitter dispute between Brussels and Moscow and increased the risk of a recession and a winter gas shortage.

Russia has cited defective or delayed equipment as the reason for a reduction in deliveries. However, European policymakers view the austerity as a political maneuver designed to sow uncertainty in the 27-nation bloc and to raise energy prices amid the Kremlin’s attack on Ukraine.

Russia’s energy weapon becomes moot.

Agathe Demarais

Global forecasting director at The Economist Intelligence Unit

Agathe Demarais, director of global forecasts at The Economist Intelligence Unit, a research and consulting firm, told CNBC that the Kremlin appeared to be arming energy supplies and “burning bridges” with Europe while it still could.

When asked whether Russia’s energy influence on Europe might be coming to an end, Demarais replied, “Yes. Very much, in fact.”

“Europe is going to have a very difficult winter, probably two years of a very difficult adjustment with a lot of economic pain. But then Europe will essentially become more independent with a more diversified mix,” said Demarais.

“And what that means is that Russia’s energy weapon will become moot,” she added. “We believe that Russia knows that and that is why it is already cutting gas supplies or creating uncertainty because it knows that if it wants to harm Europe, it has to do it now. It is a matter of now whether never.”

Race to fill gas storage

Until recently, Germany bought more than half of its gas from Russia. Yet Europe’s largest economy is currently ahead of schedule in its race to fill underground gas storage facilities to have enough fuel to keep homes warm during the colder months.

Analysts told CNBC that Germany has been able to rapidly replenish its gas supplies in recent weeks due to several factors. These include strong supply from Norway, the Netherlands and other countries, falling demand amid rising energy prices, companies switching from gas to other types of fuel and the government providing more than €15 billion ($15.06 billion) in credit lines to replenish storage facilities.

The latest estimates from the energy industry association BDEW show that German gas consumption from Russia fell to 9.5% in August. That is a decrease of no less than 60% in the same period last year.

Norway has stepped in to become Germany’s largest gas supplier, BDEW data shows, which supplied nearly 38% of German consumption last month. The Netherlands, Germany’s second largest supplier, is said to have supplied about 24% of Germany’s gas in August.

Ian Bremmer, chairman of the political risk consultancy Eurasia Group, said via Twitter last week that it “increasingly looks like Germany can survive the winter without strict rationing”, even in the worst-case scenario of Russia turning off the tap completely.

That’s “very good news,” Bremmer said. “Russia’s energy influence on Europe is almost over.”

‘Winter is yet to come’

While the EU is on track to meet its targets for filling gas storage facilities, analysts warn that this alone will not be enough.

A reduction in demand is expected to be necessary to ensure that the fuel stored will last long enough for households and businesses to survive the winter.

Jacob Mandel, senior associate for commodities at UK-based consultancy Aurora Energy Research, said that if the EU fully filled its gas storage facilities before the winter, these reserves would last about three months at best.

“The threat of shortages remains,” Mandel said. “An unexpected cold spell can quickly deplete inventories if imports don’t keep up.”

While the EU is on track to meet its targets for filling gas storage facilities, analysts warn that this alone will not be enough.

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The latest data from industry group Gas Infrastructure Europe shows that overall storage levels in the EU are over 80% full for winter on average, while underground storage in Germany is 84% ​​full.

Andreas Schroeder, chief of energy analysis at ICIS, a commodities intelligence agency, told CNBC by phone that Russia’s influence on Europe’s energy “isn’t over yet, but it’s slowly fading.”

“However, we are still in an environment of record high prices, so it’s clear that the reduced flows are affecting European markets in such a way that we have super high prices,” said Schroeder.

“This is still not over, even as Germany is slightly ahead of its storage target and the entire European Union is filling its storage too [levels]. And by reducing dependence on Russian flows, it has brought very high prices.”

“Winter is yet to come,” said Schroeder. “When the winter is mild, we need less consumption cuts, but when the winter is severe, we need more. It all depends on [the] the weather now.”

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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