LONDON: The unspoken threat to leave Europeans shivering in the cold next winter may be Moscow’s trump card in its confrontation with the West over Ukraine. But for both technical and financial reasons, the world’s biggest gas exporter would be badly hurt by any decision to cut off its main customers in Europe.
Twice in the past decade, Moscow responded to natural gas price disputes with Ukraine by cutting off supplies, affecting its European clients further down its pipelines. As tensions between the West and Russia have escalated in recent weeks, the EU has begun drafting emergency measures to brace itself for another potential energy supply crisis.
Only President Vladimir Putin can decide whether another cut-off will take place, sources at Russia’s giant energy monopoly Gazprom say. But they also say the company would face unprecedented difficulty if it were to cut supplies to Europe for a prolonged period of time.
For technical reasons, the gas has nowhere else to go but out to customers: it is impossible to severely scale back extraction volumes at Gazprom’s giant fields in Siberia, nor could such huge amounts of gas be safely flared off.
On the financial side, Russia’s second most indebted company would face big challenges in servicing its debt were export revenues to plummet. Economic sanctions against Moscow have already caused new lending to dry up, meaning Gazprom has little alternative besides steady income from exports to pay its day-to-day bills and the wages of its half million workers.
“Another gas cut would be a huge financial blow. But operationally it would be a disaster too. You just can’t turn the taps on and off on the fields — it ruins them,” one veteran Gazprom source said. Another source at the firm said it could no longer easily absorb losses like those it sustained the last time its supplies were cut off to Europe five years ago.
“Back in 2009, Gazprom had all lending options in the world at its disposal and could lose a billion here and a billion there. Today the lending is shut so money will run out quickly.”
A company spokesman said Gazprom wasn’t working on a scenario for a potential supply cut: “Our focus is to continue stable gas deliveries to our customers.”
Gazprom supplies a third of Europe’s gas and for many EU countries it is the main source of heat for homes and power for cities and industry.
Until 2011, when Moscow opened the new Nord-Stream pipeline on the Baltic Sea floor, nearly all of that gas was pumped over Ukraine, leaving the supply to Europe vulnerable to disputes between Moscow and Kiev.
Reuters
