What are the implications of Russia winding down gas supply to Europe via Ukraine?

CGTN Europe

CGTN Europe interviewed Christof Ruehl, Senior Research Scholar at Columbia University's Center on Global Energy Policy

Transcript

00:00The price of natural gas has hit a 52-week high on fears of a cold January in the United States.

00:06The natural gas futures price has risen by almost a fifth to over $4,200 per 1,000 cubic feet.

00:13Meteorologists are predicting substantial snow and ice along much of the East Coast in coming weeks.

00:19The futures natural gas price is already up more than 50% in 2024.

00:24It's now trading at its highest level in a year, while oil prices have also seen significant gains.

00:30Let's talk now to Christoph Ruhl, who's Senior Research Scholar at the Center for Global Energy Policy at New York's Columbia University.

00:36Good to see you again, Christoph.

00:38Cold weather on the way for the States, likely in Europe, too.

00:42This deal allowing Russian gas through Ukraine to Europe is set to expire.

00:48Given this cold weather on the way, which countries will be most affected by this, and what will it mean for them?

00:54Well, it's a bit of a historic occasion.

00:57This is the last gas. I shouldn't say the last gas.

01:00Nobody should say that from Russia to Europe.

01:02It's the last pipeline gas from Russia to Europe because Russia also produces liquefied natural gas,

01:07which enters global markets and through the back door finds its way through Europe.

01:11But it's historic because it's the last drop of pipeline gas, bubble of pipeline gas.

01:17On the other hand, it's not so dramatic because Europe used to get about 35% of its imports from Russian pipelines,

01:24and now this is already down to 8%.

01:26But just to put it in perspective in numbers without even caring about the units, it used to be 65 BCM.

01:33Now it's about 14 BCM.

01:35Most affected by that outage would be Slovakia and then Austria.

01:41We have heard that the Austrians cancelled it themselves.

01:44Indirectly affected would be Czech Republic because they would sort of jump in and provide some of their gas for Slovakia.

01:52Also affected, hardly mentioned, is Moldova because there's a breakaway republic part of Moldova

01:58which gets about 2 BCM of gas from Russia, and they haven't built it and paid their bills forever.

02:03So in that case, it is gas from switching it out, switching it off.

02:07So you have some small countries affected, and you have general agreement, I should say,

02:11that there will be no outage just because of the disruption.

02:14In the background, you have price increases, which I really think should be blamed on the weather

02:19rather than on this expiring contract.

02:22Is this, though, going to put further pressure on those prices?

02:25As you say, already boosted by cold weather forecasts.

02:28Are we going to see those prices go up more?

02:32Every little counts, so it will certainly play a role, but not a big one, not a dramatic one.

02:37The sums are too small, the preparation times are too long, the inventories are too full,

02:43so everybody really in the gas business looks at the thermometer.

02:47If we are running into trouble because of cold weather,

02:50because of storage going down faster than expected,

02:53then, of course, this political discussion will start again,

02:56should one or should one not have listened to Slovakia and listened to the Ukraine or not.

03:00But that's a very remote scenario at the moment.

03:04Again, de facto, it would be weather-driven, not a supply disruption, as we had seen in 2022.

03:10What does it mean for Russia?

03:12Does it mean they're going to be stuck now with a load of gas that they can't actually transport out of the country?

03:19For Russia, strategically, it's certainly bad news

03:21because it means that the last gas bubble or so to European pipelines has passed.

03:26It will be much more difficult to re-establish that system once it has been interrupted

03:30and once European countries have found alternative suppliers.

03:33So even though the volumes were small,

03:36it is certainly the case, I would think, that in Russia, in Gazprom and in the transit pipeline system,

03:41people look back now on an epoch which is likely to be over for good.

03:46And that's a problem because Russian gas production is highly concentrated in the western part of Siberia,

03:52and there is, as of now, only pipelines to Europe, to the west.

03:56There's nothing, there's no pipeline to the east, to China.

03:59So that means a large chunk of Russian gas in western Siberia is now stranded,

04:03cannot be produced because it cannot be transported.

04:06And that is an economic problem.

04:08Christoph, good to talk to you as always.

04:10Thank you for joining us on the programme.

04:11That's Christoph Ruhl from Columbia University.

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