Well, I hadn’t expected German chancellor Olaf Scholz to respond to Russia’s further move into Ukraine with anything as decisive as actually freezing the Nord Stream 2 pipeline-approval process. That process still had some months to go, which meant that he had a certain amount of time to dodge this step.
CNN’s International Climate Editor, Angela Dewan, reckons that the Nord Stream 2 is “politically dead.” While that’s true in the immediate future, I’m not sure (sadly) that that is necessarily the case over the longer term, even if the combination of Russian aggression and Scholz’s decision will force a fresh debate in Germany on a project that looked (to me) likely to quietly slide toward final approval.
Dewan continues:
Germany is one of few developed nations that opposes nuclear power and is in the process of shutting down its few reactors. Without it, it has become highly dependent on gas, and will need a radical rethink to speed up energy generation from renewables.
She concludes:
But the forever problem of the climate crisis will keep churning and will ultimately be deadlier and costlier than military confrontation is likely to be.
Well, it’s one perspective.
Putin, meanwhile, has said (Reuters reports here) that Russia will keep the gas flowing. In the case of Europe, that presumably means that Russia will continue to honor its longer-term supply contracts. Whether it goes beyond them is, as Europeans (who have been moving away from such contracts) have discovered in recent months, an entirely different matter. The spot market can be a very painful place.
European natural gas futures are especially sensitive to the latest news, because Russia provides more than a third of Europe’s supply, with some of it running through pipelines in Ukraine. Dutch front-month gas futures jumped 13.8 percent when trading started on Tuesday, then eased a bit to about 80 euros a megawatt-hour, up almost 10 percent.
To put that in context, the price was around 18-19 euros at the beginning of 2021.
It is not particularly comforting to know that the price went a long way above €80 in 2021. Russian games and worries about what Russia might do have been just one element in a market has seen sometimes dramatic increases in the price over the last nine months or so.
And, of course, Putin could switch off the taps tomorrow. And he knows that Europeans know that.