Full of Gas

It’s 20 degrees here in Ottawa . For October, that’s something of a heatwave, and it’s meant to stay this way for a week or so, well into the middle of the month. Beyond that, the weather guys say that we’re in for a generally warm autumn. No need for the winter tires just yet.

Europe, though, is said to be headed for a deep cold spell in the coming months. So good for us, bad for Europe – unless you like winter sports, of course, in which case it’s the other way around. But regardless of what weather you prefer, cold has consequences, one of which is that you have to turn the heating up, for which you need fuel. And in the modern post-coal world, that increasingly means burning natural gas.

Unfortunately, this is a bad time to do so, for the price of natural gas has shot up in recent months, as you can see from the chart below. This is a result of increased demand, reduced output from wind turbines, and a reduction in supplies as Europe’s main suppliers – Norway and Russia – fill up their own stocks before winter. This has apparently ‘all but wiped out stocks’ in the rest of Europe. The markets have responded with a binge of frenzied speculation, shoving natural gas prices up to unnaturally high levels.

Which is obviously Russia’s fault. Because, well … it’s bad, and it’s natural gas, and so Russia must be to blame. After all, we know that all those traders on the futures markets take their orders from the Kremlin.

To give example of the hysterical rhetoric floating around, CNBC ran this headline yesterday: ‘The US was right – Europe has become a “hostage” to Russia over energy, analysts warn.’ The following story then told readers that ‘Europe is now largely at Russia’s mercy when it comes to energy,’ citing analyst Timothy Ash (who regularly pops up on the pages of the Kyiv Post) denouncing Russia’s ‘energy blackmail’ and saying that:

‘Europe has now left itself hostage to Russia over energy supplies … [It’s] crystal clear that Russia has Europe (the EU and U.K.) in an energy headlock, and Europe (and the U.K.) are too weak to call it out and do anything about it … Europe is cowering as it fears [that] as it heads into winter Russia will further turn the screws (of energy pipelines off) and allow it to freeze until it gets its way and NS2 [North Stream 2] is certified.’

If I get this right, the logic is that Russia is deliberately withholding supplies from Europe in order to force Germany to complete the certification of the North Stream 2 pipeline linking Germany and Russia. Unfortunately, Ash fails to provide a shred of evidence for this claim, and it’s not as if the Russians are expressing any sort of concern that the certification may not happen, or that they are specifically targeting Germany.

In fact, there’s no evidence that Russia is blackmailing anybody. Russia’s president Vladimir Putin even sought to calm international markets by telling the Russian gas company Gazprom to keep sending supplies through Ukraine even though it would be cheaper to send them via alternative routes. It’s important to maintain Russia’s reputation as a reliable supplier of energy, he noted, adding that Russia would indeed increase supplies to Europe this year, with exports possibly reaching a record high.

Critics complain that Russia could be pumping more gas to Europe than it currently is. It is apparently true that the volume of deliveries has been down in the past couple of months, as Russia fills up its own stocks before what is expected to be a harsh winter. But, deliveries for 2021 as a whole are on par with last year and Russia is meeting all its contracts. Furthermore, as Ben Aris has pointed out, it’s not that easy for Russia to greatly increase the quantity of gas it supplies Europe via existing pipelines. This is because different gas fields serve different pipelines, with limited connections. The line going via Ukraine comes from fields that are already ‘maxed out’. Additional gas would have to come from the Yamal peninsula – i.e. via North Stream or North Stream 2. With the former already at capacity, that in essence means the latter. In other words, Aris concludes:

‘It is possible for Russia to send more gas west without using NS2 but it’s limited & most expensive option for Gazprom. By far easiest & cheapest option for both Gazprom & EU is to turn NS2 on. This would solve the current gas crisis.’

It seems to me that Russia’s critics need to decide what they want. For years, they’ve been complaining that Europe is buying too much Russian gas. Now, though, they’re complaining that the Russians won’t sell them more! The Russians sell you gas – that’s a sign that they’re out to get you. They won’t sell you gas – proof that they’ve got you!

Frankly, it makes no sense.

Besides which, people don’t sell you stuff unless you ask them to, which in business terms means signing a contract with them. Russia, as previously said, is fulfilling its contracts. What more is it meant to do? As German chancellor Angela Merkel pointed out this week, if European states haven’t signed up to buy Russian gas, they can’t really complain if they don’t get it. She said:

‘To my knowledge, there are no orders where Russia has said we won’t deliver it to you, especially not with regard to the pipeline in Ukraine. Russia can only deliver gas on the basis of contractual obligations, and not just only like that.’


Of course, if Russia was exploiting the rising cost of gas by engaging in price gouging, there might still be some grounds for complaint. But that’s not the case. Russia prefers to lock its customers into long-term contracts. Anybody who had the good sense to sign such a contract with Gazprom a while back when prices were low will now be laughing: their supplies are guaranteed and they’ll be cheap. Germans, Hungarians, Serbs, and the like are probably feeling a bit smug right now. Others who preferred to gamble on the market, or to dump Russia for an alternative supplier such as American LNG will now have to pay the price. But that’s their fault not Russia’s. As Putin pointed out:

‘The practice of our European partners has confirmed it once more that they made mistakes. We talked to the European Commission’s previous lineup, and all its activity was aimed at phasing out of so-called long-term contracts. It was aimed at transition to spot gas trade. And as it turned out, it has become obvious today, that this practice is a mistake.’

None of this, unfortunately, has stopped the flood of stories blaming Russia for Europe’s gas crisis, a crisis that is in large part due to the latter’s own errors. To give a flavour, here’s some of the headlines in the American and British press this past 24 hours:

‘Don’t Fall For Putin or Orban as They Try to Exploit Europe’s Energy Crisis’ – Washington Post

‘As Europe Faces a Cold Winter, Putin Seizes on the Leverage From Russia’s Gas Output’ – The New York Times

‘Russia has the West over a barrel: Fury at “bullying” Putin for offering Europe more natural gas IF his Nord Stream 2 pipeline is approved.’ – Daily Mail

‘Gas price crisis: Is Putin using energy supply as a weapon and what is its new Nord Stream 2 pipeline?’ – Sky News

‘UK dubbed “Putin’s puppet” as “Soviet” Britain’s gas prices plummet after Russian offer’ – Daily Express

‘How “Sleepy Joe” handed Putin the bargaining chip he is using to hold Europe to ransom in gas crisis’ – Daily Mail

Now, I can understand why Western politicians would want to find a scapegoat for their own failings, but why does the press go along with this? Wasn’t there a time when the Fourth Estate prided itself on holding the powers that be at home to account? Apparently no more. Blaming Russia obviously sells more copy. As long as that remains the case, expect the pipelines of BS to keep on flowing profusely!

28 thoughts on “Full of Gas”

  1. I remember back in the 90s a friend of mine, energy consultant, asked me to program a computer model of a spot market for electricity. Using his extremely complicated formulas. So, we developed that model.

    I’m sure it was a bit different, simpler than the natural gas market, because the assumption (as well as the practice) was that the dispatcher (state-government employee) is buying power directly from power companies, with no intermediate traders.

    As I remember, the model showed that the market works fine as long as supply is well above demand. But as demand is growing, even though still below supply, the price skyrockets. Which is exactly what we observed in California in 2000-2001, after they implemented a spot market for electricity in 1998.

    Here, with intermediate traders, it should be much worse than that. And I imagine the traders (mostly Swiss gentlemen, probably) are those who take most of the windfall.


    1. Here, with intermediate traders, it should be much worse than that. And I imagine the traders (mostly Swiss gentlemen, probably) are those who take most of the windfall.

      Interesting assumption. The Swiss Gentlemen may profit more from their options and futures deals than their brethren in spirit elsewhere? You have any insider knowledge on that? 😉


      1. No insider knowledge. I know (from my old days, when living in Switzerland) that a lot of energy contracts are handled by Swiss companies. But that was long time ago; it could be different now.

        Other than that, I hear that Gazprom doesn’t sell gas on the market (at least not currently), only via contracts. So, it has to be traders, speculators, who are gaming the market.


      2. No insider knowledge. I know (from my old days, when living in Switzerland) that a lot of energy contracts are handled by Swiss companies.

        Judged on gas (patrol/gasoline) prices in Switzerland via the German South once a very, very long time ago, it surely may have looked like that. In hindsight. But the financial train may have moved on … The price is now pretty much the same across frontiers by now. No more trickling down effects possible?


      3. Petrol price in Switzerland was exactly the same on all different gas stations, to the tenth of a penny. I came there from the US, and so it seemed odd. When I shared my surprise with my Swiss boss, he said that the country is run like a cartel.


      4. Petrol price in Switzerland was exactly the same on all different gas stations,

        That’s a myth, and you know it is. I assume. Strictly, the difference between Southern Germany and Switzerland could have been the result between lower ‘indirect taxes’ across the border.


  2. As noted in the thread just before this one, the lead BBC news headline on its half hour news feed within the past 12 hours, was an uncritical reference to the Biden administration’s Jake Sullivan, asking Russia to not politicize energy deliveries, as (according to Sullivan) it has done in the past.

    The same segment made a suggestively critical reference to Russia seeking to have NS2 running soon. No second guessing of Sullivan’s aforementioned and dubious claim, along with the contradiction of the critical reference to Russia seeking to have NS2 up and running.

    On the subject of the actual threat:


    Providing top quality analysis on a range of key foreign policy, historical, media and sports issues. The coverage improves by bringing on quality sources which haven’t had ample opportunity because of cronyism and political biases.


  3. Never ever Europeans have lived as badly as under Putin!

    Well, I expect EUnuchs to girdle their loins and stomach this little inconvenience. After all, they are all good capitalists and liberals professing sincere faith into their Deity:

    “‘UK dubbed “Putin’s puppet” as “Soviet” Britain’s gas prices plummet after Russian offer’ – Daily Express”

    Oh, if only! The UK is still a capitalist country. Still might run out of TP though. All because of Russia, of course.


  4. This article is a great take-down of the western media that only knows how to bash Russia. A possible correction: You say “Russia’s president Vladimir Putin even sought to calm international markets by telling the Russian gas company Gazprom to keep sending supplies through Ukraine even though it would be cheaper to send them via alternative routes.” Not all of Russia’s gas to the EU may be going through Ukraine. According to an EU news source, gas for Hungary may be going through Turk Stream:



    1. Frank, in the article you link to Georgi Gotev, wrote this line:
      If all the transit is diverted, Ukraine will also find itself with huge – and now essentially useless – gas infrastructure it has built, which
      will probably rust.

      It obviously hasn’t, but simply inherited the structure. Mind you, he corrects this in his latest article.

      Commenting on the possibility of increasing gas supplies through Ukraine, Putin recalled that Ukraine’s gas transport system had not been repaired “for decades” and that “something could burst” there at any moment.



      1. Frank, I wish I was as sure as you, on matters.

        Central planning may or may not have somewhat evened out the advantage, considering the “heritage”? … But where to start from there on? …

        But yes, the “Visa Affair” over here in Germany, left traces on my mind. …


    2. Hungary’s gas IS going through TurkStream and Austria since 1 October. We have just signed a new 15-year deal with GAZPROM. Having learned the lessons from Ukraine’s stealing in 2006 and 2009, gas deliveries to Hungary now completely avoid Ukraine. After 2006, Hungary built several pipelines(towards Slovakia, Serbia, and Austria) to diversify its gas transit routes and undercut the monopoly of Ukraine.

      The other goal is to strengthen our hand in dealing with the Ukronazis’ treatment of the Hungarian minority in Zakarpattia. The Ukronazi regime got upset about being cut out of our gas trade and tried to complain to Brussels. Huge own goal, Hungary is even more hostile to Ukraine then before. Orban openly stated that we will stifle Ukronazia’s NATO and EU membership as long as we can. I am sick and tired of these Nazis in Kiev. If the West loves them that much they should foot their energy bills.


  5. In each of these articles – like one I read in the Guardian this morning, you will read starting in about the middle that there is really nothing Russia can do as it is pumping oil and gas above 2019 levels but has to refill its stocks for its own people and even though it is pumping more gas to Europe above 2020 levels demand far exceeds 2020 levels. This shows that more needs to be done in all these markets to make renewable energy sources more comprehensive and also that nuclear power needs to be explored more seriously and there are two countries in Europe which produce nuclear power reactors – Russia and France. In a sane world this would be a grand opportunity for both countries to work together to provide everyone and themselves with the energy of the future. We do not live in a sane world.


  6. Yesterday, after a wekk-long hunger strike and (allegedly) losing 12 kg of his not inconsiderable weigh, Mik-HAIL Saakashvili… aborted his hunger strike.

    Neither the beginning, nor the end of this, ah, “performance”, got any traction in the Free and Independent Western Media ™



      1. The National Interest is the campiest rag. A quarter of its articles consists of “mil-hardware pron”, a quarter of old-timey copy-pasta from the “mil-hist” sites of, inevitably Murikin’ glorification bent, a quarter of the articles written by the people, who, obviously, paid to TNI for a chance to be printed therein, cuz otherwise their writings won’t see a light elsewhere. Oh, and the final quarter? It consists of reposting its own reposts.

        And to think, that their worst pressitudes buggered off it and decided to found The American Interest, now safely deceased. Sadly, not all of them departed TNI. Not even enough.


      2. Another crucial Georgian run-off election is in the works, this time, not in the southern U.S. state, but the southern Caucasus country

        Curious first line.


  7. Can’t speak for other countries but all the main news outlets in the UK have been captured by govt/security services for a long time now, all seem to be fully paid up members of the Integrity Initiative (a tax payer funded propaganda organisation created by the security services) and do as they are told by Whitehall/MI5/6 and the various ‘cyberwar quangos attached to them. It’s embarrassing that the entire British news network has zero independence and are either Govt stenographers – the Guardian – or beholden to corporate fossil fuel interests like Murdochs SkyNews. In short, anyone getting news from the top 6 selling newspaper outlets is being demonstrably lied to and propagandised. the UK resembles Nazi Germany more every day, there is actually far more diversity and ‘independence’ in Russian media than the UK. Most UK people do not want to critically think, they want their bias’ confirmed, hence a right wing populist rag like the Daily Mail.


    1. the UK resembles Nazi Germany more every day

      What inspires you to use such a comparison? I didn’t know that Sky was Murdoch owned, admittedly wondering if it was the venue that seemed to get my link attention frequently at one point. 😉

      Paul: Wasn’t there a time when the Fourth Estate prided itself on holding the powers that be at home to account? Apparently no more. Blaming Russia obviously sells more copy.

      Complex issues, just as ‘fake news’, ‘woke’ et al. purely used as label nowadays. Facts are sacred, comment is free.???

      Liked by 1 person

  8. Just saw this piece by reporter Valentin Zhukov, re. the energy crisis in Latvia. The soaring prices of gas and electricity are hitting average households very hard. Even basic food products are affected by the soaring inflation.
    Almost half of Latvian families live in poverty, according to the official definition. Government is debating whether to subsidize and lower prices on communal services; versus keeping the prices the same but offering hand-out checks to suffering families.

    Energy crisis is compounded by covid crisis, with healthcare workers fleeing for better jobs in Western Europe. And EU has done very little to help Latvia.
    The one saving grace is some remnants of Soviet heritage, namely a vast underground natural gas storage reservoir, and also Latvia’s participation in a consortium called BRELL which still allows it to get some cheap energy from Russia and Belorussia. This makes Lithuanians mad, and they want Latvia to completely cut itself off from Russian energy, just like they (=the Liths) did.

    Writer concludes that the biggest winner here is not even Russia, but the United States. Americans are making out like bandits and accruing super-profits in this big energy crisis, but it is very easy for them to deflect all the popular anger against Russia, through a process of propagandistic deflection and mis-direction. Baltic, just like other European elites, the author concludes, have been integrated completely with the U.S. elites, so now they only care about the interests of the USA, and not about ordinary people in their own countries.

    Liked by 1 person

  9. Off-topic, sorry! But fans of Russian Grand Opera might be interested in my review of Modest Mussorgsky’s famous opera “Boris Badenov” performed this past weekend at the Metropolitan opera in New York City. In brief, the Met showed the briefer (1869) version in a somewhat lackluster production, but with great singers, as always.


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