Russia gains advantage in gas war


Nazi defeat. Russian tanks rehearse the Victory Parade in St. Petersburg Square, which will take place on May 9. /REUTERS

Moscow doubles its income from the sale of solid fuels during the war despite strong international sanctions

Moldova is emerging as the next war front in the war in Ukraine, but the European Union has already become the scene of the economic struggle that Russia maintains against the EU countries with gas as a missile. In the first sets it seems that it is Moscow that gains advantage despite the sanctions. The Old Continent’s dependence on supplies from its giant eastern neighbor is such that it is not yet possible to resort to ‘arsenals’ that would make Vladimir Putin bend the knee.

The EU is still trapped. The numbers prove it. During the 65 days in which Russia occupies part of Ukraine, Kremlin-linked energy supply companies have doubled their income from the sale of gas, oil and coal. Up to 63,000 million euros, of which 44,000 come from the Union, have gone to its coffers taking advantage of the rise in prices because the more restrictions are increased, the more the Russian Federation inflates prices.

Estimates from the Center for Research on Energy and Clean Air (CREA) indicate that “the sanctions have been undermined by the continued exports of fossil fuels. Europe’s desire to keep the door open to supply and payments for them has prevented broader punishments on Russian banks, financial institutions and trade,” the authors of the report said Thursday, for which the entry of hundreds of million euros daily has supported the exchange rate of the ruble.

This ‘think tank’ points out that the Twenty-seven assumed 30% of coal purchases and around 50% of oil since the end of February, while they received approximately 80% of liquefied natural gas (LNG) exports.

“The EU and many Member States have responded to the crisis by announcing new clean energy and energy efficiency targets, policies and measures. These steps will provide a replacement for Russian fossil fuels for years to come, but have essentially no effect on Russia’s fossil fuel export revenues in the short term.

The center highlights the strong effect on the income balance of price increases, since during the little more than two months since the beginning of the invasion of Ukraine, Russian oil deliveries to the EU fell by 20% and those of coal 40%, while those of LNG increased by 20% and purchases of gas from the Union through networks rose by 10%.

However, the around 44,000 million paid by the EU countries in exchange for their imports of fossil fuels contrast with the income of around 140,000 million euros accounted for by Russia on account of its exports of gas, oil and coal to the countries throughout the past year through pipelines, and ports in the Baltic and Black Seas, with an average of just over 11,600 million euros per month, according to figures published by the British newspaper ‘The Guardian’.

War in Ukraine, live: Last minute

The landscape will change in its future because Russia has no substitute for Europe and no alternative pipeline connections to divert its LNG elsewhere. But in the meantime, “the continued export of energy resources is a big hole in the sanctions. Everyone who buys fuel becomes complicit in the monstrous violations of international law committed by the Russian military,” explained Laura Millivirta, lead analyst at the Center for Energy and Clean Air Research.

laboratory mice

Aware that he must capitalize on the advantage he has in the early stages of this economic war because the EU countries cannot stop depending on Russian contributions until 2023, Vladimir Putin has ordered this week to cut gas supplies to Poland and Bulgaria after his refusal to pay in rubles the contracts signed to be resolved in dollars. The governments in Warsaw and Sofia have become his ‘lab mice’. Brussels wants to deactivate this blackmail by sharing the gas that other partners receive through the reserves that they currently accumulate.

But the truth is that several European operators – up to ten – and five countries have begun to pay Russia in rubles, according to sources confirmed by Reuters. Only the pro-Russian Executive of Hungary has admitted it. Slovakia, Austria and Germany remain firm in their refusal to change the form of payment.

In principle, no further supply cuts are planned until the second half of May. Next Monday the energy ministers will hold an extraordinary meeting to deal with the situation. Volodymyr Zelensky warned Thursday that Russia “seeks to provoke a world price crisis” and “chaos” in the world food market.

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