Russia’s energy conflict with Europe escalated dramatically this week following the detection of four leaks on the Nord Stream 1 and 2 natural gas pipelines, which run parallel to each other under the Baltic Sea from Russia to Europe via Germany. Fears that Russia could halt gas supplies to the continent through Ukraine added to the turmoil.
European gas prices jumped on reports that the pipeline damage was suspected sabotage and rose further as Russia’s state-controlled gas major Gazprom PJSC warned there is a risk Moscow could impose sanctions on Ukraine’s energy company Naftogaz due to ongoing arbitration, which would prohibit Gazprom from paying Kyiv the transit fees, and consequently put at risk gas flows to Europe via Ukraine.
Russian gas flows through Ukraine have been steady at about 42 million cubic meters a day in recent weeks.
If gas supplies through Ukraine are halted, Western Europe would be cut off, leaving just the TurkStream pipeline sending Russian gas to Turkey and to a handful of smaller European countries still deemed friendly with Russia. Underlining just how fragile supplies are, there were reports by Russia’s security service last week that they had thwarted a planned attack by Ukraine on TurkStream – a claim that Kyiv has denied (GM Sept. 23, p. 1).
On Sept. 26, pressure drops and leaks were detected in the Nord Stream 2 and Nord Stream 1 pipelines in Danish and Swedish waters north of the Danish island of Bornholm after explosions were reported in the area. On Sept. 27, Sweden’s coast guard discovered a fourth leak in the Nord Stream system. Two of the leaks are in Danish waters and two in Swedish waters.
While neither the Nord Stream 1 or 2 pipelines currently are transporting gas, both contain gas. Flows from Russia through Nord Stream 1 have been halted since Aug. 31 (GM Sept. 2, p. 35). Nord Stream 1 previously provided around 25% of the European Union’s (EU) annual Russian gas imports. It was reduced to 20% of capacity in July.
The Nord Stream 2 pipeline has never started up commercial operation. Construction was completed in December 2021, but Germany suspended certification of the pipeline in February following Russia’s invasion of Ukraine (GM Feb. 25, p. 1).
Sources close to the matter said the absence of active gas flows through the two pipelines has limited the immediate impact of this week’s damage.
But gas continues to bubble up from the pipelines, with Denmark estimating both links would be empty by Oct. 2. Environmental activist organization Greenpeace has warned of the potential environmental fallout from the leaking gas.
Several governments believe the damage to the Nord Stream pipelines – which coincided with the official launch on Sept. 27 of a new gas pipeline (The Baltic Pipe) taking Norwegian gas to Poland and lying in close proximity to the Nord Stream structures – was “deliberate” and “an act of sabotage.”
A British defense source told the UK’s Sky News they were likely premeditated attacks using underwater explosives.
The incidents have prompted increased security on energy infrastructure across Europe, with some pointing the finger at Russia.
Only a state actor could have carried out attacks on the Nord Stream pipelines, and “the most likely culprit is Russia,” the former head of Germany’s federal intelligence agency, Gerhard Schindler, told German newspaper WELT on Sept. 29.
He said Russia stands to gain the most from this act of sabotage, with Moscow now being able to justify the halt in gas supplies by pointing to the defective pipelines without having to advance alleged turbine problems or other arguments for breaking supply contracts, WELT reported.
The Kremlin said claims that Russia was behind a possible attack on the Nord Stream gas pipelines were “predictably stupid.”
It said a foreign state was likely responsible for an incident that resulted in the leaks at the Nord Stream 1 and 2 gas pipelines, according to a Moscow Times report the same day. According to the newspaper, Russia launched an “international terrorism” probe on May 28, and according to a Prime News report, Moscow “is ready to investigate the Nord Stream incident jointly with EU.”
Russia has been squeezing gas supplies to Western Europe since its invasion of Ukraine, as part of a cat-and-mouse game to exert maximum leverage on Ukraine’s Western allies.
Europe has responded by filling up its gas storage facilities and is working to secure alternate sources of gas, which has been coupled with intervention by European governments (GM Sept. 16, p. 29; July 29, p. 1).
Certainly, the EU has gone some way to wean itself off Russian gas. Before the invasion of Ukraine, the bloc got around 40% of its natural gas from Russia; today, that now stands at about 9% of the total.
This week’s surge in Europe’s natural gas prices came after weeks of declines in its price, buoyed by an improving picture for European supplies this winter. The Dutch TTF front-month gas (currently October), the European benchmark, closed at €185.19 a megawatt-hour (MWh) on Sept. 29, having surged 11% the previous day to close at €207.187 per MWh.
However, industry watchers are concerned that by next spring, European gas facilities could be nearly empty, without any Russian gas to refill them.