- "Europe has not sanctioned Russian gas, it is Russia that is sanctioning us," says an analyst.
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The EU pays Russia 89% more for less energy since the invasion of Ukraine
Energy prices in Europe have skyrocketed since Russia's invasion of Ukraine, six months after this Wednesday, so Moscow now earns 89% more money than a year ago from exporting hydrocarbons to the European Union, despite selling 15% less fuel.
The community block currently spends some 13,916 million euros per month to buy coal, oil, and gas from Moscow, compared to the 7,330 million monthly average it paid a year ago when prices were already beginning to skyrocket due to the increase in demand with economic recovery after the pandemic.
The calculation comes from the Eurostat series between March (the month of the start of the war) and June 2022 compared to the same period in 2021, the latest data published by the Community Statistics Office both the value (+89%) and volume (-15%).
The average monthly expenditure of this comparison is similar to that offered by the Center for Research on Energy and Clean Air, which shows that the EU has paid Moscow 14.1 billion euros for coal, oil, and gas since the Russian troops entered Ukraine last February 24.
According to the calculation of that Helsinki-based institute, the total expenditure in the six months that have elapsed since the invasion stands at 85,000 million euros, close to the 102,000 million euros that the community bloc paid to Moscow in all of 2021.
This source of income for the Kremlin, together with the drop in imports due to international sanctions, has triggered Russia's current account surplus, multiplying it by more than 3 between January and July of this year, reaching a figure of 166.6 billion euros. dollars, according to data from the Central Bank of Russia.
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Liquefied natural gas
In their strategy to guarantee supply and protect themselves against the possibility that Vladimir Putin completely closes the gas tap in winter, the Twenty-seven have already filled their tanks to 77.74% and have committed to reducing consumption by 15% to face the impending cold season.
The EU is also replacing fuel flowing through Russian pipelines with liquefied natural gas (LNG) carried by ships from Qatar, Egypt, or the United States. The latter country alone exported 57 billion cubic meters (bcm) to the EU in the first half of 2022, compared to 34 bcm for all of 2021.
But LNG is an expensive product compared to pipeline gas. In addition, since the beginning of the war, the euro has depreciated against the dollar to its lowest level in 20 years, which makes the bill even more expensive. In April 2008, one euro was exchanged for 1.59 dollars and now it is paid at 0.99.
According to a senior analyst at the Bruegel think tank Georg Zachmann, the EU will be able to "get through next winter even if Russia cuts off supplies, but the price implications will be quite drastic."
"It will continue to cost us dearly, but the question of how we will achieve it will no longer be asked," German Chancellor Olaf Scholz said last weekend, expecting the first German LNG ports to come online by the end of 2023.
Belgium, Croatia, Spain, Estonia, Finland, France, Greece, Ireland, Italy, Latvia, the Netherlands, and Poland also plan to open or expand terminals soon, according to data from the Gas Infrastructure Europe platform.
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Strategic patience
The EU has approved corrective measures against Moscow on many economic fronts and the European Commission defends that their effects must be assessed in the long term, as they will increase over time.
"We need strategic patience," the EU's High Representative for Foreign Policy, Josep Borrell, wrote on his blog last July when the sanctions in the area of energy had not yet come into force.
The ban on importing Russian coal into the EU, approved last April, only applies from August 11 and the oil veto -with certain exceptions- will do so from January 2023.
To the effect that these sanctions may generate, we must also add the drop in long-term gas purchases. At the end of June, the flow had fallen by 30% compared to the average for the 2016-2021 period, according to data from the European Commission's Joint Research Center.
This means, according to data recently shared by the head of European diplomacy, that Russian gas now represents 20% of total consumption in the EU, compared to 40% prior to the military aggression against Ukraine.
"Europe has not sanctioned Russian gas, it is Russia that is sanctioning us," sums up Zachmann.
Although the energy corrections end up deteriorating Russian finances, Brussels and the EU rulers warn that the biggest war in Europe since the Second World War will also undoubtedly have a high cost for the community bloc in the area of energy.
"The next five to ten winters will be difficult," Belgian Prime Minister Alexander De Croo warned on Monday.
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