Yahoo Finance Like it or not, with Nord Stream 2, Putin has a foot on the gas Europe badly needs
After years of debate in Germany and beyond, the Russian state-backed energy giant Gazprom confirmed last month that it had finished building Nord Stream 2, a 760-mile pipeline with the potential to send 55bn cubic metres of gas under the Baltic Sea to Germany every year.
Russia is already Europe’s biggest gas supplier, but once running, Nord Stream 2 would offer a significant boost to the annual 170bn cubic metres that keep lights on across the continent.
Never shy of seizing an opportunity in a crisis, Russia’s deputy prime minister, Alexander Novak, suggested last week that swift approval from Germany’s regulators for Nord Stream 2, currently set to take months, could be the answer to the soaring gas prices troubling European governments.
Related: Europe’s soaring gas prices: does Russia hold solution to crisis?
It was a move that cooled markets and followed intense pressure from Europe and the International Energy Agency, the world’s energy watchdog, to boost supplies.
In reality, Nord Stream 2 cannot be the answer to the short-term crisis. At best, Gazprom has conceded that it would probably only be running at 10% of capacity in the remaining months of this year. If Gazprom really wished to cool markets, it could book further capacity for gas supply via pipes through Poland and Ukraine.
Indeed, there are signs that Russia has been increasing supply in the past two days, and once Gazprom has hit a November deadline of being fully stocked for this winter’s domestic demand, even more gas should be available for Europeans.
The Nord Stream 2 argument underlines the dilemma facing Europe as it wrestles with how to clean up its energy supplies.
Europe is setting itself some challenging targets in the name of the climate emergency, including raising the share of renewable energy in the EU to 40%. That is where money is being invested.
But as Europe closes its coal mines and gears up its wind turbines, there will be a difficult transition period. Germany made that situation even tougher with its decision to phase out nuclear power after the 2011 Fukushima disaster, leaving it relying on fossil fuels to help bridge the gap to a renewables-powered future.
Those opposed to Nord Stream 2, including the White House, argue that it is part of the Kremlin’s geopolitical strategy. While ostensibly a private-sector project, it is clearly under Vladimir Putin’s control. The US argues that regulatory approval will only reinforce Europe’s dependence on Russia and undermine Ukraine, a key western ally, by making its pipelines redundant.
Perhaps Putin will seek to play politics with gas. But the Kremlin has been loth to do so in the past, seeking instead to be a reliable partner. And Russia has one key interest above all, and that is to sell as much gas as it can as swiftly as possible.
Putin’s change of heart last week had this economic reality in mind: while it revels in being a nuisance for its neighbours, it is not in its interests to accelerate the shift to renewables in Europe. The clock is ticking on fossil fuels, and Russia would be undermining its finances by speeding up Europe’s decarbonisation.
As for Ukraine, there is ample evidence that the transit fees paid by Europeans for gas sourced from its old pipelines have ended up in the pockets of some less than reputable characters. And they are old pipelines, prone to leaks and explosions. Nord Stream 2 would be a cheaper and more efficient source of supply. Europe has every interest in helping Ukraine rebuild its economy, but the broken model of today isn’t necessarily what needs preserving.
Some additionally argue that the growth of the liquefied natural gas market (LNG) makes pipelines and Nord Stream 2 less relevant. LNG can be shipped around the world. The developments over the past few days offer some pause for reflection.
Most LNG is locked into long-term contracts – the majority of which are destined for Asia. As China emerged from the global pandemic it was insatiable in buying up the unreserved stock. Brazil added to the shortfall, as it turned to LNG to produce electricity normally generated by hydropower dams.
Putin is not a man Europe wants to do business with. But the global energy crunch has given him and his pet project a powerful negotiating position – one that may force Europe’s hand.
BA may rue its lack of generosity
Two of the UK’s biggest airlines, British Airways and Ryanair, were adjudged by the Competition and Markets Authority not to have broken the law when they refused to refund customers who were prevented by Covid rules from taking flights they had booked. But the airlines were far from vindicated: only a lack of legal clarity and an uncertain court battle prompted the CMA to drop its investigation, and it stated unequivocally that passengers had unfairly lost out.
Some may see this as a demonstration of the toothlessness of a CMA, but neither government nor the airlines come out of the chapter looking good. BA had called the CMA investigation – at a time when it was pole-axed by travel bans and making redundancies – “incredible”. Ryanair maintained more bullishly that it was providing the flights and obeying the law.
The carriers had offered their most generous terms and conditions ever, refunding millions of cancelled flights and allowing free rebooking. Their own schedules were thrown into disarray at short notice by suddenly changing government travel rules. Any fine would have paled beside the billions airlines lost during the pandemic.
Wider consumer behaviour also complicates the picture. Essential international travel was permitted – and those who needed to fly accepted the hardship of quarantine. As UK city hotels could testify after a summer of late cancellations, plenty of holidaymakers saw flexible Covid policies as a risk-free back-up plan.
Many, though, will have been unjustly stung in situations that slipped through insurance policies. For low-fare Ryanair, low expectations are priced in. BA, however aggrieved it feels, should be concerned that customers will perceive it has not met a fairer standard. In the long run, more generous competitors may reap the rewards.
Dave, there’s a wee problem saving Christmas
He managed to dig the UK’s biggest supermarket out of a hole, and now the government is hoping Dave Lewis can rescue Christmas. As a supply chain tsar, the former Tesco boss has been tasked with fixing a crisis caused largely by staff shortages. It started with lorry drivers, but retailers are now struggling to recruit warehouse workers, especially those with special skills, such as forklift truckers.
After Brexit, many people who used to come from Europe for seasonal work can find better and more lucrative jobs elsewhere. Meanwhile, the government’s slow and ill-conceived “action” on resolving the issue is pushing industry into finding creative solutions.
Tesco last week credited its investment in rail freight for helping it ride out the worst of the supply chain crisis: it has plans to increase the number of containers it transports by train from 65,000 a year to 90,000 at Christmas.
The supermarket is not the only one trying new ideas. Last week John Lewis was the latest business to open a driver academy, aiming to get 90 more people behind the wheel of a lorry every year.
On a completely different tack, Ikea announced plans to shift production of some furniture from the far east to Turkey – cutting the distance goods will have to be shipped. And Ocado last week invested £10m in self-driving vehicle startup Wayve, and will trial four vans in London over the coming months (supported by human operators).
Such ideas are, for now, a small-fry alternative to a battle for workers that has led to pay rises and big bonuses for some formerly underpaid and under-appreciated groups of employees.
In the longer term, though, driving lorries in the UK must be made much more attractive. When even simple benefits such as washing facilities and toilets are well below standard, it’s hardly a surprise that sought-after drivers are choosing to truck on elsewhere. Lewis could do worse than to look to the loos.
