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

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

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Europe’s reliance on Russian gas appears to be coming to an end, energy and political analysts say, with many fearing Russia could cut off supplies entirely over the winter. It may reduce the risk of further supply disruptions during this period.

Europe has endured a sharp drop in gas exports from Russia, traditionally its largest energy supplier, in recent months.

It deepened a bitter dispute between Brussels and Moscow, exacerbating the risk of recession and gas shortages in the winter.

Russia cites equipment defects or delays as reasons for the drop in deliveries. But European policymakers say the supply cuts are a political ploy designed to sow uncertainty across the bloc of 27 countries and push up energy prices amid the Kremlin’s onslaught on Ukraine. thinking about.

Russian energy weapons will become meaningless.

Agat Desmarais

Global Forecast Director, The Economist Intelligence Unit

Agathe Desmarais, global forecast director of the Economist Intelligence Unit, a research and advisory body, told CNBC that the Kremlin appears to be weaponizing energy supplies and “burning bridges” with Europe.

Asked if Russia’s energy clout in Europe was coming to an end, Desmarais replied: “Yes, very much indeed.”

“Europe is heading into a very difficult winter. Probably two years of a very difficult adjustment with a lot of financial pain. But then Europe will essentially become more independent in a more diverse mix. It will be something,” Desmarais said.

“What that means is that Russia’s energy weapons are rendered useless,” she added. “From our point of view, Russia knows that, and it knows that if it wants to harm Europe, it has to do it now, so it has already cut gas supplies or It doesn’t matter now or never.”

The race to fill the gas reservoir

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

Analysts told CNBC that several factors have allowed Germany to fill gas inventories rapidly in recent weeks. These include strong supply from Norway, the Netherlands and other countries, declining demand amid soaring energy prices, companies switching from gas to other types of fuel, and governments restocking storage facilities. including providing more than €15 billion ($15.6 billion) of credit lines to .

Hedge fund says US can't save Europe if Russia cuts gas flow for winter

Germany’s gas consumption from Russia fell to 9.5% in August, according to the latest estimates from the electricity industry association BDEW. This is a significant drop from his 60% for the same period last year.

According to BDEW data, Norway became Germany’s largest gas supplier, supplying almost 38% of Germany’s consumption last month. Germany’s second largest supplier, the Netherlands, is estimated to have supplied about 24% of Germany’s gas in August.

Ian Bremmer, president of political risk consultancy Eurasia Group, tweeted last week that even in the worst-case scenario of Russia shutting the taps completely, “Germany could get through the winter without serious rations.” It’s becoming,” he said.

This is “very good news,” Bremmer said. “Russian energy influence over Europe is almost over.”

“Winter hasn’t come yet”

The EU is on track to meet its gas storage filling targets, but analysts warn that this alone will not be enough.

A reduction in demand is expected to be necessary to ensure fuel storage lasts long enough to adequately support homes and businesses during the winter months.

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

“The threat of shortages remains,” Mandel said. “Unexpected cold snaps could quickly deplete stocks if imports can’t keep up.”

The EU is on track to meet its gas storage filling targets, but analysts warn that this alone will not be enough.

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According to the latest data compiled by industry association Gas Infrastructure Europe, EU-wide storage levels are above 80% on average, and Germany’s underground storage is at 84% before winter.

Andreas Schroeder, head of energy analysis at commodity information service ICIS, told CNBC by phone that Russia’s influence on European energy “isn’t over yet, but it’s slowly but surely fading.” said.

However, “we are still in a record high price environment, so it is clear that the decline in flows will affect the European market, making prices very high,” Schroeder said.

“Despite Germany being slightly above its storage target and the entire European Union filling up its storage, this is not over yet. [levels]And the reduced reliance on flows from Russia has resulted in very high prices. ”

“Winter hasn’t come yet,” said Schroeder. “If the winter is mild, we need to reduce consumption cuts, but if the winter is severe, we need to cut even more. [the] the weather now. ”

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