US finds there are no easy answers to Europe’s gas supplies

The energy supply crisis - and that for natural gas in particular – has been exacerbated by fabricated geopolitical and economic factors overlapped. So much so, the relatively straightforward issue of gas supply has become even been mixed up with threats related to weapons of mass destruction.

We bring up the gas crisis given it is one of the repercussions of the ongoing Russia-Ukraine crisis. This is because a Russian gas pipeline runs through Ukraine to Western Europe since the Soviet era. Plus, there is the failure for now to operate the new Nord Stream 2, a pipeline which flows directly from Russia to Germany via the Baltic Sea.

The crisis has led to a serious shortage of gas supplies to Europe as well as to doubling prices and inflation rates, which could see the UK’s hit 7.3 per cent. The shortage of gas supplies threatens to halt vital industries, especially in Germany.

The reasons are related to the rapid recovery of the global economy, which led to a rise in energy demand, which has raised the price of oil to $90. However, there is also another crisis that has been created as a spinoff from the Russia-Ukraine issue, whereby Washington is bringing considerable pressure to bear on Russian gas supplies to Germany in exchange for a pledge to provide US gas supplies to European countries as alternative.

The US has increased its gas exports to Europe, but this did not help much in resolving demand, which led it to resort to other major gas-exporting countries, particularly Qatar, whose Emir had a meeting with President Biden at the White House. This is in addition to the US’s appeal to Libya, Egypt, Algeria, and China to use their gas inventories.

No spare stocks

These attempts have failed for many reasons. On oil, two countries have excess production capacity - Saudi Arabia and the UAE. But in the case of gas, no country has excess capacity, including Qatar, which markets its gas exports under long contracts.

This means that the entire Qatari gas has already been sold for the coming years and that any breach of these contracts, including delays in supplies, will result in significant compensations that Qatar is trying to avoid. This was confirmed by Qatar’s Energy Minister who said: “Qatar cannot meet the EU’s gas needs. We have not spoken to our Asian customers about the idea of diverting gas to Europe.”

This represents Qatar’s response to a US request. Qatar provides only 5 per cent of Europe’s gas supplies. The Qatari gas is exported in tankers as liquefied natural gas, while most European gas imports come through pipelines, as European countries do not have a large LNG import infrastructure.

Tilted in Russia’s favour

In fact, all these complications work in favour of Russia, which did not threaten to cut gas supplies despite the intensification of the Russia-Ukraine crisis. On the contrary, Moscow seeks to operate the new pipeline, which could help meet Europe’s full gas demand and lead to cutting down prices to the benefit of European consumers. But this is a solution that Washington strongly opposes.

This clearly indicates that the US is facing a real impasse. On the one hand, it tries to ease the dependence of its European allies on cheap Russian gas, which gives it a preferential advantage and for which there is no alternative.

This situation has led to shift in positions between Washington and Berlin. Washington also did not find a response from other gas producing countries for a simple reason - there is no one that can bridge the shortage by increasing production.

-- The writer is a specialist in energy and Gulf economic affairs.