Gazprom and green deal: who will win? Gazprom is manipulating the deliveries of gas to European markets. Why?

Gazprom
Gazprom RIA/Scanpix

Until the end of 2021, Gazprom was considered a reliable supplier of gas to Europe, or at least to the markets of Western Europe. That allowed Gazprom to become a dominant exporter of gas to Europe, with a more than 40% share of the EU gas import market.

That picture changed dramatically in the second half of 2021: as Fatih Birol, Executive Director at International Energy Agency (IAE) recently stated: they “see strong elements of “artificial tightness” in European gas markets, which appears to be due to the behaviour of Russia’s state-controlled gas supplier. /…/Russia has reduced its exports to Europe by 25% in the fourth quarter of 2021 compared with the same period in 2020./…/And this is despite the exceptionally high market prices for the natural gas we have seen in recent months” (https://www.linkedin.com/pulse/europe-world-need-draw-right-lessons-from-todays-natural-fatih-birol).

Such behaviour of Gazprom brought clear consequences on the ground: an unprecedented surge of natural gas prices in the EU – which at times exceeded $2000 per thousand cubic meters, an absolute historical record, and nearly 20 times higher than the average European natural gas prices in 2020 (https://www.martenscentre.eu/blog/how-gazprom-manipulated-the-eu-gas-market/).

Such a surge in gas prices became a reason for the unprecedented rise of prices for electricity and heating, which shocked all the consumers in Europe. Quite many of them started to blame European Green Deal for such a rise in electricity prices, speculating that switching from gas to renewable energy is too costly.

It looks like such a negative and wide European public reaction to the implementation of the Green Deal is exactly what Kremlin and Gazprom were expecting to achieve with their deliberate manipulation of the European gas market. That is the justification and motivation for them to continue doing such manipulations now and in the foreseeable future.

Fight against Green Deal is increasing energy prices, not fostering the implementation of Green Deal

Beyond achieving environmental goals, the European Green Deal will drastically reduce Europe’s dependence on Russia’s gas supply: gas imports are estimated to fall by 60-70% in 15 years (Geopolitical consequences of Green Deal, ECFR, https://ecfr.eu/publication/the-geopolitics-of-the-european-green-deal/).

This is a cause of a major concern for Gazprom and the Kremlin. Gas export is not only a tool of geopolitical influence on the European continent; it is also a major source of revenue (64% of Russia export revenue in 2019; 60% of EU imports from Russia were energy products in 2019) that maintains the current economic and political structure in Russia. Without revenues from gas and oil, Russian economy will be forced to major structural transformation. Such a transformation of economical structure will lead to significant changes in the political structures. In other words, the implementation of the Green Deal has the potential to put an end to the Kremlin’s authoritarian rule. Therefore, Green Deal is the Achilles’ heel of autocracy in Russia. Unless a transformation to democracy in Russia will happen earlier than Green Deal will be implemented, Russia’s future case is able to prove a formula valid for the entire post-Soviet area: no gas – no autocracy (https://lithuaniatribune.com/10-points-for-an-answer-to-putin-threats/). In other words, that could be achieved and will be a consequence of the EU decision to implement the Green Deal.

Putin and his entourage gradually realise that the Green Deal is a mortal threat to their autocratic and kleptocratic regime. In addition to that, problems for the future of the Russian economy are also related to the fact, that till now Kremlin authorities are refusing to make any significant steps in order to modernize their industries, which continue to produce “dirty” production (Vladimir Slivyak, https://www.france24.com/en/tv-shows/perspective/20211209-alternative-nobel-laureate-vladimir-slivyak-on-fighting-climate-change-in-russia).

Altogether, those are the reasons, why the Kremlin and Gazprom will definitely fight against European Green Deal implementation in different areas: Kremlin will fight against Green Deal because Green Deal will radically cut consumption of Russian gas in Europe; they will fight against Green Deal because with introduction of Carbon Border Adjustment Mechanism (CBAM) Russian industry production will lose competition on European markets, and they will fight against Green Deal if instead of gas Europe will start to use “green” and clean hydrogen, which Gazprom will not be able to produce out of natural gas.

We can just guess what the instruments will be, which Kremlin and Gazprom will use in the fight against the implementation of the Green Deal. But it’s already very clear that they will use a wide toolkit: starting from direct and open manipulations with gas deliveries to European markets, which will allow them to manipulate the prices for gas and energy (exactly, what witnessed this year); and ending with all sorts of the hybrid propaganda and lobbying instruments, targeted to convince European decision-makers that shift from gas to renewables is very costly and that it will “kill” traditional industries of Europe. We can predict that Gazprom will try to establish “a coalition” with the largest European gas companies to combine their lobbying efforts against the implementation of the Green Deal. The EU during the next decade needs to be ready to face all the “dirty tricks” of Gazprom in their war against the implementation of the Green Deal. This year with manipulations in the market and surge of the prices, we have seen just a beginning of that Gazprom fight. 

The analysis is showing very clearly, that the rise of energy prices during this winter season is not because the EU started to implement Green Deal, but because of the opposite – Gazprom started its fight against the implementation of the Green Deal. In order to defend the future of the Green Deal, the EU needs to immediately launch an official investigation into Gazprom manipulation practices in order not to allow Gazprom in the future to use its dominating position in the European market in such an unacceptable way. In addition, since now Gazprom have to be called  and recognised as “an unreliable supplier of gas”. That is the reason why the EU needs to look at how to diminish its dependency on Gazprom supplies immediately. 

Green Deal as an instrument to strengthen European strategic autonomy in the geopolitical security area

One additional reason, why the Kremlin and Gazprom started its fight against the implementation of the Green Deal is of course the fact, that Kremlin until now is using dependency of individual Member States of the EU on gas deliveries from Gazprom as an instrument to make an influence on the geopolitical decisions of the governments of those states in foreign and security matters. 

Recently international media was publishing a lot of opinions of well-known experts, who were saying that decisions of the new German government not to deliver defence weaponry to Ukraine, when the Kremlin is threatening them with military invasion, was related to the fact that in German import of gas almost 50% are coming from Russia. And the price hike, which was artificially created by Gazprom, was also targeted to the German public in order to convince the German government not to become too critical to Kremlin aggressive behaviour. 

Looking from that angle, it is very clear that from the geopolitical security point of view Europe should push the implementation of Green Deal as one of the most important instruments, and it will allow Europe to have less dependence on Gazprom domination in the market, which is becoming threatening to strategic geopolitical security of Europe. That is exactly the reason why the autocratic and post-imperially aggressive Kremlin will fight heavily against the implementation of the Green Deal, which will cut instruments of Kremlin influence in Europe.

Green Deal – for Europe “whole, free and at peace”?

Green Deal was designed as a European pure ecological instrument of major scale and importance. And that its primary strategic goal – to make Europe “fit for 55” and in 2050 – “climate neutral”. This is why this Green Deal is so important. Because it will dramatically change the European economical, industrial and energy landscape. Of course, it will influence the neighbourhood of the EU. Also, it will influence major gas suppliers to the EU. Some of them, like the majority of Arab countries, are preparing themselves and they are modernizing their economies now. Others, like Russia, instead of preparing themselves for the inevitable change in European and global consumption of gas, are still trying to fight against such a change. Because such a European change is in fact a real threat to their existence as autocracies. That is why, when we are looking for rational answer why Kremlin exactly now started operation of military threats against Ukraine and the whole West, we should not forget that for survival of Kremlin regime implementation of Green Deal is more dangerous, than theoretical possibility of Ukraine becoming member of NATO. Despite the fact, that Kremlin nowhere openly opposes implementation of Green Deal, we should not become naive – for Kremlin geopolitical aggressive instruments of Gazprom are more important than several military divisions. We see it from destructive Gazprom activities against Ukraine or Moldova.

Therefore that is why we need to have very clear understanding – if we want “Europe – whole, free and at peace” we need to push forward implementation of Green Deal, because that is how the aggressive power of authoritarian Kremlin and Gazprom, both domestically and on EU territory, can be very substantially diminished.

But before that will be achieved through the implementation of Green Deal, we need to be ready that Kremlin will fight heavily against Green Deal. Sometimes even with military threats, as we see now.

We are fighting against climate change, Kremlin is fighting for the regime survival. The Green Deal is exactly in the center of that battle.

Let’s hope that Green Deal will win!

EPP Lithuanian office
EPP Lithuanian Office
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