Wednesday, 24 August 2022 — Swiss Policy Research

Gas pipelines form Russia to Europe (Welt)

Is Russia limiting gas flows to Europe? The surprising answer is: no. 

Many people in Europe and the US seem to believe that Russia, in response to Western sanctions, has been limiting gas flows to Europe. Yet this is not the case.

There are currently five major pipelines that supply – or could supply – Russian gas to Europe: Nord Stream I and Nord Stream II through the Baltic Sea to Germany; the Jamal pipeline through Poland to Germany; the Soyuz and Brotherhood pipelines through Ukraine; and the TurkStream pipeline through the Black Sea and Turkey to Southeast and Central Europe (see the map above).

All of these pipelines are currently out of service or run at limited capacity, though not because of Russian retaliation, but because of Western sanctions or political decisions:

• The Jamal pipeline is closed because Poland has terminated the operational agreement with Russia (after the Russian invasion of Ukraine and to become independent of Russian gas).
• The Soyuz pipeline – which accounts for about one third of the gas delivered through Ukraine – has been closed by Ukraine after LPR forces took control of the gas compressor station.
• Nord Stream I runs at limited capacity because Canadian and EU sanctions have prevented the repair and return of a Siemens gas compressor turbine.
• Nord Stream II was completed in late 2021 but has never entered service due to US political pressure on Germany; Germany canceled certification of the pipeline on February 22.
• TurkStream – which in 2014 replaced the South Stream project – remains operational, but because of EU sanctions, Bulgaria has denied euro payment to the Russian Gazprom Bank. In contrast, Hungary has defied EU sanctions and continues to receive gas through TurkStream.

There is also a widespread misconception that Russia demanded “payment in rubles” to retaliate against Western sanctions. Yet this is not the case, either. Instead, after Western sanctions against the Russian central bank froze about $300 billion in Russian foreign exchange reserves, Russia decided that euro and dollar payments for gas have to be made to an account at Russian Gazprom Bank and will then be converted into rubles by the Russian central bank (to avoid seizure by the US/EU).

Why is Russia not (yet) actively limiting or stopping gas flows to Europe? Simply because Russia is interested in earning revenue from gas exports, being seen as a reliable supplier, and avoiding further escalation of the Ukraine conflict and direct confrontation with NATO countries. However, Russia did put pressure on Kazakhstan to prevent Kazakh oil exports via Turkey instead of Russia.

Why then is Europe jeopardizing its own gas supply through sanctions against Russia? The initial goal likely was to cripple Russian export revenues and the Russian economy. Yet this has largely failed as international oil and gas prices have risen to record highs. Thus, Russian oil and gas revenue has actually increased since the outbreak of the Ukraine war (though tech sanctions are still biting).

However, the Western response can only really be understood from a US perspective, not from a European perspective. From a US perspective, cutting off Russian gas flows to Europe is a means to isolating Russia, pressuring Europe into supporting the US proxy war in Ukraine, and forcing Europe to switch to American or Arab LNG gas supplies. The most obvious example of this strategy is the Nord Stream II pipeline, which the US blocked despite a German-Russian agreement.

More broadly, the US role in Ukraine is to be seen in the context of the US strategy in Eurasia. Back in June, former US Secretary of State and former CIA director, Mike Pompeo, explained in a speech at the Hudson Institute: “By aiding Ukraine, we undermined the creation of a Russian-Chinese axis bent on exerting military and economic hegemony in Europe, in Asia and in the Middle East. This would further devastate the lives of Americans and our economy here at home. () We must prevent the formation of a Pan-Eurasian colossus incorporating Russia, but led by China.”

In spite of reduced Russian gas flows, most European countries – including Germany – will still reach their gas storage target levels for the winter season, though at significantly higher market prices. This has already led to some bizarre situations, such as Germany’s largest fertilizer producer having to halt production, while fertilizer shortfalls are being replaced by imports from Russia, which have been exempted from sanctions.