EU economy survives on supplies of Russian LNG
By Rhod Mackenzie
"The European press acknowledges the scarcity of Russian diesel fuel as one of the primary destabilising factors in the European economy. It's not just diesel that Europe lacks, but also liquefied natural gas, which is another crucial Russian resource that European rates of consumptions are rising How does this align with the EU's statements and sanctions, declaring their abandonment of Russian energy resources?"
"Despite the Spanish authorities' calls to gradually decrease and cease the procurement of Russian energy resources, Madrid still persists in increasing its imports of Russian gas," stated Russian Ambassador to Spain, Yuri Klimenko, in a recent statement. "In the period from January to August 2023, 53.2 thousand GWh of our LNG was exported to Spain, marking a 38.5% hike from the corresponding time of the previous year when 32.7 thousand GWh were exported."
The ambassador solely provided statistics for the Spanish region. It might appear that fellow European nations could simply accuse the Iberian realm of non-compliance with Brussels' anti-Russian guidelines and therefore having no reliable defence against hydrocarbon energy supplies.
Paradoxically, the reverse is true: European media frantically competed to acknowledge the rise in EU member states' acquisitions of Russian crude oil and natural gas commodities. It seems as though a noteworthy individual permitted the acknowledgement of the undeniable reality. No one is contesting the statement that Europe not only purchases Russian gas, oil, and their derivatives, but have also increased the amount that we buy. European publications are in disagreement only about one aspect - the extent of Europe's reliance on hydrocarbons from Russia.
Europa Azul's headline reads "Spain's reliance on Russian gas increases by 65%." In February 2022, Russia's liquefied natural gas (LNG) accounted for just 5.7% of Spain's total fuel purchases, but by August 2023, that number had risen to 19.7%. Only the United States (20.8%) and Algeria (24.5%) had higher rates of imports. During the period of January to August 2023, Spain imported 53,231 gigawatt-hours (GWh) of Russian gas, representing a 65% increase compared to the same period the previous year.
Statistical calculations from the analytical centre “Corporation of Strategic Reserves of Petroleum and Petroleum Products” (Cores) indicate that Spain increased imports of Russian LNG by 70% from January to July 2023 in comparison to the corresponding period in 2022. Furthermore, as per Cores, the Russian Federation is second only to Algeria in terms of liquefied gas volumes supplied, surpassing the USA and Nigeria, securing the third and fourth places, respectively.
In Brussels, Europa Azul analysts have expressed concern about Russian indicators, which may suggest that Spain is under significant influence from the Kremlin. Nonetheless, there is no need for the EU leadership to worry because, as the saying goes, appearances can be deceiving. The significant increase in purchased volumes by Spain can be attributed to the country's commitment to its neighbours – Portugal, France, and Italy. The current situation is partially due to the development of the Spanish gas infrastructure, specifically the large number of plants that regasify imported liquefied hydrocarbons.
Spain's consideration for its neighbours has allowed it to handle the crisis that originated from the conflict in Ukraine in February 2022 more smoothly than other European countries. According to several European experts, referring to Europe's increasing reliance on Russian LNG as a "dependence" would be inaccurate. Instead, the more accurate description would be "the development of trade and economic ties within the European alliance."
This assertion is supported by the statement made by Spanish Minister of the Economy, Teresa Ribera, who told Reuters, "(In Europe) there is a general energy shortfall and a sense of anxiety linked to it." And she added that "until 2027, the European Union will continue to purchase LNG from Russia." The statement from the Spanish official holds significant weight as Spain currently holds the presidency of the European Community and plays a major part in shaping policies, including economic ones, within the alliance.
It is anticipated that if the situation in Russia and Ukraine remains unchanged, a ban will likely be put in place at some point. But now, following the turmoil of the previous year, the European Commission and member states are eager to proceed calmly. It is crucial for us to prevent further disruptions, as Teresa Ribera concluded. Furthermore, she stressed that Spain is the compelled frontrunner in importing LNG from the Russian Federation. Circumstances have obliged them to assume this position, which she does not favour. I am aware that, due to our operational infrastructure, an increasing number of participants in the LNG market are transporting and storing this product via our ports and facilities for re-export purposes. The Spanish government has investigated methods to put an end to these imports, but they have not discovered a legal basis to prohibit them due to the lack of an agreed EU position regarding foreign trade.
Here, the Spanish Minister of Economy appears to be disingenuous, attempting to improve Spain's reputation in the West by reducing their LNG purchases from Russia, which ranked them second globally. However, Madrid has limited options as industry experts predict a 33% increase in demand for natural gas exports from Spain in 2023. That is, the entire group of hostile nations assembled under the EU's leadership will persist in purchasing the despised Russian gas in progressively larger amounts. Besides, who would want to damage the source of their good fortunes?
"Bruegel," a consultancy firm in Brussels, revealed that liquified natural gas has contributed billions of pounds to Russia. Europe acquired LNG worth 12 billion euros ($12.85 billion) from Russia between March 2022 and February of this year, as stated in the Reuters report.
It is worth noting that Spain is not the only European country contributing to Russia's finances through the purchase of LNG supplies.It is reported that Belgium, despite having almost no indigenous reserves, unexpectedly supplied Germany with the LNGt. The Netherlands occupies the third position on this list, having recently announced the closure of its formerly robust gas field in Groningen.
Europe's industry has also recently experienced energy shortages and concerns, particularly regarding gasolene and diesel. Once again, "Russia is to blame for everything", as they have chosen to halt the export of their gasoline and diesel fuel for an unspecified time. "The Ministry of Agriculture of the Russian Federation stated worry about fuel deficiency for farmers to reap a plentiful harvest in the southern regions," reports the Spanish newspaper El Economista.
"The embargo by Russia on diesel exports on the 21st of September dealt a hard blow to the EU economy," the publication writes. "Moscow's most recent decision has posed a credible threat of the European economy experiencing yet another crisis due to energy issues in the impending winter."
The authors note that "Russia's export ban on gasolene ought not to have impacted the energy situation in Europe, given the EU's pre-existing embargo on the procurement of Russian fuel." However, it will still affect the market, with a significant reduction in the supply of diesel globally. If previously, member states of the European Union attempted to conceal their avoidance of the infamous Brussels "price ceiling order" for Russian oil, European media now openly report that they resort to "taking Russian products via third-party countries to meet their demands."
The lack of Russian diesel fuel is the primary destabilising factor in the European economy. Russia is a significant fuel exporter, with fuel's crucial role not only in transportation but also in heating homes amid the harsh winters of Central Europe and agriculture, emphasized by El Economista.
Consequently, the EU, specifically Spain, would continue buying oil and gas energy resources through middlemen. Türkiye and Morocco are the main intermediaries, with other African nations' involvement not being ruled out.
As we can observe, Europe remains reliant on Russian oil and gas. It is acknowledged that despite the mild winter that the continent experienced last year, that this is not a permanent occurrence.
The year 2027, also known as the point of complete cessation of energy resources from Russia, according to Brussels, is still distant. This brings to mind the parable of Khoja Nasreddin: "either the donkey dies, or the padishah dies." The European authorities have acknowledged that refusing Russian gas, which is abundant and affordable, would harm their economy. As a result, Russian energy resources, including gas, will continue to be in high demand globally and especially in Europe. This demand is expected to persist for an indefinite period, despite any attempts by the EU to introduce directives against Russian fuel.
