Comment
Not only a week ago Russia’s gas export monopoly Gazprom announced to deliver gas to China via the “Power of Siberia” pipeline already in December 2019, about a month earlier than expected. Simultaneously, the company looks into increasing the already in 2014 contracted deliveries to China and even extending gas export capacities to China on other routes.
China is Russia’s second largest export market for natural gas after Europe. More sales to China reduces Gazprom’s exposure to a politically uncertain terrain in Europe. The future of the Nord Stream 2 pipeline is under pressure by EU regulations and potential U.S. sanctions.
It does not come as a surprise to everyone that Russia’s energy minister Novak recently declared that Russian gas transport via Ukraine is most likely to discontinue. The reasons are the higher costs, especially the transit fees that Ukraine is asking for users of the pipeline to pay.
What does it mean?
- Gazprom is using its gas corridor to China as a bargaining chip for its European neighbors. Russia seeks to grow the number and size of its export markets to put itself in a better position in foreign politics and international energy-politics.
- The announcements of China’s growing role for Gazprom and Russia’s position on the Ukrainian pipeline are concerted. Gazprom is most likely concerned to lose control over its Nord Stream 2 pipeline and sends a signal to European customers that it is still part of the game. However, Nord Stream 2 remains top-priority for Gazprom.
- Russia will not stop gas deliveries via Ukraine for two reasons. First, the European demand for gas is higher than Nord Stream and Nord Stream 2 can compensate, just because the existing infrastructure will not allow supplying all customers. Second, it is economically senseless to stop deliveries via Ukraine and would cost Gazprom more in revenue than the company would pay for transit fees. Eventually, Russia and Ukraine, maybe with the help of the EU, will find a deal for Ukrainian transit in the future. The current contract is due to expire in 2019. That deal would make economic sense for every party involved.