In Brussels, the Ministers of Energy of the Twenty-Seven are holding a meeting on Monday to study a gradual cessation of oil purchases from Russia. Objective: to dry up its funding for the Kremlin’s war effort, which exports two-thirds of its oil to the European Union (EU).
“There is a political will to stop oil purchases from Russia and we will have measures and a decision on a gradual withdrawal next week,” said a European official involved in the discussions on Sunday, without hiding that the decision no. is “not easy to implement”.
Two landlocked European countries, Hungary and Slovakia, depend on Russian pipelines and the European Union also wants to avoid a global spike in oil prices.
In 2021, Russia supplied 30% of crude oil and 15% of petroleum products purchased by the EU. Breaking these supplies is not trivial:
Russia’s oil import bill was four times that of gas, $80 billion versus $20 billion.
Josep Borrell, High Representative of the EU for Foreign Affairs and Security Policy, in April
The main importers of fossil fuels from Russia (gas, crude oil, petroleum products and coal) are Germany, Italy, the Netherlands and France. The embargo on coal, decided on April 7, will come into force at the beginning of August.
Thierry Bros, professor at Sciences-Po Paris, energy specialistdecrypts the situation for us:
In mid-March, you estimated that under the pressure of public opinion and the continuation of the war, Russia would export less and less hydrocarbons to Europe, to the benefit of Asia. What about today ?
We are there precisely. We made this embargo on coal, which will be effective in August, now we are discussing the one on oil. It should be noted that there are two “forms” of embargo: the political one, under discussion, but also the “self-embargo”, as when Total announced at the end of March that it would no longer buy Russian oil. We are going anyway, whether it is a political decision or not, towards a de facto embargo: there will be no more purchases of Russian oil by the end of the year. The politicians are trying to dress it up because the discussions are not succeeding, but by the end of 2022, we will no longer import Russian oil or petroleum products.
Will the prices be affected?
It will result in some price going up, yes. We can clearly see that the price is rising a lot on diesel, for example, since we ourselves are not able to produce enough of it.
And for the gas?
What we have seen is that imports increased sharply in March, due to the build-up of stocks for next winter. Usually we start storing in April, there it started earlier, and stronger: the countries have maximized their current contracts.
From April, we observe a 21% drop in imports. First under the effect of the Baltic countries, which themselves decided to no longer supply themselves with Russian gas. Then because of Vladimir Putin’s decision to cut off deliveries to Poland and Bulgaria last week.
Can Putin on his own cut off supplies to other countries, or even the entire EU?
Vladimir Putin has been using the gas weapon for a long time. Already last year, no one had really understood: he had stopped selling gas on the markets, therefore beyond what the contracts provided for. Soon after, during the summer, it failed to fill Gazprom’s storage facilities in Germany, the Netherlands and Austria. I had started to alert, but the EU had not understood. This was already the political use of the gas weapon. Then it stopped deliveries to Bulgarians and Poles last week.
The choice of these countries is no accident: the Bulgarian and Polish contracts ran until the end of the year, so if they ask for compensation, it will not cost Moscow too much – a few hundred million dollars. euros. These two countries had already planned to emerge from dependence on Russia at the end of 2022, so there are only a few months to “cover”.
If Putin did the same to Germany, the compensation would amount to several hundred billion euros, with a contract that lasts until 2037. He could do it with Finland, 100% dependent on Russian gas, but it is now connected to European countries. It can do it in Denmark, but it wouldn’t be smart: Copenhagen can produce gas offshore to compensate.
For the moment it would not be very smart: it would put Emmanuel Macron in a very bad mood, even though he chairs the European Union. Putin is unlikely to do so.
But anything is possible. The risk exists. In any case, by 2023 at the latest, we will have to be independent of Russian gas. So we have to expect a few difficult months, as will be the case for Poland and Bulgaria.
What are the alternatives ?
You will first have to import from elsewhere. But it depends on the offer, if we are already at the maximum… OPEC is not at the maximum but it does not want to produce more oil. And gas side, everyone is already at the ceiling. So it will be necessary to distribute the shortage. For example by buying back – at a high price – shipments destined for less wealthy countries, such as India, Bangladesh, Pakistan. As for them, they will either move towards blackouts or they will have to burn coal.
A priori, we will know how to manage that. The difficulty is if there is an embargo or a stoppage of deliveries in Germany. It is the only country that has put itself in a situation of systemic risk: as Angela Merkel explained everywhere that we had to be nice to the Russians and that there was no problem, we never invested one euro to deal with this risk. For example, there are no regasification terminals in Germany. The others have all provided “insurance”, but not Germany. It is the largest volume on the Russian gas market, and the only one that has not carried out a risk analysis. So when the risk materializes, there is no way out. It’s simple.
For example, the second country [en volume, ndlr]is Italy. At the moment, its Prime Minister is making the rounds of all the gas-producing countries in Africa to recover additional volumes. He started warning that the air conditioning couldn’t run everywhere this summer, etc.
Will we also have to reduce our consumption?
Yes, of course: if we start with the most probable scenario, which is that in 2023 we will have no more Russian gas at all, our gas demand will have to be around 10% lower than at present. It is therefore necessary to find 10% of consumption to cut, and the best thing is to do it immediately, rather than ending up doing industrial load shedding at the last moment, this winter.
Politicians should start to educate the French on the subject, to hunt down waste. With gas or oil, any megawatt hour that is not consumed right away can be stored. Clearly, we must immediately consume less to be resilient next winter.
Source: Le Progrès : info et actu nationale et régionale – Rhône, Loire, Ain, Haute-Loire et Jura | Le Progrès by www.leprogres.fr.
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