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Issue title:

Gazprom/Russia vs. Germany/Europe: "Tit for tat" in June

Publication date:
05.07.2022
In this issue:

The "gas crisis" continues to escalate. With their actions and reactions, Germany/Europe and Russia are trying to either improve or weaken Europe's gas security. It resembles a strategy game. Russia's last move was a significant reduction in supplies via Nord Stream and thus curtailments in the long-term contracts. The consequences of this "strategy game" alone are taking place in real life and they are harsh.

This was also very tangible at E-world, which took place in June. I have never experienced the dominance of a single topic so clearly, and the extreme uncertainty about future developments. Sooner or later, almost all conversations turned to the declaration of the alert level and, above all, the possibility of the importing companies to pass on additional procurement costs. It was already clear on the first day of E-World that the alert level would be declared; the amended Energy Security Act basically allows higher procurement costs to be passed on. "Then there will be chaos throughout Europe," the managing director of a larger trading company said. "I'm already allocating time slots for consultation," said a lawyer who thinks the regulation is not applicable. Municipal utilities, operators of district heating networks, and end customers fear high and incomprehensible price increases. The colourful array of interlocutors shows that in the event of a case, the "Christmas tree system" will apply. Starting with a very small number of companies that have Russian natural gas in their portfolio, the price increases diffuse further and further through all stages of the value chain. A very small number of companies actually means 'two': only Uniper and VNG have a substantial amount of gas from Gazprom Export in their portfolio in Germany. And it is absolutely clear that especially Uniper would have to be supported. The company will not be able to sustain the substitution of Gazprom volumes with short-term spot market purchases for long. A highly reliable source says that Uniper is already only selling volumes on the wholesale market with delivery starting after 1 April 2023. But the current approach in the EnSiG to protect the companies is probably wrong and will probably to be changed.

This issue also contains an interview with Karsten Schmid and Andreas Kamper, the two managing directors of E*Star. E*Star? Find out here how the crisis might also be an opportunity for new approaches. 

We won't 'see' each other again until the beginning of September, as I'm taking a summer break.

TOPIC OF THE MONTH: Gazprom/Russia vs Germany/Europe: Tit-for-tat in June

Dear readers, whether the tit-for-tat strategic approach from game theory correctly describes the development of European-Russian gas relations is for you to judge. But in June, there were the following moves and parallel counter-moves: 

  • On 14 June at 12:44, Gazprom announces on its Telegram channel that the flow on Nord Stream has to be reduced from 167 million m³/day to 100 million m³/day. One turbine had not returned to the Portovaya compressor station at the Nord Stream start point after maintenance.
  • On 14 June at 16:30, the German government publishes an announcement that the trusteeship for Gazprom Germania will be extended. The company receives a loan from KfW for 9.8 billion euros. It is renamed "Securing Energy for Europe (SEFE)".
  • Then, on 15 June at 15:06, Gazprom announces that due to the expired maintenance interval and condition, another turbine at Portovaya would have to be taken out of service. The company says that as of 0:30 a.m. on 16 June, only a gas flow of 67 million m³/day would be possible on Nord Stream.
  • On 23 June, the Federal Ministry of Economics and Climate Protection (BMWK) declares an alert (see section 2.1).