Putin Puts Europe Into an Energy Vise So Tight That Some Countries Are Chopping Wood

In addition to nuclear blackmail, Russia is using natural gas to put Europe in a hammerlock.

Satellite image ©2022 Maxar Technologies via AP
The Zaporizhzhia nuclear plant in Russian occupied Ukraine, August 19, 2022. Satellite image ©2022 Maxar Technologies via AP

After six months of war in Ukraine, President Putin’s military offensive has stalled. Now, as winter looms, Mr. Putin is aggressively playing the energy card. Russia is deliberately deepening Europe’s energy crisis to the gravest level since the Arab oil shock of 1973. 

Half a century ago, the OPEC oil crisis was staged partly for political reasons, partly for economic ones. Led by Saudi Arabia, OPEC sought to help Egypt and Syria destroy Israel in the Yom Kippur war. The six-month oil embargo quadrupled world oil prices.  

Today, Mr. Putin seeks to destroy Ukraine as an independent nation. He already is reaping the benefits of high prices for gas, oil and coal. As in 1973, lagging American oil production is tightening world markets. 

On the nuclear front, Russia’s Defense Ministry threatened Thursday to close the largest nuclear power plant in Europe. Russian soldiers occupy the plant at Zaporizhzhya and use it as a base from which to fire on nearby Ukrainian territory. This Soviet-era complex of six reactors employed 11,000 before the war started.  

At best, a shutdown would cut off Ukraine from the source of 20 percent of its electricity. Russian technicians would then reroute the electricity to Russia or its occupied territories. By stealing the electricity, Russia would force Ukraine to buy power from Europe’s already over-stretched and over-priced market.  

“Obviously the electricity from Zaporizhzhia is Ukrainian electricity,” the UN secretary-general, António Guterres, said Friday at Odesa. Turning to the danger of war time sabotage, he said: “We must tell it as it is: any potential damage to Zaporizhzhia is suicide.”  

Nuclear experts warn that the delicate process of shutting down the reactors could cause an accident. Shutting down requires halting nuclear chain reactions, while protecting fuel from overheating and preventing a meltdown.  

According to the Ukraine intelligence, Russia had told its nuclear workers stationed at the Zaporizhzhia nuclear plant not to report for work on Friday. In response, Ukrainian civilians started to evacuate Zaporizhzhya city. Washington and Kyiv warn that the Kremlin is planning a “false flag” operation.  

On Friday, Mr. Putin warned President Macron of “the danger of a large-scale catastrophe that could lead to radiation contamination of vast territories.” Earlier in the week, the head of Russia’s Radioactive, Chemical and Biological Defense forces, Igor Kirillov, specified that an accident in Zaporizhzhya could send radioactive material across Germany, Poland and Slovakia.  

In addition to nuclear blackmail, Mr. Putin is using natural gas to put the European Union in an energy hammerlock. Over the last decade, a succession of European politicians — most notably Angela Merkel — ignored clear warnings from Washington about the dangers over reliance on cheap Russian gas.  

Now, Mr. Putin is turning off the tap. Cognizant that Germany, Europe’s largest economy, relied on Russia for 55 percent of its gas last year, Mr. Putin has slashed flows on Nord Stream 1, the Russia-Germany Baltic Sea pipeline, to 20 percent of capacity.

Politicians worry that to force the EU to force Ukraine to the bargaining table, Mr. Putin will eventually shut off all gas exports. Last week, Uniper, Germany’s largest importer of Russian gas, reported a $12.5 billion loss due to Russian gas supply cuts. 

Today, after Gazprom announced a three-day total shutdown of Nord Stream 1 “for maintenance,” Amsterdam gas prices spiked 19 percent before ending the day at a five percent rise.  

“Our product, our rules,” the chief executive of Gazprom, Russia’s state-run gas exporter, Alexei Miller, said in June at the St. Petersburg International Economic Forum. “We don’t play the games where the rules are not set by us.”  

To fill the gap, the EU has started a crash program to cut natural gas usage by 15 percent before winter. Air conditioning is cut off in hallways. Heat is turned off in swimming pools. Germany is restarting several coal-fired electricity plants and is debating decommissioning its last three nuclear power plants. World coal prices have increased six-fold over the last year  

Over the last five years, European natural gas prices have averaged about twice as high as those in America. Currently, they are eight times as high. Now at record highs, the EU price is equivalent in energy terms to $400 a barrel of oil.    

To diversify supplies, 11 EU countries are building or planning LNG landing terminals. Once hooked up to ocean going tankers, these terminals will turn supercooled liquid into gas for transmission through pipelines. For years, Germany’s leaders dismissed these terminals as projects pushed by Texas politicians eager to export American gas.  

Now, to some degree, America is coming to the rescue. The Paris-based International Energy Agency reported last month that this summer, for the first time in history, America exported more gas to the EU than Russia. LNG, though, is too expensive to revive German factories built to run on cheap, pipeline gas. While the LNG imports will keep the lights on, the costs of LNG will likely sink the German and many other European economies into deep recession. 

In one hiccup, a mysterious explosion in early June took out a major LNG exporting plant in Freeport, Texas. Responsible for 20 percent of American gas exports, the plant is expected to be back on line in October. Investigators are trying to determine if the plant was knocked out by Russian hackers. In early August, Freeport LNG retracted its force majeure, a notice used to describe events outside a company’s control. 

Mr. Putin can afford to pinch the natural gas hose to the EU, the buyer of 80 percent of his gas exports, because he makes his real money selling oil. Western sanctions have backfired. In a tight oil market, Russia is making more money selling less oil. With Brent oil selling at $100 a barrel, Russia’s Urals is selling for only a small discount. Despite President Biden’s visit to Saudi Arabia last month, OPEC did not increase oil production.  

“The oil market victory means Putin can afford to forego revenue by restricting natural gas sales to Europe, putting pressure on Berlin, Paris, and London, which are bracing for massive retail energy price increases and potential shortages that may lead to rationing this winter,” Javier Blas wrote earlier this month for Bloomberg. “Moscow is making so much money selling oil it can afford to restrict crude supply to Eastern European nations, too, as it did earlier this week.”  

In a world of tight energy markets, a tight oil market is pushing up oil prices. 80 percent percent of the 5.3 million homeowners who heat with oil are in the Northeast. But, with world demand high, Bloomberg reports that distillate inventories in the US mid-Atlantic are at a 30-year low.  

To counteract American concerns, America’s energy secretary, Jennifer Granholm, predicted in an interview Sunday that America will see “record” oil production starting next year. 

In Europe, gas prices this winter are expected to go so high that markets will break down, industries will close, and governments will impose rationing. In advance, some Europeans are chopping wood.  

In Belgium and the Netherlands, firewood prices have doubled. In Germany, Google searches for firewood have spiked. In Hungary, logging restrictions have been loosened. Last week, Bulgaria banned wood exports outside the EU.   

“The winter is coming, and we don’t know how cold it will be,” the Czech Republic’s minister of industry and trade, Jozef Sikela, said last month. “But what we know for sure is that Putin will continue to play his dirty games.”  

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