Cold War: Is Germany caving to Putin’s gas blackmail?

20 July 2022

10:57 PM

20 July 2022

10:57 PM

After a summit in Tehran yesterday, Putin spoke about the massive Russia to Germany Nord Stream 1 pipeline – currently closed for its annual maintenance period and due to reopen tomorrow. There’s a big question as to whether it will and at what capacity, given that Germany is at Russia’s mercy. Putin said that everything depends on western sanctions. He wants a turbine for the NordStream1 pipeline repaired in Canada – which would break sanctions – and the Germans are all for giving in. One turbine has just been repaired in Montreal, and Berlin begged the Canadians to send it back to give Putin what he wants. But Putin now wants a second turbine repaired. No turbine, no gas (and cold Germans). Putin’s full quote is here and the key extract is below:

‘There are two functioning [turbines] there, they pump 60 million cubic metres per day… If one is not returned, there will be one, which is 30 million cubic metres. Has Gazprom something to do with that?’

The European Union is midway through a giant bluff. It today published a document saying it is ‘succeeding in diversifying away from Russian gas imports’. But that’s over time: for now, they are in a desperate position. If Putin reopens Nord Stream 1 with flows at 30 million cubic metres of gas a day, as suggested in his quote, that’s barely a fifth of the normal rate. LNG imports can’t make up the shortfall.

So all depends on how much gas flows through the Nord Stream1 pipeline. We’re following it every day on the Spectator data hub. The below graph could determine the short-term future of energy in Europe.

It’s hard to overstate the importance of this: if Putin turns off the taps, Germany has no plan B and Europe freezes. Germany has been desperately trying to fill its gas storage in preparation for the winter – something else we’re tracking live at the Spectator data hub. So far, German efforts are stalling with less gas stored for winter than in previous summers – as the below chart shows:

Putin is not saying he’ll turn the gas off (even suggesting he could send it through the as-yet-unopened Nord Stream 2 instead) but is, in effect, saying that unless the turbines are repaired and sanctions lifted, then he’d have no choice but to keep flows at a minimal level. Javier Blas, the impeccably-informed Bloomberg correspondent, sums it up:

‘Once Russia stops shipments completely, it can no longer apply pressure. Tactically, Moscow is likely to keep some gas moving, retaining the option of cutting or slowing flows whenever it chooses… Russia has clearly written off its gas relationship with Europe. For now, however, the Kremlin will continue to enjoy the best of both worlds: high revenue and compelling leverage. To achieve its objectives, Russia needs to continue selling some gas into Germany, but at reduced rates, as it’s currently doing.’

European officials have said this talk about turbines is a pretext for Moscow to try and wreak economic havoc on the continent: in Kyiv, it’s feared that Putin is testing the West’s resolve. ‘It’s absolutely clear that Moscow is cutting supplies for geopolitical reasons – it wants to create a European gas crisis this winter to bring Europe to its knees to the point where it cuts support to Ukraine and forces Kyiv to concede to Moscow’s demands,’ according to Timothy Ash, analyst for BlueBay Asset Management in London.

‘Putin is blackmailing us,’ said Ursula von der Leyen as she introduced the EU’s gas policy. And perhaps successfully so. Wolfgang Munchau, who wroteour cover story on the Cold War dynamic, said recently in his unmissable Eurointelligence morning email that ‘If the gas miraculously comes back at the end of next week, we know for sure that Putin received iron-clad assurances from his German friends’ that they will keep buying Russian gas.

So has Germany decided that it cannot, after all, continue the Russian energy boycott? Will Olaf Scholz buckle to Putin’s bluff? We’ll find out more in the next few days.

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