How Gazprom’s gas strategy paved the way for Russia’s invasion of Ukraine
The recent Russian aggression against Ukraine has shocked the world and triggered a wave of sanctions and condemnations from the West. But behind the scenes, the Russian state-owned gas company Gazprom has been playing a key role in preparing and supporting the Kremlin’s military campaign. How did Gazprom use its gas supplies as a political weapon to weaken and divide Europe, and what are the implications for the future of European energy security?
Gazprom’s gas monopoly and its leverage over Europe
Gazprom is the largest gas producer and exporter in the world, and it supplies about a third of Europe’s gas demand. Gazprom has a long history of using its gas exports as a tool of influence and coercion, especially towards its former Soviet neighbors like Ukraine, Belarus, and Moldova. Gazprom has repeatedly cut off or threatened to cut off gas supplies to these countries over political disputes, pricing issues, or transit fees. Gazprom has also been accused of corruption, political interference, and economic pressure in many of its export markets, such as Poland, Hungary, Bulgaria, and Serbia.
Gazprom’s gas monopoly has given it a significant leverage over Europe, especially in the winter months when gas demand peaks and alternative sources are scarce. Gazprom has exploited this leverage by manipulating gas prices, restricting gas flows, and creating artificial shortages in the European spot market. Gazprom has also tried to undermine the EU’s efforts to diversify its gas sources and routes, such as the Southern Gas Corridor, the LNG terminals, and the interconnectors. Gazprom has also lobbied hard to build and operate controversial gas pipelines, such as Nord Stream 1 and 2, that bypass Ukraine and increase Europe’s dependence on Russian gas.
Gazprom’s gas strategy before and during the invasion of Ukraine
In the spring of 2021, Gazprom began to change its gas supply practices to Europe, in anticipation of a possible military conflict with Ukraine. Gazprom reduced its gas supply to the European spot market, where gas prices are determined by supply and demand, and kept its gas supply to the long-term contract customers, where gas prices are fixed or indexed to oil prices. This created a supply-demand imbalance in the European market, and pushed gas prices to record highs, reaching over $1000 per thousand cubic meters in the winter of 2021–2022.
Gazprom also refused to fully refill European gas storages, which are used to balance gas supply and demand and to ensure security of supply in case of disruptions. Gazprom left about 20% of the storage capacity empty, creating a sense of vulnerability and anxiety among European consumers and policymakers. Gazprom claimed that it had no contractual obligation to fill the storages, and that it was facing technical and regulatory constraints. However, many analysts and observers suspected that Gazprom was deliberately withholding gas from Europe to create a favorable political and economic environment for its invasion of Ukraine.
When Russia launched its attack on Ukraine on February 24, 2022, Gazprom did not interrupt or limit its gas supply to Europe, despite the sanctions and condemnations from the West. On the contrary, Gazprom increased its gas transit through Ukraine, reaching the maximum contracted daily level of 109.6 million cubic meters. Gazprom also resumed its capacity booking on the Yamal-Europe gas pipeline, which runs through Belarus and Poland. Gazprom’s apparent compliance with its contractual obligations was seen as a signal that it wanted to maintain good relations with its foreign partners and customers, and to avoid further escalation of the crisis.
However, Gazprom’s gas supply strategy was also a double-edged sword. On the one hand, it allowed Gazprom to generate huge profits from the high gas prices in Europe, and to avoid losing its market share and reputation. On the other hand, it also exposed Gazprom to the risk of losing its gas transit infrastructure and assets in Ukraine, if the Ukrainian forces, supported by the West, managed to repel the Russian invasion and regain control of the territory. Moreover, Gazprom’s gas supply strategy did not prevent the West from imposing severe sanctions on Gazprom and its affiliates, such as freezing their assets, banning their access to financing, and suspending their participation in strategic energy projects, such as Nord Stream 2.
The future of Gazprom and European energy security
The war between Russia and Ukraine has profound implications for the future of Gazprom and European energy security. On the one hand, the war has demonstrated the fragility and vulnerability of Europe’s gas supply system, and the need for more diversification and resilience. The war has also increased the public and political awareness and opposition to Gazprom’s gas monopoly and its negative impact on Europe’s sovereignty and security. The war has also accelerated the transition to cleaner and renewable energy sources, such as wind, solar, and hydrogen, which can reduce Europe’s dependence on fossil fuels and emissions. On the other hand, the war has also shown the difficulty and complexity of decoupling from Gazprom’s gas, and the need for pragmatism and cooperation. The war has also highlighted the importance of dialogue and diplomacy, and the potential for constructive engagement and confidence-building measures, such as the trilateral gas talks between the EU, Russia, and Ukraine. The war has also underscored the interdependence and mutual interest between Europe and Gazprom, and the possibility for finding common ground and solutions, such as the green gas partnership.
The war between Russia and Ukraine is not over yet, and its outcome is uncertain. But whatever the result, the war will have lasting consequences for Gazprom and European energy security. The war will force both sides to rethink and reshape their gas relations, and to adapt to the changing geopolitical and energy landscape.
