US failed to oust Russia from EU energy market

American gas did not fall into the stream.

On December 20, 2019, on Christmas Eve, the United States imposed sanctions on participants in the Nord Stream 2 Russian-European gas project.

We do not know how President Trump felt when he signed the defence budget for 2020, in which, in a separate article, sanctions were imposed on participants in the most important energy project of the Old World. Perhaps the President, who is well versed in development and show business, but, as you know, is not very strong in the global global economy, did not even understand what kind of pig the Senate and Congress planted for him, and what bad consequences for him and American companies lurk in this document …

Why does Europe need Russian gas?

So, as you know, the European Union is the second largest economy in the world. The political and economic bloc from 27 countries with a population of almost half a billion people is the leader in world exports and imports (about 30%), ahead of the United States and China in this indicator. In world trade, Europe holds a leading position in the production of chemical and pharmaceutical products (about 50% of world exports), and is a leader in the global engineering, automotive, aerospace and shipbuilding industries. To understand the role of the EU in the global economy, it is enough to say that the products of European companies – technology, equipment, machine tools, components, materials and semi-finished products in one way or another provide about 40% of all world exports.

However, the economic power of the block has one very weak spot – the efficient operation and growth of the growing economy of the block requires reliable supplies of energy resources in huge volumes. Despite the diversification of European energy, using all known fuels, gas is a key source of energy for European countries. It is gas that gradually displaces in Europe, which pays great attention to ecology, such fuels as coal fuel oil, and partly nuclear energy.

In 2019, the EU needed about 550 billion cubic meters of natural gas per year for the operation of industry, energy and transport, of which only 170 billion cubic meters of gas were produced by the EU countries themselves. The remaining 380 billion cubic meters were received by Europeans from other countries: 197 billion m3 from Russia (37% of EU needs), 23 billion m3 from Qatar, 20.6 billion m3 from Algeria, 8 billion m3 from Nigeria, 7.6 billion m3 from USA.

In principle, even a cursory glance at these figures is enough to understand that Russia is a key gas supplier for the EU. It should be noted that despite the constant attempts of the Europeans themselves to reduce energy dependence on their eastern neighbour, this is practically impossible to do. In recent years, the European Commission, the main collective governing body of the Old World, has taken a number of restrictive measures aimed at reducing the share of Russian gas in its market. However, none of the so-called “energy packages” adopted in Brussels gave the expected result. The reason for this is both obvious and insurmountable – at present and in the foreseeable future, no supplier can guarantee the supply of such volumes of blue fuel to the EU market.

The main volumes of gas are supplied to European consumers via pipelines from Russia, Norway, the Netherlands, Germany, Denmark and the UK. Own production in the EU countries is reduced year by year, and is replaced by foreign supplies. For natural geographic reasons, Russia has been the main source of gas supplies to Europe over the past 40 years. The gas pipeline system linking the rich deposits of Western Siberia with the European market was created back in the days of the USSR, and has been constantly developed by modern Russia. In addition to gas pipelines passing through Ukraine and Belarus, in the 21st century, Russians built the Nord Stream-1 subsea gas pipeline in the Baltic.

In principle, even the existing Russian gas supply system, in conjunction with its own production and other energy sources (oil, coal, nuclear power plants, solar, hydro and wind energy) allows Europeans to satisfy most of the needs of their economy. Nevertheless, in order to protect itself, the European Union has put a lot of effort and invested enormously in the diversification of energy supplies over the past 10 years. Considerable attention was paid to the development of renewable energy – solar and wind energy. A lot of effort and money was spent on improving the energy efficiency of enterprises, transport and households, as well as on the construction of infrastructure for receiving liquefied natural gas. 

Gas D-Day USA

It was at this point that the United States appeared on the gas market. While extremely sophisticated and very expensive terminals for receiving liquefied gas (LNG) were built in European ports, and Putin’s Russia’s relations were ruined due to events in Ukraine, on the other side of the Atlantic Ocean, the democratic administration of Barack Obama was eyeing the European gas In the world there are and consume natural gas. The country’s industrial and economic power, together with an advanced and unsurpassed entrepreneurial initiative, has been achieved by the world leader in gas production and processing technologies, including LNG. Until now, it seemed that a huge share of the richest energy resource was about to go to an American company.

And LNG began to actively acquire Europeans, to deal with certain energy systems of the Old World. The situation was very favourable for Europe – economic and technological sanctions should be paralyzed for the work and development of oil and gas processes. Russian companies.

However, several important factors. The fact is that there were two flaws in American LNG.

Fluctuations in world hydrocarbon prices. In the US, oil prices are extracted from oil production. American oil, gas and petrochemicals instantly fill the domestic market, and their excess was easily sold abroad – good, cheap loans, high technology and the desire for growth. But energy prices, caused by a slowdown in China, the US and the US economy, have become uncompetitive even in the domestic market. Buying gas in the US was a very bad deal. As a result, American companies were not able to achieve a 10% share in the European LNG market – Russian, North African and Qatari gas proved to be very profitable for a giant market that requires a lot of cheap energy.

The EU gas market has become the Atlantic Ocean. The thing is to ensure uninterrupted gas supply to the gas pipeline. Must be delivered to one of the ports of the Gulf of Mexico or the East Coast. It takes about a week to load the average gas flow, an ocean revision takes about 10 days, a gas unloading process (it takes about 4 days).

Thus, provided that the world has everything that is needed for the production of gas gases, all the capacities of LNG terminals, weather and navigation conditions), American gas will not be able to compensate Europeans for the loss of even a quarter of Russian gas.

Exile from the gas paradise

Despite the fact that the initial attempt to diversify the gas market was carried out using LNG (America occupied only 5th place in the LNG market – about 7%), pipeline gas from Russia remained the cheapest and most reliable energy carrier for the EU. In Europe, there is economic and economic economic development.

An important addition to the existing gas pipeline line is that in order to maintain industry competitiveness, the EU promises to become the Nord Stream -2 subsea gas pipeline. Despite numerous disagreements, the Russians and Europeans were eventually able to agree on the construction of this main highway. Dozens of Russian and European companies took part in the construction of the underwater gas artery, thousands of jobs were created, contracts were signed, and settlements were made.

And now, when the construction of the Nord Stream-2 gas pipeline was completed, only a few weeks remained, and it was decided to stop this grandiose project.

The White House for European project participants requires the participation of all interested parties in the construction. The construction of the Northern Project-2 was stopped. but, apparently, the Russians have already found resources to independently complete the laying of the highway. The only negative consequence for Russia is likely to be the postponement of the launch of the pipeline for several months.

What did America win? With just one signature, Donald Trump killed several birds with one stone. Unfortunately, all these hares are American.

Firstly, such a blatant White House interference in Europe’s politics, economy and energy enraged German Chancellor Angela Merkel, the head of Europe’s richest and most influential country. The head of one of America’s most reliable allies in Europe and NATO said that Europe would not tolerate such hostile actions.

Secondly, it is safe to say that further US attempts to occupy a share of the European market will be met with great caution. Unfortunately, Europeans have already realised that buying American gas is a very bad deal – expensive and dangerous.

Thirdly, knowing Russia’s reaction to such sanctions, one can be sure that the Russians will make every effort to squeeze the United States not only from the European market, but also try to cause a lot of trouble to American interests in China, Japan and Southeast Asia. The Russians are currently building a major gas pipeline from Eastern Siberia to China, and are building powerful LNG terminals for deliveries to Japan and the Pacific. There is no doubt that American companies in these promising markets will have to puff for and for Nord Stream-2.

The most unpleasant thing in the whole story is that such rude measures were completely in vain – literally in those days when the Senate and the US Congress handed over such a controversial document to the President for signature, a number of European companies refused the already paid batches of American gas, and, especially for commercial reasons. At present, the Russians are taking extraordinary measures to finish building the last miles of the gas pipeline in spite of sanctions, and, even with the worst-case scenario, they will complete it by the end of this year.