Vladimir Putin’s energy war against Europe is failing, shows an article published this Monday, 19, in The Wall Street Journal. The president of Russia has considerably reduced the supply of natural gas to countries on the mainland, with the aim of pressuring them to stop supporting Ukraine. However, the price of the input is getting lower and lower. And Moscow’s finances are deteriorating as Europeans lay out plans to deal with a shortage of Russian gas.
Signs that Putin’s economic strategy is failing coincide with the Russians’ setbacks on the battlefield as Ukrainian forces reclaimed Kremlin-occupied territories.
The European Union (EU) claims that the Russian president’s purpose is to inflict pain on families and businesses on the continent. The idea would be to pressure the citizens of the countries to protest against their governments, so that they stop applying economic sanctions to Moscow.
Russia is not sure that it will lose this fight. But there is a growing consensus among officials, energy experts and economists: while Russian actions will cause Europe serious difficulties, Putin is likely to fail in his plans. According to experts, Europeans can get out of winter without facing fuel shortages. Once winter is over, the ex-KGB agent will have less bargaining power.
Moscow’s energy bonanza wanes as natural gas exports fall and the price of oil plummets. Brent crude, the global benchmark, has dropped from more than $120 a barrel to around $90.
Last week, the EU put forward proposals to ease the pressure on consumers, including mandatory restrictions on the use of electricity. Some energy experts fear that direct government subsidies for energy will thwart efforts to contain demand.
The coming winter is the period of maximum vulnerability for European governments. If the season is harsher than usual and leads to increased energy consumption, optimism may evaporate. But there are concrete signs that Russia’s bargaining power is waning. Natural gas and electricity prices, which rose sharply after the temporary closure of the Nord Stream Gas Pipeline, quickly reversed.
On Friday the 16th, gas traded at around €185 a megawatt-hour. This is nearly three times the level a year ago and more than double the level recorded in June, when the Kremlin ramped up Nord Stream activities. Even so, it fell by more than 45% compared to August.
Alternatives to Russian supplies, including LNG from the United States and other countries, are helping to fill some of the gap left by the closure of Nord Stream. Underground gas storage reached 85% of capacity and exceeded the EU target of 80% by the end of October.