Vladimir Putin has accused European leaders of being ‘out of their minds’ as he denied withholding gas supplies amidst an energy crisis and ahead of winter.
Putin said Russia has always kept the taps into Europe open, including during the Cold War, and that any suggestion he is throttling supply is ‘complete nonsense’.
But he reiterated that approving the new Nord Stream 2 pipeline from Russia to Germany would ‘significantly decrease’ pressure and reduce gas prices – despite experts saying the new line is not needed.
He also harangued European leaders over their failure to top up gas supplies during the summer, suggesting climate targets were to blame.
‘Europe tells us: “We are cutting down… moving away from hydrocarbons”,’ he told an energy forum in Moscow.
‘Yet you will have to keep pumping (gas) through Ukraine for who knows how long, for another 100 years… Are you out of your minds?’
Vladimir Putin has accused European leaders of being ‘out of their minds’ as he denied withholding gas supplies
Russia has linked easing Europe’s gas crisis with approving the Nord Stream 2 pipeline (top), but experts say the Kremlin already has plenty of capacity to boost supplies without bringing the new route online (pictured)
Putin insisted that Russia has already exceeded the contracts it holds with Europe, and stands ready to go further still.
‘We will increase by as much as our partners ask us. There is no refusal, none,’ he said. ‘We are not using any weapons.’
One of Russia’s main routes for pumping gas into Europe currently runs through Ukraine, which makes about $1billion per year in fees for maintaining the line.
The Nord Stream 2 pipeline would bypass that route by going direct to Germany, depriving Ukraine of the money.
The move would also hurt Poland, which sits along another major gas route – a move observers say would punish the two countries for allying closely with Europe.
In addition, it would make Europe more reliant on Russian gas – handing Putin power and leverage over the continent. The US has opposed the line for this reason.
Russia only completed construction on the line last month, after Joe Biden lifted key sanctions which had halted construction.
It now only needs the approval of European regulators to begin pumping gas.
Critics say the recently constructed Nord Stream 2 pipeline would deprive Ukraine – a key EU ally – of transit fees. Pictured: an employee works at a gas compressor station near Uzhhorod, Ukraine
Why is Nord Stream 2 such a big deal?
Despite their talk of renewable energy and a greener planet, European leaders remain reliant on fossil fuels for around two thirds of their energy.
Natural gas makes up the second-largest chunk of the EU’s ‘energy mix’ – second only to oil – and was responsible for more than 20 per cent of power generation in 2020.
Almost all of that gas – around 90 per cent – is imported from outside of the bloc, with 40 per coming from Russia, which is the single-largest contributor.
Nord Stream 2 is an $11billion pipeline that runs from Russia to Germany underneath the Baltic Sea and promises to roughly double the capacity of the already-existing Nord Stream pipeline, one of four major routes through which Russian gas reaches Europe.
Begun in 2011, the line was only completed earlier this year after getting caught up in a political tug-of-war between Washington and Moscow.
The Kremlin is eager to open the line because it will allow it to sell more gas into Europe, a huge money-spinner for an economy which gets a third of all its revenue from the oil and gas sector.
It would also be a major political victory for Putin, allowing him to bypass lines that run through Ukraine and Poland – depriving both countries of large sums of money they collect for maintaining those lines.
This is seen as payback for the pair splitting from Russia’s sphere of influence by joining the EU.
Putin also hopes it will increase European reliance on Russian gas, giving him increased clout over the continent while limiting retaliatory actions – such as sanctions – that western leaders can take against him.
Several European countries – most notably Germany, which gets 75 per cent of its energy from fossil fuels and would become a major gas distributor to its neighbours once the line is open – are in favour.
But it is vehemently opposed by others, with Ukraine and Poland – perhaps unsurprisingly – being the most outspoken.
The US has historically opposed the project, fearing it will make it harder to get European leaders to take a tough stance against Russia while handing more money and power to its long-time foe.
But in a surprise move, Joe Biden effectively green-lit the completion of the project earlier this year by lifting sanctions on the company that was building it.
The sanctions had stopped construction through all of 2020, and prompted the likes of Ted Cruz to brag that the line would never pump gas.
Biden scrapped the measures in May, and the line was finished not long after. The move was seen as a sweetener to US ally Germany, but was blasted by Biden’s critics as short-sighted.
NS2 now only needs the approval of European leaders to start pumping gas, something Putin’s energy minister suggested would end the current crisis – leading to accusations that Russia is holding Europe to ransom.
Putin insisted that Moscow had supplied gas to Europe through the Cold War and now wants Europe to accept gas piped through the new line which is more financially beneficial to Russia and bypasses Ukraine.
He said it was ‘very important’ to ‘suggest a long-term mechanism to stabilise the energy market’ in what he called a ‘difficult situation.’
Europe is facing a gas crisis leading up to the coldest season of the year, with a surge in prices and depleting reserves caused by a cold end to last winter.
Demand is rallying as economies ramp up after the end of pandemic lockdowns and there are dips in supplies from renewables like wind.
Wholesale natural gas prices, the lead indicator for overall energy prices in Europe, have more than tripled this year. Oil and coal prices have also jumped. Those spikes are expected to feed through to bills for households and businesses in coming months.
Some in Europe are blaming Russia for the increase in gas prices, saying Moscow is intentionally not boosting supplies to pressure Europe for more long-term contracts and for the certification of the Nord Stream 2.
Experts say that Russia already has the means to pump more gas into Europe through four existing lines, and is withholding supplies for its own political ends
Joe Biden effectively green-lit completion of the $11billion Nord Stream 2 pipe to Germany back in May when he lifted sanctions that had halted construction work through 2020.
Before Biden’s intervention, the US under Donald Trump had been bitterly opposed to the project – fearing it would hand influence and money to Putin, while hurting the West’s ability to retaliate against him.
Nord Stream 2 has been enthusiastically backed by Angela Merkel who wanted the pipeline to increase Germany’s natural gas revenues – but it has been bitterly opposed by Eastern European nations who fear it will embolden Russia to act more aggressively on their borders and in Ukraine.
Russian engineers finished work on Nord Stream 2 last month and now only need EU leaders to give final approval to start pumping gas – a bargaining chip that Moscow has wasted no time in using to threaten the continent.
Aleksandr Novak, Russia’s energy minister, has explicitly linked easing the gas crisis – caused when demand outstripped supply as economies reopened post-Covid – with the opening of the Nord Stream 2 pipe, saying it would send a ‘positive signal’ that would help ‘cool’ the market.
And Putin today blamed ‘systemic flaws’ in the European energy market and brushed off criticism, saying that ‘some try to pass their errors on to others’.
Russian officials have repeatedly said over recent weeks that suppliers are fulfilling obligations under contracts with European buyers.
Moscow is not upping supplies available on the short-term spot markets, which the EU prefers, arguing it is more competitive.
Russia’s energy minister said earlier Wednesday that new contracts would be needed for increased deliveries to Europe.
‘If there are requests, that will only be via the establishment of new contractual obligations,’ Nikolai Shulginov said, describing Russia as a ‘reliable supplier’.
Putin said that Russia was ‘ready’ to increase gas exports, claiming supplies were being increased by ‘as much as our partners are asking us’.
Ukrainian President Volodymyr Zelensky this week called on Europe to develop a ‘common long-term vision of Europe’s energy security’.
Russia, which supplies more than a third of European gas, has said a speedy launch of its Nord Stream 2 pipeline would help combat the surge in prices
Putin blamed ‘systemic flaws’ in the European energy market and brushed off criticism
Moscow has also not booked additional gas transit capacity via Ukraine to Europe for October, raising concerns.
Russia denies it is pressuring customers, saying it needs to fill its own reserves for the winter before sending supplies on to Europe.
But European and UK gas prices surged last week to record peaks, energised by fears of runaway demand in the upcoming northern hemisphere winter.
The crisis has also been exacerbated by a lack of wind at turbine sites, coupled with ongoing nuclear outages – and the winding down of coal power by climate-conscious governments.
The energy issue will headline an EU leaders’ summit next week.
The list of options the European Commission presented include emergency payments – perhaps in the form of energy vouchers – to poorer households.
Consumers should also be allowed to defer paying bills, and taxes and levies that can account to more than a third of the cost of those bills could be reduced or suspended, the Commission said.
It stressed, however, that these proposals must be ‘temporary’ and ‘targeted’.
Medium-term proposals also presented were vaguer.
They focused on boosting investment in renewable energy sources and pan-European grids – measures already charted as the EU re-gears itself to become carbon-neutral by 2050.
Surging wholesale gas prices have already caused issues in the UK, including bankrupting small suppliers and halting meat production – amid warnings of price hikes and potential blackouts this winter
Speaking about the global energy crunch, the International Monetary Fund backed targeted measures for the vulnerable only, saying anything broader than that would be costly and lead to ‘very negative incentives’.
The European Commission is strongly pushing back at criticism by some in the EU – most notably Hungary – that Europe’s energy price surge was from the cost of the green transition.
‘Let’s be clear. The current situation is due to our overdependence on fossil fuels,’ Commission chief Ursula von der Leyen tweeted.
‘While gas prices have rocketed, renewable energy prices are stable. The green transition is leading the way to Europe’s energy independence,’ she said.
Her EU executive is suggesting that member states can tap revenue from the bloc’s carbon-trading scheme to help pay for some of the emergency measures.
It also lent some support to a suggestion by Spain that gas be jointly purchased in the EU, but only insofar as ‘the potential benefits and design’ of the idea should be explored.
Other countries – including Germany and the Netherlands – have warned against ‘extreme measures’ in the face of a situation they see as temporary.
Analysts at the Bruegel think tank said that the EU cannot do much to boost supply in the short-term.
‘The only thing Europe can quickly do to prevent a potentially difficult winter is to actively promote energy conservation in both the residential and industrial sectors,’ said Bruegel senior fellows Simone Tagliapietra and Georg Zachmann in a post on the institution’s site.
For households, that would include ‘switching off lights, closing curtains, and taking shorter hot showers’ while manufacturers could pare back production or consider temporary closures, they said.