What is the economic damage if Russian gas supplies to Europe stop? Who is the biggest loser?

Moscow

- The announcement by the US administration that it is communicating with gas-producing countries to provide supplies to Europe is a prelude to a new potential crisis with Russia, and signs of a new economic war against it, aimed at stopping the flow of Russian gas to Europe and depriving Moscow of one of the largest gas consuming markets in the world.

If this is done, the urgent question will arise about the economic damage that Russia will suffer, and the alternatives that could be available to it to compensate for the heavy losses in the event of a halt in gas supplies to Europe.

struggle for supremacy

The issue of sanctions on Russian gas exports to Europe goes beyond the political dimension formally linked to the Ukrainian crisis. It is no secret that the United States, which dominates most of the world's energy exports, does not accept anyone competing with it for this throne, especially from its biggest geopolitical opponent.

This is not the first time that a dispute has erupted between the two countries over issues related to energy and its supply lines, as it suffices to recall the fierce competition in the nineties of the last century over the direction of oil and gas shipments in the Caspian Sea, at which the West made great efforts to prevent the supply of the Caspian Sea region. With oil and gas flowing through Russian territory, US officials publicly asserted that the United States would be satisfied with any pipeline option, as long as it bypassed Russia.

But with the beginning of the 21st century, the situation in international politics has changed, and at the same time, the US policy towards Russian oil and gas resources has also changed.

Russian experts believe that in the absence of an effective effect of ending Russia's long-term contracts with European countries, the United States went to the option of pouring oil on the fire of the Ukrainian crisis, one of the reasons for which, in their opinion, was the undermining of the authority of Gazprom.

Previously, Russia faced strong opposition in the implementation of the "South Stream" gas pipeline project, which was supposed to be laid in Bulgaria, but strong pressure from the European Union and the United States prevented its implementation, and as a result, it was abandoned with the gas pipeline project Turkey, and although Russia got additional opportunities for gas supplies, at the same time it has become dependent on a single consumer.

economic lung

The gas industry constitutes the pillar of the Russian economy, the most important of which is its competitive advantages, and a main source of foreign exchange earnings in the state's general budget.

Russia has huge potential for gas production, a huge global and domestic market and the ability to supply more than 300 billion cubic meters of gas annually. Moreover, entire regions of the world depend on Russian gas supplies.

The share of Russian gas in European consumption is about 40%.

In total, more than 200 billion cubic meters of gas are exported to Europe, with annual consumption of about 550 billion cubic meters.

Since the beginning of last year, Gazprom has increased gas supplies to Turkey by 188.5%, Germany 41.5%, Italy 15.9%, Romania 332.4%, Poland 13.8%, Serbia 121.5%, Finland 27.9%, Bulgaria 48.9%, and Greece 17.5%.

The Russian gas giant announced last year 2021 that it raised gas production by 18.1% (48.6 billion cubic meters) compared to the same period last year, to reach 316.5 billion cubic meters, and gas exports rose by 21.5% (by 21.8 billion cubic meters), Which made Russia approach the historical maximum.

According to the data of February 2022, Russian gas exports grew 2.1 times last year and amounted to 54.2 billion dollars, compared to 2020 when they amounted to 25.7 billion dollars.

alternative markets

Economist Victor Lachon believes that leaving the European gas market undoubtedly means great losses for Russia, but on the other hand, it has huge alternative markets in terms of consumption volume, such as China, especially after the expansion of the "Power of Siberia" pipeline, which contributed to an increase in Russian gas exports to China. For more than 10 billion cubic meters, as well as alternative markets in India, the republics of Central Asia, the countries of Southeast Asia, and even in the future in Africa.

Lachon explains to Al Jazeera Net that Asia remains the most promising market for Russia, which has the largest gas reserves in the world, and intends to increase the volume of its exports to Asian countries, primarily to China.

Although Europe is Gazprom's main market, the European bureaucracy is preventing an increase in supplies from Russia, despite the gas shortage and record high fuel prices ahead of the winter season, according to the same spokesman.

tough choices

But the economist Lachon stresses that the biggest loss in theory is the loss of the energy weapon as a means to protect national interests, and to resist pressures against the unfriendly policies of the European Union countries.

In his opinion, the American talk about finding alternative sources of Russian gas to Europe, will practically mean forcing it to buy more expensive gas with less favorable terms, as costs remain the main enemy of the American dream of supplying natural gas to Europe, because LNG supplies from the United States are more The cost of gas exports via pipelines from Russia.

Moreover, Germany will not buy American LNG, because it does not have the infrastructure to do so, and building new plants cannot be profitable, not to mention Berlin's announcement that it already plans to decarbonize completely by 2050.

The economist continues that the only way out for European countries to replace the import of Russian gas is heating with coal instead of gas, a large part of which arrives from Russia itself, but at the same time, it contradicts the prevailing environmental standards on the continent.

European alternative

The economist Lachon points out that within Europe itself, Norway is the only major supplier of gas, but it is not a member of the European Union, and all the gas produced in the North Sea, which amounts to about 100 billion cubic meters, is sold by the state to the United Kingdom and the European Union.

Meanwhile, Norway cannot seriously increase production due to its limited resource base, as well as estimates by many experts that Norwegian gas production will decline from 2024.

Other countries that have an adequate resource base and are not bound by gas export commitments that could replace Russian supplies to Europe are either under sanctions, do not have the transportation infrastructure and deliveries to Europe, or do not want to strain relations with Moscow.

The Russian expert recalls the warnings of several international energy companies to the US State Department, of the almost complete absence of gas alternatives provided by Russia in the European market.

Moreover, Lachon stresses that the further deterioration of relations between Russia and the United States and the threat to search for alternatives to Russian gas will not eliminate the fact that Europe is objectively dependent on oil and gas supplies from Russia, and therefore, will not be able, not only to abandon Russia as an energy source, but even Participation in imposing serious sanctions on Moscow.