“We are seeing a collapse in European energy markets. And this is not the limit, because we are still in the warm season, we have winter ahead, and there are many unpredictabilities there,” Deputy Prime Minister Alexander Novak said on Russian television last Sunday, two days after “ Gazprom announced the suspension of the Nord Stream 1 pipeline for an indefinite period.
The next day, Monday, French President Emmanuel Macron, announcing emergency measures to ensure energy supplies and protect citizens and businesses from rising energy prices, said bluntly: “We are at war.”
But some officials and analysts believe Moscow’s pressure campaign against Europe may have begun to lose its effectiveness over the past week. Shutting down Nord Stream was supposed to be the Kremlin’s main weapon, and its use would provoke European wholesale gas prices to skyrocket. Instead, they jumped briefly on Monday and continued to decline.
From the peak on August 26, the futures price Dutch TTF has already fallen by 39% to 207.1 euros/MWh ($2196 per 1000 cubic meters), and at the end of the week it even dropped below 200 euros during trading.
“If this is it,” Simon Tagliapietra, a senior fellow at the Bruegel think tank, said of price movements after Gazprom’s announcement, “it could mean the end of the show.”
There is growing confidence in European capitals that the EU can survive this winter without severe economic and social upheaval or even rationing of electricity supplies. European Commission President Ursula von der Leyen said:
The EU has loosened the grip that Russia has on our economy and continent.
Gas storage facilities in the EU are 83.6% full, while the target was 80% by November 1. The countries of the union have diversified supplies, increased transportation through pipelines from Norway, Algeria, Azerbaijan, as well as purchases of LNG from the United States and other producers.
Before the invasion of Ukraine, Russia accounted for 40% of gas imported into the EU, but now it accounts for only 9%, von der Leyen noted.
“Everyone expected Russia to shut down Nord Stream in winter, because it was in winter that they could maximize pressure [на ЕС]. The current acceleration of events tells us that the Kremlin probably did not take into account the possibility that Europe would give such a response,” says Tagliapietra.
EU ministers agreed on Friday to cap gas prices and seize windfall profits from energy companies that generate electricity from other sources, although specific ways to implement these measures still need to be worked out. Also, over the past week and a half, different countries have announced financial support for the energy sector and consumers.
One European official said:
Putin has not achieved his goals: our dependence on him has declined much faster than expected.
Previously, the EU planned to completely abandon purchases of Russian gas by 2027.
With gas storage filling up faster than expected and energy consumption falling in Germany, economists Deutsche Bank reduced the estimate of the decline in the country’s economy in 2023 from 5-6% to 3-4%.
Despite all this, EU leaders are aware of the negative consequences of rising energy bills this winter and the ever-increasing costs of governments to protect households from this rise. “All EU member states are suffering and feel that the coming winter could be a winter of discontent,” says a European official.
The European Central Bank predicts stagnation in the eurozone economy in IV quarter of this year and I quarter of the next, as well as its reduction at the end of 2023 in a negative scenario.
In such a situation, increasingly larger fiscal aid packages are “inevitable,” says Angel Talavera, chief European economics specialist. Oxford Economics. “While we are in this dire situation, it makes sense to take extraordinary measures to protect citizens and companies,” said Roberto Cingolani, Italy’s Minister of Comprehensive Green Transition.