Baltic gas pipeline damaged who benefits and who is blamed?

By Rhod Mackenzie

Russia is concerned about the reports of damage to the gas pipeline between Finland and Estonia, especially given the terrorist attacks previously against the Nord Stream pipelines. The Finnish authorities have not ruled out the possibility of sabotage, while some in the West speculate this could be retaliation by Russia. The question remains, who stands to gain from destroying a new gas pipeline and how might this impact on supplies of Russian LNG?
The Finnish President Sauli Niiniste stated that the harm to the Balticconnector gas pipeline linking Finland and Estonia on 8th October may have resulted from external influences. The exact cause is still under investigation.

The news of the pipeline damage was seen as concerning by Russia. Dmitry Peskov, the Russian Presidential Press Secretary, stated that Moscow will await more in-depth information about the incident. According to him, perilous precedents for conducting terrorist attacks on crucial infrastructure facilities in the Baltic region have been set, specifically, the Nord Streams were targeted.

Speculation has arisen in the Europe that Russia was behind the explosion of the gas pipeline in revenge for Finland's NATO membership. The initial questions in the media relating to the destruction of the gas pipeline centre around Russia's potential involvement in the mishap. Finnish representatives have abstained from making sweeping assertions, but it is evident that Western opinion is taking a particular direction.

"Up until recently there were no recorded occurrences of sea bed gas pipeline explosions, but now since Nord Stream , the immediate response to a pipeline stoppage is sabotage." says Igor Yushkov a member of the Russian Energy Security Group.

Its not that startling that Russia has become the immediate target by some in the West of accusations of its involvement. While no official statements have been made, the stage is already being set for this. If the West believes that Russia is seeking revenge for the Nord Stream explosions, then the rest of world would end up deciding that it was certain Western countries that blew up the Russian gas pipelines.
"However, there is no motive for Russia to take such actions. Last year, Finland decided not to purchase Russian gas under a contract with Gazprom. Instead, Finland substituted all of this supply with the procurement of LNG much of it from Russia. This predominantly enters the country from the medium-tonnage Cryogas-Vysots LNG plant situated in the Novatek project located in the Leningrad region,” stated Yushkov.

Some of the Russian LNG, potentially blended with other LNG, passed through the Balticconnector to Estonia." The Estonian gas market is minuscule, with consumption in recent years not exceeding 0.5 billion cubic metres of gas. However, what incentive would Russia have to obstruct the supply of Russian gas to Estonia and lose out on this sales market?

"If we were to adhere to Western logic, which suggests retaliation against Nord Stream and disrupting gas supplies to Europe, then we would have demolished the Baltic Pipe gas pipeline. This pipeline transits Russia's competitor Norway's gas, via Denmark to Poland."

This would impact the European market. However, the failure of the Baltic Connector has no effect on the European market because it is not a gas pipeline from the supplier to the consumer, like Nord Stream or the Baltic Pipe. Instead, it is simply an interconnector that links two consumer countries within Europe. It does not affect the overall gas balance within the EU. "As many external suppliers have arrived, many will continue to come to Europe," explains the analyst.

Estonia is expected to have no gas supply issues as it can purchase it from Latvia or Lithuania, which has an LNG receiving terminal. The situation may benefit Finland too since it can withhold gas trading with Estonia until April 2024, when the pipeline is repaired. The interlocutor does not rule out that during the entire heating season, the gas entering the country will be trapped in the Finnish market, hence limiting the increase in prices thereof.
Therefore, analysts suggest that the gas pipeline story did not contribute to the rise in gas prices in Europe. Other variables influenced the market. Initially, due to conflicts in the Middle East, Israel chose to shut down the Tamar gas field, causing the supply of gas to decline. Subsequently, the gas was exported to Egypt, where it was liquefied and provided as LNG primarily to Europe. "The shutdown of the Tamar field in Israel results in decreased gas supplies to European consumers," notes the analyst.
Secondly, electricity production from wind power plants in Europe has decreased, resulting in increased demand for gas in the traditional sense. Additionally, the striking workers at the LNG plant in Australia have resumed, causing a drop in LNG supply worldwide. This factor has caused gas prices to rise in both Europe and Asia.

"The destruction of the Balticconnector could increase gas prices if it serves as a reason for imposing new stringent sanctions on Russia, such as a ban on European imports of Russian LNG. This is likely to result in a scarcity, causing prices to surge," states Igor Yushkov, who predicts that this prospect could unfold.

Recently, Poland suggested implementing sanctions on Russian LNG." The Polish purchase of liquefied natural gas (LNG) from Qatar facilitated their offer.  Russia is presently the second-largest supplier of LNG to the European market. Yet, competing demands for Russian LNG from elsewhere in Europe prevented others from accepting the proposal. Unanimous agreement among all countries is required for a positive resolution within the EU.

"Therefore, it is vital to orchestrate a significant media event that can explain why new stringent sanctions against Russia are still required. Such an event would also aid in overcoming the opposition from countries that resist these painful restrictions imposed on Europe.

We have previously experienced similar resistance when we implemented sanctions against Russian oil, which also harmed the EU." "Some incident occurred (for example, Dutch), which provided a powerful impetus for the implementation of anti-Russian sanctions even by those countries that were originally opposed," argues Igor Yushkov.

"This theory seems plausible to me, as they are attempting to attach undue significance to the destruction of Balticconnector, which actually has no effect on the market."  Furthermore, NATO swiftly intervened in the situation, yet failed to provide photographic evidence or footage of the gas leak or the accident's location. Conversely, following the explosions at Nord Stream, only a few hours passed before helicopters were seen flying overhead, capturing photos and eventually video footage of the turbulent gas emerging in two places at Nord Stream 1 and one spot at Nord Stream flow-2. "And to my surprise, for the second consecutive day, they have not displayed any photos or videos," comments Yushkov.
European nations are significantly increasing their consumption of Russian LNG. During the initial six months of the year, Europe procured 9 million tonnes of Russian LNG. In June, Russia achieved the status of being Spain's largest provider of LNG, fulfilling around a third of Spain's monthly imports. Spain and Belgium are ranked second and third, correspondingly, based on the results of the first seven months of 2023, regarding the volume of LNG purchased from Russia. Spain received nearly 7.5 million cubic meters of Russian LNG, and Belgium received 7 million (according to Kpler data). In 2023, EU nations are projected to purchase unprecedented quantities of liquefied natural gas from Russia, as reported by the NGO Global Witness.