Russia Tightens The Geopolitical Energy Screws On Germany And The EU

Russian energy giant Gazprom tightened the geopolitical screws on Germany and the EU Friday with the announcement that its Nord Stream 1 pipeline would be shut down indefinitely. The announcement came just hours after the leaders of the G7 held their own press conference to announce their unanimous agreement to attempt to impose a “price cap” on Russia’s oil exports.

Perhaps the timing was mere coincidence, but perhaps not.

Nord Stream 1 had already been down for a scheduled maintenance that was supposed to last just a few days, and would have seen the line restarted on Friday. But Gazprom officials claimed that they had discovered a new “fault” in the system’s last remaining in-service compressor turbine that will require repairs before the line can be restarted. Flows through the pipeline are normally powered by a total of 6 compressors, but four have been down for months and Reuters reports that a fifth remains in Germany, where it has been mired for weeks after undergoing repairs at a Siemens Company facility in Canada.

Gazprom complained last week that the delay in getting the turbine shipped back to its compressor station in Portovaya has resulted from restrictions imposed on Russia by U.S. and European sanctions related to the war in Ukraine. Nord Stream 1 has been delivering gas into Germany at just 20% of its normal capacity since July, a situation Gazprom blames on the necessity of operating the pipeline system with just one of six compressors in operation.

“The sanctions regimes of Canada, the EU, the UK and a mismatch of the current situation with the existing contractual obligations by the Siemens side make delivery of the 073 engine to the Portovaya compressor station impossible,” Gazprom said.

Eric Mamer, chief spokesperson for the European Comission, responded to Gazprom’s claim in a tweet, saying “Gazprom’s announcement this afternoon that it is once again shutting down NorthStream1 under fallacious pretenses is another confirmation of its unreliability as a supplier. It’s also proof of Russia’s cynicism, as it prefers to flare gas instead of honoring contracts.”

Whatever the real motivations and facts at play might be, Gazprom’s latest move places Germany in real peril as winter approaches. While officials there recently celebrated the news that natural gas storage facilities have been filled to 80% of full capacity, that really provides scant comfort to the population. As is the case in the United States, natural gas storage is designed to perform only a periodically-tapped backup whenever current production or import volumes are unable to meet current demand.

Due to intentional government policy decisions, Germany has precious little current natural gas production, and relies almost solely on imports of natural gas to meet current demand, with Russia its largest single source. Since its vaunted wind industry began to fail more than a year ago, the German government has been scrambling to source additional imports to satisfy consumer and industrial needs, and that effort intensified into full desperation after Russian President Vladimir Putin’s decision to wage his senseless war on Ukraine.

U.S. President Joe Biden promised shortly after Putin’s invasion that the U.S. LNG industry would work to fill much of Germany’s and Europe’s needs, but he made that promise without actually checking with anyone in the U.S. industry. While many U.S. cargoes have since been re-routed from Asia and elsewhere to deliveries into Europe, it will take years of major infrastructure expansion and billions in new investments for the U.S. industry to really make a big difference on Europe’s behalf. Unfortunately, Biden’s regulators have displayed precious little intent to speed up the issuing of permits that must be had before any expansion can proceed.

Meanwhile, the Biden administration has also served as the ring-leader pushing this “price cap” concept within the G7. Despite Friday’s announced agreement, the group has still not released the details of any plan, and we thus have no word about how the self-possessed G7 leaders would convince Russia’s three biggest non-European oil trading partners, China, India and Iran, to cooperate in this global plan. Such cooperation would be essential to any real success, but seems unlikely given the membership of China and India along with Russia in the increasingly-powerful BRICS alliance, and Iran’s reported desire to join. One can only wonder if the G7 planners have really thought this scheme through to its logical conclusion, or if this is mainly all about messaging and optics.

What we see here is just one more of a long series of examples of how these sanctions supposedly imposed on Russia by the governments of the west appear to be backfiring, inflicting more harm on the common folk in Europe, Canada and the U.S. than they are on Vladimir Putin and the Russian army. In this instance, all the machinations and scheming have left Germany and much of the rest of Europe in great peril as winter approaches.