Queen’s Gambit. Mikhail Krutikhin on how the Kremlin sacrifices Gazprom’s revenues to blackmail Europe

Russian gas deliveries to Europe have fallen rapidly and sharply, and appear to be declining further. Europeans do not believe much in the technical reasons for this fall, such as the inability to get a repaired compressor unit from Canada or Ukraine's refusal to receive gas through the Sokhranivka border hub, which is under the control of Russian troops. The reasons for this are political, they believe, for example, in the German government.

In 2017-2019 average daily pipeline deliveries of gas from Russia to the EU countries fluctuated in the range of 400-500 million cubic meters. Then new factors entered the usual scheme. Thus, Gazprom prepared the Nord Stream 2 highway for operation, hoping to transfer the entire transit flow through Ukraine to this route. The US Congress, which announced sanctions against the project, prevented the Russian export monopolist from doing this. Gazprom was forced to sign a five-year gas transportation contract with the Ukrainians, but from the beginning of 2021, it began to gradually reduce pumping volumes.

In the winter of 2021-2022, Moscow turned gas supplies into an instrument of open pressure on Europe, contributing to the crisis that flared up that winter. Gazprom refused to replenish its underground gas storage tanks for the winter period, stopped selling gas under spot and short-term contracts (which until then provided it with almost 40% of gas sales in Europe) and began to interrupt transportation along various routes every now and then under the pretext of preventing pipelines, then without any pretext at all. Officials in Russia frankly declared: "We will freeze you - you must understand that without our gas you will not last long."

The purpose of such manipulations of gas flows was, of course, pressure. On the one hand, Gazprom was still counting on the lifting of sanctions on Nord Stream 2, and on the other hand, Moscow made it clear to the Europeans that their decarbonization and green transition programs did not suit the Russian leadership, which back in 2019 proclaimed in the "Energy Security Doctrine" reliance on fossil fuels, and energy "green" continues to be considered a whim or even attempts to harm Russia's interests.

Europe did not succumb to that winter pressure. On the contrary, the Russian supplier's non-commercial behavior has forced it to step up green transition programs and reduce energy dependence on Russia.

Gazprom's blackmail forced Europe to speed up the "green transition"

With the outbreak of hostilities on Ukrainian soil, gas exports quickly began to turn into weapons, and in this role it threatens to stop completely if the Europeans do not reconsider their attitude towards Russian policy. Moscow actually put into motion the last weighty argument - "turn off the gas." It looks like a competition: either Europe will end its dependence on Russian gas (promising to do so within a few years), or Gazprom will shut off all the valves on gas pipelines leading to the west even earlier.

What is Gazprom doing?

Firstly , it stops gas supplies to those companies that did not agree to transfer payment to Gazprombank (under a sham scheme invented to justify the presidential demand to pay in rubles) - in Finland. Poland, Bulgaria, Denmark, Germany...

Secondly , deliveries along the Yamal-Europe route passing through Belarus and Poland to Germany have been completely stopped. The reason is the far-fetched "counter-sanctions" of the Russian government against the operator of the Polish section.

Thirdly , the gas supply through Nord Stream 1 was almost halved under the pretext of a malfunction of compressor units.

Fourthly , the gas supply to the Ukrainian gas transmission system at the Sokhranivka border junction has been cut off, where the Ukrainian network operator is not given the opportunity to control the situation.

Fifthly , Gazprom, without convincing reasons, refuses to transfer the volume of transportation from Sokhranivka to the Sudzha hub, which is ready to receive such gas flows that can even replace the entire Nord Stream.

And sixthly , the Turkish Stream was stopped for prevention, through which gas goes through Turkey to the countries of southeastern Europe.

Scheme of existing and planned main export gas pipelines from Russia to Europe https://commons.wikimedia.org/wiki/User:Nicolay_Sidorov

As Miss Marple said, “I’m still ready to believe in one coincidence, but I’ll never believe in several at once.” The average daily supply fell below 100 million cubic meters.

The situation is critical both for European countries, some of which depend on Russian supplies, and for Gazprom, which is committing suicide as a gas exporter, since it has no real alternatives in other markets. In this game, the Kremlin sacrifices not a pawn, but almost a queen, deliberately causing enormous damage to the domestic economy.

The Kremlin donates not a pawn, but a queen, deliberately causing enormous damage to the economy

The suicidal behavior of Gazprom, transformed from a commercial company (albeit extremely corrupt, but generally fulfilling its functions) into a political tool, is a phenomenon that economists and political scientists will study for a long time to come. The theoretical scientific basis for this phenomenon has already begun to be summed up, they even came up with a beautiful name for it - weaponized interdependence (“interdependence turned into a weapon”).

In 2019, American researchers Henry Farrell and Abe Newman formulated this concept in an article published in the authoritative journal International Security. I had the opportunity to take part in refining their ideas, which formed the basis of a collective work published in the United States last March: The Uses and Abuses of Weaponized Interdependence (“Use and Abuse of Weaponized Interdependence”). My chapter there is devoted to a special case - the evolution of Gazprom.

At first glance, systems based on interdependence are stable precisely because their elements are dependent on each other. Like, for example, the European gas market on the one hand and the Russian monopoly gas exporter on the other. And this system has withstood shocks and trials for a long time: the anger of the United States, the invasion of Czechoslovakia, the Afghan war - nothing disrupted deals that were beneficial to both sides. And then suddenly one of the important nodes of the system decided to play "king of the hill", albeit to the detriment of its own commercial interests and the interests of customers.

For starters, some European countries, where Russian gas supplies are indispensable, faced price increases from the monopoly supplier, and prices were often determined by the attitude of the country's leadership towards the Kremlin's policy. And then there were politically motivated shutdowns of gas, and even during the winter heating season. In 2005, 2006, 2009, 2012 - and in the winter of 2014-2015, Gazprom simply cut supplies by half, although it suffered a loss in the form of lost profits of almost 4 billion euros.

The behavior of the Russian supplier led to European retaliatory actions - the accelerated adoption of antitrust rules like the Third Energy Package, multibillion-dollar lawsuits and the launch of an investigation into the actions of Gazprom. The company then made some concessions, acknowledged all the claims of the investigators and revised its approach to pricing policy, abandoned attempts to limit the re-export of Russian gas, removed political requirements in gas supply contracts.

For a while, it seemed that the attempts of the Russian leadership to use the company as a political weapon, neglecting interdependence, by and large failed. In Europe, they have built and are building terminals for receiving liquefied gas from other sources, laying gas pipelines-interconnectors across borders to transfer the necessary volumes of gas in the event of interruptions provoked by Moscow, and also monitor compliance with antitrust rules and regulations, as happened, for example, with the monstrously costly but failed South Stream and Nord Stream 2 projects.

The role of the Russian gas supplier was then greatly reduced. One could even come to the conclusion that Moscow's policy of turning a system of interdependence that worked well and beneficial to all participants into a one-sided weapon remained just an excellent example on which political scientists in the United States and other countries can practice their theories.

The current situation proves that this is not the case. Moscow decided to go all the way and unleash a full-scale gas war against Europe.

American Daily Newspaper

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