- According to Yale’s Jeffrey Sonnenfeld, Russia’s efforts to transform Europe’s gas market are on the brink of failure.
- He said on Monday that the relationship between Russia and European buyers was changing in favor of the EU.
- “Gas is becoming a buyer’s market,” he wrote.
According to Yale professor Jeffrey Sonnenfeld, Russia’s plan to devastate Europe’s gas flows could backfire sharply if the market shifts in favor of the European Union.
Sonnenfeld wrote in a Financial Times column on Monday that the relationship between Russia and Europe has changed and that Europe is no longer dependent on the Kremlin’s energy flows. However, Moscow is still dependent on European buyers.
“A lot of attention has been focused on the demand side of the market equation: reducing or destroying demand, rationing and moving away from natural gas,” Sonnenfeld said. “But we shouldn’t forget the supply side for economic reasons.”
Sonnenfeld added that upon further analysis, Europe is indeed fully capable of replacing Russian supply “without requiring demand destruction or even substitution away from gas.” Europe is already buying enough gas and LNG from alternative sources to offset the loss of Russian flows.
He estimates the EU now gets just 9% of its gas from Russia, down from 46% before the war, as supplies from Norway and Algeria via pipelines, and LNG from the US and elsewhere have helped offset cuts from Moscow.
“It’s easy to overlook this revolution because it’s very new. But a review of every major LNG development project, liquefaction terminal and production field shows that more than 100 billion cubic meters of additional supply is expected to be brought online this year alone. This is a 20% increase in total LNG supply,” Sonnenfeld said.
And with demand for LNG falling in other parts of the world, particularly China, the additional supplies should fully replace the gas Europe consumes from Russian pipelines, he added.
However, separate reports have shown that Europe has outbid less wealthy countries in Asia, such as Pakistan, for LNG supplies, threatening them with shortages ahead of the winter.
And some analysts have warned that next winter will be more difficult for Europe than the upcoming winter, which is still benefiting from a trickle of Russian gas that is likely to be completely cut off by next year.
However, Sonnenfeld noted that while gas prices remain high, the volumes Europe has been able to secure on world markets have allayed fears of supply shortages and will rob President Vladimir Putin of $100 billion annually in lost gas revenues.
“Having eroded his country’s reputation as a reliable energy supplier, which the Soviet Union maintained even at the height of the Cold War, Putin has very little existing export capacity and, given the freezing conditions and the challenges of Arctic shipping, is struggling to build more than a single one Pipeline connecting Russia with China carries 10% of the capacity of Russia’s European pipeline network, and China is not in a hurry to build new ones. So the only losers from this gas blackmail are Putin and his accomplices,” he concluded.