Despite the Western sanctions imposed in response to Russia’s invasion of Ukraine, one thing has not been affected so far – Russian gas flows to Europe and the funds to pay for it.
Europe remains heavily reliant on Russian gas, which supplies roughly 40% of its needs, and is now concerned that Russian President Vladimir Putin may use it to retaliate against sanctions. However, Russia, which pumps gas through pipelines that cross Ukraine and other eastern European countries, needs the revenue now more than ever.
A decade of Russia v US gas wars in Europe laid out in US embassy cable (2008) #SouthStream #BlueStream #NordStream #Ukraine #Germany #Italy Link: https://t.co/xCu7nBIMGY pic.twitter.com/tR2UyfkGqK
— WikiLeaks (@wikileaks) March 8, 2022
Senior officials of Italian energy giant Eni reject claims that their collaboration with Russia’s Gazprom endangers Europe’s energy security. Evidence points to the fact that Eni is now a major part of Gazprom’s plans for expansion. The USG might find it useful to push the next Italian government to redefine Eni’s interests. Gazprom’s relationship with Italian energy giant Eni has shifted from a commercial to an “integrated strategic” relationship. Gazprom will be allowed to sell gas directly to Italian consumers starting in 2010.
Alvera predicts easy gains in Russian natural gas production through equipment modernization and efficiency upgrades. The South Stream project is driven by two factors: (i) increasing EU demand for natural gas and (ii) the unreliability of the Ukrainian pipeline system. The underwater portion of the pipeline will be owned by a 50-50 Eni-Gazprom joint venture, South Stream AG. Eni CEO Alvera was dismissive of allegations that Gazprom intends to use South Stream to further cement its hold on European energy supplies. The 10 bcm of new gas that is introduced to the market through South Stream is dwarfed by the expected increase in European demand and the anticipated supply shortage.
Russia has been delivering gas to Europe to fulfill long-term contracts. Volumes of Russian gas delivered at the Slovakian border have increased since Ukraine war began. Gas prices on the spot market have risen sharply, making Russian gas more attractive to European buyers. Nord Stream 2 project is a conduit running offshore along the same path between Russia and Germany.
