Tensions With Ukraine 'Coincide' With Russia Cutting Gas Output to Europe: Energy Monitor

A recent decrease in the storage level of gas leading to an increase in prices across Europe could be strongly attributed to "Russia's behavior," the executive director of the International Energy Agency (IEA) said.

The intergovernmental agency based in Paris monitors energy levels and works with countries around the world to recommend low-cost and sustainable energy policies.

IEA head Fatih Birol said Russian state-owned gas supplier Gazprom reduced its exports to Europe by 25 percent in the fourth quarter compared to last year "despite high market prices."

"I would also note that today's low Russian gas flows to Europe coincide with heightened geopolitical tensions over Ukraine," Birol said on Wednesday during a phone call with reporters. "I just wanted to highlight this coincidence."

Russia has demanded that Ukraine not be allowed to join NATO and has moved thousands of troops to its border with the country in recent months. Some believe Russia's gas cuts could be an attempt to pressure other countries to comply with its demand.

Birol said that if Russia sent as much as a third more gas to Europe, it would cover about 10 percent of the continent's daily consumption. That is what energy industry officials say is necessary to hold Europeans over should the winter become colder than expected.

Fatih Birol, International Energy Agency
International Energy Agency Executive Director Fatih Birol said Russia was to blame for much of Europe's current natural gas crisis. Above, Birol addresses a session on day five of the COP26 UN Climate Summit in Glasgow, Scotland, on November 4, 2021. Photo by Daniel Leal/AFP via Getty Images

"In terms of European gas...we believe there are strong elements of the tightness in European gas markets due to Russia's behavior," Birol said.

"Contrary to other pipeline supporters, such as Norway, Algeria and Azerbaijan, which increase their supplies to Europe, Gazprom reduced its exports to Europe by 25 percent" in the fourth quarter compared with a year ago.

Russian President Vladimir Putin has underscored that Gazprom has met its obligations under long-term contracts and blamed high spot gas prices on European decisions to move toward volatile short-term market pricing.

He has also asserted that German gas customers have been reselling Russian gas to Poland and Ukraine rather than addressing their own market's needs.

Other factors that contributed to Europe's low gas reserves included a cold winter last year, less power from renewables and strong summer demand for shipments of liquid gas in Asia.

Russia also wants German and European Union regulators to approve its newly built Nord Stream 2 pipeline that would bypass other countries and start bringing natural gas directly to Europe, but it faces opposition from Ukraine, Poland and the U.S.

Gas levels in underground storage—the primary way utilities meet surges in demand for heat and electricity—are at only 50 percent of capacity, compared with the historical average of 70 percent at this point in the year. That has sent natural gas prices soaring, a commercial opportunity that Russia's state-owned supplier Gazprom has foregone.

"Uncertainty over price and supply remains high, with most of the heating season still to come," Birol said.

He said supplies of liquid natural gas sent by ship were helping but that its timeliness was limited due to longer transportation times.

Birol said Gazprom was behind much of the lower storage, with the company accounting for half of the deficit in stored gas despite owning only 10 percent of Europe's storage capacity.

The Associated Press contributed to this report.