The future of EU energy security

A mural showing the Nord Stream pipeline is displayed on a container near the Nord Stream 1 pipeline in the Baltic Sea, Lubumin, Germany, July 20, 2022. [AP]

The news about the four leaks in the Nord Stream pipeline leaves everyone with the same thought, with little doubt that such events are too rare to be a coincidence. This could be sabotage. If this turns out to be the case, it is very likely that we will never find out who actually sabotaged the pipeline. may be beneficial.

Undoubtedly, we must look to Russia for potential sabotage. Russia is undoubtedly a country with the technical military capabilities to carry out such operations. More importantly, Russia has strong motives. The Nordstream 1 leak provides a perfect opportunity for Gazprom to invoke “force majeure” about her obligation to supply natural gas to the EU this winter.

Force majeure is probably the only way Gazprom can escape major legal proceedings against it, and if it doesn’t restart the flow of Nord Stream 1 before the pipeline cracks this winter, various Massive compensation awarded by arbitration court. There is absolutely no possibility of force majeure in offshore pipeline operations. The last time such an event occurred was a crack in his 40s oil pipeline off the coast of Scotland in 2017, when Ineos invoked force majeure to prevent the closure of the pipeline for weeks. .

risk and consequences

Despite having the ability and motivation to sabotage the pipeline, it must be said that Russia takes great risks in carrying out such operations. At a depth of 100 meters, using heavy explosives to sabotage a pipeline four times is not an easy task. Whether it’s military divers, special submarine missions, or drones that damage pipelines in a controlled manner (so as not to destroy them completely), remain unnoticed. It would require an extend operation that would be very difficult to perform.

If this was state-sponsored sabotage, Russia would appear to be the prime suspect, but there are issues that raise questions. If the Russians are really behind this, they would have no motive to destroy both the Nord Stream 1 and 2 pipeline systems, the Kremlin would only want the Nord to sabotage his Stream 1 system for all of the above purposes. can be achieved. This would make it easier for Russia to claim this was an accident and, more importantly, pressure the EU to take advantage of the abandoned Nord Stream 2 pipeline.

When it comes to the effects of the Event, the extent of the damage does not seem to be easily repaired. It should therefore be taken for granted that the Nord Stream system will fail next winter, further exacerbating the EU’s problems with security of supply. Even if the pipeline hadn’t delivered gas in September, Gazprom was under pressure to fulfill contracts with European customers and start delivering gas when the winter period began. prize. EU.

But this event alone is not enough to make Russia escape. The EU pressured Gazprom to deliver some of its lost gas volume through the still-operating Ukrainian and Belarusian pipeline routes, and to continue delivering Russian gas to Europe, operating at about 20% of capacity. can do.

This is where the second incident happened last week when a financial dispute between Gazprom and Ukraine’s Naftogaz came to light. It may come as a surprise to many, but in the past seven months since Russia’s aggression, Russian gas still flowed through Ukraine to the EU, where Ukrainian state-owned companies were charging shipping fees. rice field. From a Russian state enterprise.

Material Arbitration Disputes

The two companies have a contract from the end of 2019 that includes a take-or-pay clause, obliging Naftogaz to pay full transportation charges even if Gazprom does not send the agreed quantities through the Ukrainian network.

Earlier in September, Naftogaz initiated arbitration proceedings against Gazprom at the International Court of Arbitration of the International Chamber of Commerce in Paris, demanding full payment from the take-or-pay clause. This was supported by the fact that Gazprom was sending an estimated amount of gas through the Ukrainian transport system. “The funds he received from Gazprom were not paid on time and in full,” Naftogaz said.

In response, last week, the day after the Nord Stream case, Gazprom announced that it would not accept arbitration and if Naftogaz does not stop the process, Russia will impose sanctions and Gazprom will not be able to pay anything. Naftogaz.

This second deployment makes things very difficult for the EU. If the arbitration dispute situation escalates, Ukraine will have to decide whether to continue to allow Russian gas to flow into her EU even after Gazprom has stopped paying transport charges altogether.

running out of options

It should be borne in mind that even with a production capacity of 20% over the past seven months, Ukraine’s routes still supply the EU with about 15 billion cubic meters of Russian natural gas annually. These amounts alone are equivalent to his 15 billion cubic meters/year that the EU secured from the US when Joe Biden and Ursula von der Leyen met a few months ago. The US already exports as much of her LNG as possible to the EU, and he will find it difficult to cover the new gap of 15 billion cubic meters per year.

Therefore, more than recent developments on Nord Stream, the arbitration dispute between Gazprom and Naftogaz is a real source of concern for the EU’s energy security. The combination of the two events will mark the first time her EU gas supply is in real danger this winter. So far, concerns have been based purely on speculation and there have been no real facts indicating the inability to cover EU gas demand. Considering how arbitration might play out in the future, there are actually good reasons to be concerned.

The Ukrainian and Belarusian routes still have the capacity to cover Europe’s necessary gas needs, and combined with large LNG imports and the stockpiled storage facilities already in place, the situation is still hopeless for Europe. not. Now, along with geopolitical and financial issues, there are also legal developments in the EU’s energy security narrative this winter.

Michalis Mathioulakis is an Energy Strategy Analyst, Academic Director of the Greek Energy Forum, and a Fellow on Energy Issues at the Hellenic Foundation for European & Foreign Policy (ELIAMEP). The future of EU energy security

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