Analysis
Russia’s hybrid war on Ukraine extends to new
terrain as Gazprom cuts supply to Europe
Patrick
Wintour
Energy war with west has exploded after weeks of
tension
Fri 2 Sep
2022 21.08 BST
The energy
war between Russia and the west has suddenly exploded, threatening an all-out
power struggle in which the west seeks to cap the price of Russian oil and the
Kremlin cuts off the supply of gas to Europe.
The
unpredictable dispute, in which both sides deploy unconventional weapons of
economic warfare, shows the extent to which Russia’s hybrid war in Ukraine has
been extended into new terrain. President Vladimir Putin is testing Europe’s
real willingness to see the lights go out in defence of Ukraine’s sovereignty.
Gazprom,
the Russian state-owned gas monopoly supplier, on Friday afternoon announced
that during a routine maintenance check an oil leak had been discovered in the
main gas turbines at compressors on the Nord Stream 1 gas pipeline, which takes
gas from Siberia into northern Germany via the Baltic Sea. Gazprom said the
leak would take an indefinite amount of time to fix, after innumerable other
unusually prolonged breaks for maintenance.
The Russian
announcement – seen in the west as a piece of transparent blackmail – came
hours after the G7 finance ministers pressed ahead with an elaborate plan,
first outlined by the US at the G7 leaders summit in June, to put a cap on
Russian oil prices. The aim is to introduce the cap as early as December,
depriving Putin of the resources he needs to fund the war past the winter.
Until now, Gazprom had hit a sweet spot of dwindling European demand for
Russian energy not leading to a fall in revenue, due to the rise in global
energy prices.
The news in
the G7 finance ministers announcement was that the US had managed to get a
previously sceptical Germany to examine the proposal in earnest.
As soon as
the G7 leaders meeting ended in June, senior US officials came to London to
talk to the Treasury about how the idea would work. London, the centre of the
shipping insurance industry, is indispensable to the plan. In essence, it
requires shipping underwriters not to provide insurance to any tanker that is
planning to sell the oil above a price cap set by the G7.
An
audacious piece of market intervention, the plan retains many inherent flaws.
Underwriters claim they do not know the price of the oil that the ship they
have insured will sell.
For the
scheme to work, it may require neutral oil importing countries, such as India
to participate, or else Russia will simply find new markets for its oil. The
Greek shipping industry in particular would be hit.
Despite the
work since the G7, no target price has been agreed and the noises out of the
London insurance industry are not enthusiastic. But the plan does now have the
enthusiastic endorsement of the UK chancellor, Nadhim Zahawi, and more
importantly the US Treasury secretary, Janet Yellen. But it remains a long-term
plan on a drawing board.
By
contrast, Putin already has powerful destructive levers at his disposal. He has
cut supplies to just 20% of normal level on Nord Stream 1, contributing to the
vast rise in gas prices. The question is whether he plans to continue toying
with Europe by occasionally threatening to reduce supplies, or to instead go
for the jugular by turning off gas supplies altogether.
There is a
risk that could backfire, not least if the powerful Russian gas industrialists
think he is jeopardising their industry. There is an argument that if he
intends to damage Germany industry seriously, he needs to strike now.
Germany
claims to be ahead of plan in its efforts to fill reserves to 80% of capacity.
But German industrialists and politicians have warned cutoffs could lead to
blackouts and possible mass redundancies.
Inside the
EU there is little doubt that Putin has been manipulating gas supplies for
months, just as so many countries warned Germany that Putin would probably do
if Berlin became too dependent on cheap Russian gas.
Eric Mamer,
the European Commission’s chief spokesperson, said: “Gazprom’s announcement
this afternoon once again shutting down Nord Stream 1 under fallacious
pretences is another confrontation of its unreliability as a supplier.”
He added:
“It is also proof of Russia’s cynicism”.
But Russia,
accused of innumerable battlefield war crimes and its economic relations with
Germany in tatters, will hardly be shedding tears at such accusations.
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