Russia’s grip on Europe’s gas
November 9, 2021 - Russian President Vladimir Putin promised Europe more gas from state-controlled giant Gazprom, but gas supplies via the Russian Yamal-Europe pipeline are just one-tenth of normal.
In late October, President Putin said he had asked Gazprom to “gradually’ raise gas flows to Europe starting November 8. Since October 31, Russian gas flows via the Yamal pipeline and the Ukrainian gas transmission system have sharply dropped or reversed, travelling from Germany eastward to Poland.
In a sign that gas supplies are not starting, Gazprom hasn’t booked any of the day-ahead capacity offered at the Sudzha and Sokhranovka entry points on the border between Russia and Ukraine. Neither has Gazprom reserved an increase at the Mallnow metering point in Germany. In addition, the gas giant reportedly has yet to book any additional capacity via Ukraine or Poland through the first three quarters of 2022.
Putin has linked Gazprom’s future deliveries to a rapid German certification of Nord Stream 2, declaring that “if the German regulator hands its clearance for supplies tomorrow, supplies of 17.5 billion cubic metres will start the day after tomorrow.”
Putin has blamed the European Commission for the crisis saying Europe had made a mistake by reducing the share of long-term deals in natural gas trade and moving to the spot market instead, where prices have surged to record highs.
Over the last decade, gas prices in the EU have gradually moved away from long-term contracts linked to the cost of oil -- so-called “oil-indexation” toward “gas-on-gas” competition on spot markets. The Title Transfer Facility (TTF) in the Netherlands has emerged as the most liquid hub and relevant price benchmark in the EU, offering trading and hedging options to a growing pool of traders.