Putin's Comments Drive Down Europe's Gas Prices as Blame Game Continues Over Rise in Costs

One day after Russian President Vladmir Putin said his country could sell gas to European spot buyers through its domestic market, Europe's soaring gas prices dropped on Thursday, the Associated Press reported.

On Wednesday, during a government conference about energy issues, Putin said that the growing demand amid the global economic recovery from the pandemic has driven Europe's rising gas prices. He said the spot-buyer solution, in addition to existing long-term contracts, could help the 27-member European Union.

"I would like to underline that the situation in the European energy markets is a bright example of the inadmissibility of hasty and politically motivated moves in any sphere, particularly in energy issues that determine stability of industries and welfare and life quality of millions of people," Putin said in response to EU leaders moving the process too quickly for industry adjustment.

Putin also defended harsh criticism from EU leaders who alluded to Russia's failure to boost supplies as fuel price increased.

"Russia has always been a reliable gas supplier to consumers around the world, in Europe and in Asia, and always has fully met all its obligations. I want to emphasize that," Putin said.

For more reporting from the Associated Press, see below.

Putin discusses easing Europe's gas prices
One day after Russian President Vladmir Putin said his country could sell gas to European spot buyers through its domestic market, Europe's soaring gas prices dropped on Thursday. Above, Putin attends a meeting on energy sector development at the Novo-Ogaryovo residence outside Moscow on October 6, 2021. Alexei Druzhinin/AP

Hungarian Prime Minister Viktor Orban echoed Putin's criticism of the EU's policies, blaming the soaring energy prices on the EU Commission's "Green Deal" policies for fighting climate change. Hungary is an EU member.

Putin emphasized that Russian gas supplies to Europe in the first nine months of the year rose 15 percent compared to the same period in 2020, adding that they could set a new record this year. He said that state-controlled gas giant Gazprom has unfailingly met consumer demands for more gas as envisaged under existing supply contracts.

The Russian leader also rebuffed Ukraine's claim that Moscow was trying to cut supplies delivered through Ukrainian territory in anticipation of the Nord Stream 2 coming into service. Russia has pumped 8% more gas via Ukraine than envisaged by the existing transit contract, Putin said.

Analysts say Gazprom has delivered all the required gas under long-term agreements but has not sold additional gas on the spot market and instead used it for domestic needs.

That has led to criticism from some analysts and some European politicians, who accused Russia of withholding gas to pressure German and European authorities into speeding final regulatory approval for the recently completed Nord Stream 2. The pipeline is designed to deliver gas directly to Germany, bypassing Poland and Ukraine.

Other market watchers cautioned that it was impossible to say whether political or strictly commercial concerns motivated Gazprom. The pipeline is not expected to be approved in time to supply more gas this winter, but it should come online sometime next year.

Gas prices in Europe rose to a record of over 116 euros per megawatt hour ($134 per MWh) in Europe on Tuesday, more than six times the price at the start of the year. Prices came down to 104.52 euros per megawatt hour ($120.79) on Thursday, still painfully high, following Putin's remarks.

Reasons aside from the Russian supply issue include strong demand from Asia for available supplies of liquid natural gas, which can move by ship instead of fixed pipeline, and a cold winter that left European reserves depleted.

The tight gas market combined with low reserves has led to concerns that Europe will see shortages if the coming winter is colder than usual. The recent rise in prices "has raised the possibility that, as a last resort, European governments may need to ration the supply of electricity to businesses or households," Capital Economics senior Europe economist David Oxley said.

A few months of such power reductions could lower quarterly GDP by as much as 5 percent, Oxley said.