This article was last updated on September 12, 2022
Valdimir Putin on Europe’s Natural Gas Crisis
At the recent Eastern Economic Forum held on Russky Island in Russia’s Far East, Vladimir Putin made some very interesting comments at a plenary session on the current situation in Europe which was formerly one of the largest consumers of Russian natural gas.
The Forum was attended by the following world leaders:
Chairman of the State Administration Council, Prime Minister of the Caretaker Government and Commander-in-Chief of the Armed Forces of Myanmar Min Aung Hlaing, Prime Minister of Armenia Nikol Pashinyan, Prime Minister of Mongolia Oyun-Erdene Luvsannamsrain, and Chairman of the Standing Committee of the National People’s Congress of China Li Zhanshu. Additionally, the Prime Minister of India Narendra Modi, the Prime Minister of Malaysia Ismail Sabri Yaakob and the Prime Minister of Vietnam Pham Minh Chinh addressed the audience via video linkup.
The theme of this year’s Forum was “On the Path to a Multipolar World“, a rather timely theme given the rapidly changing global reality…unless you happen to be a denizen of Washington. The Forum included discussions on the projects that are important for Russia’s Far East region and for strengthening the ties between Russia and its fellow Asia Pacific nations.
Here are some of Vladimir Putin’s comments on the West in general and Europe in particular, keeping in mind that Europe’s leadership has made some rather bold moves to punish Russia since the Ukraine operation began in early 2022 with all bolds being mine:
“Europe is about to throw its achievements in building up its manufacturing capability, the quality of life of its people and socioeconomic stability into the sanctions furnace, depleting its potential, as directed by Washington for the sake of the infamous Euro-Atlantic unity. In fact, this amounts to sacrifices in the name of preserving the dominance of the United States in global affairs.
Back in spring, many foreign corporations rushed to announce their withdrawal from Russia, believing that our country will suffer more than others. Today, we see one manufacturing site after another shutting down in Europe itself. One of the key reasons, of course, lies in the severed business ties with Russia.
The competitive ability of European companies is in decline, for the EU officials themselves are essentially cutting them off from affordable commodities and energy, as well as trade markets. It will come as no surprise if eventually the niches currently occupied by European businesses, both on the continent and on the global market in general, will be taken over by their American patrons who know no boundaries or hesitation when it comes to pursuing their interests and achieving their goals.
With Russia’s exports of its massive natural gas reserves to Europe rapidly declining as a response to Europe’s anti-Russia sanctioning, it is interesting to note the following development as quoted from Putin’s address:
“I want to note here that yesterday, Gazprom and its Chinese partners decided to switch to 50/50 transactions in rubles and yuan with respect to gas payments.”
As a response to the European and American sanctions, Russia is moving to shift its contracted natural gas sales to China out of euros and into a combination of yuan and rubles, yet another way of reducing the American dollar’s hegemony, as shown in this article from Bloomberg:
Gazprom supplies natural gas to China through the Power of Siberia pipeline in a deal estimated to be worth $400 billion over its 30 year life. Natural gas exports to China have grown to at least 15 billion cubic metres in 2022 from 10.4 billion cubic metres in 2021. Additionally, Gazprom has signed two additional deals with China for a further 10 billion cubic metres over a 25 year contract using a new pipeline as well as a contract to design and build the Soyuz Vostok link through Mongolia which would supply 50 billion cubic metres per year. as shown here:
These developments clearly shows that Russia does not need to sell its natural gas to Europe as it has willing buyers elsewhere.
Let’s go back to Putin’s comments on Europe and how it is benefitting from current grain exports from Ukraine:
“If we exclude Turkiye as an intermediary, all the grain exported from Ukraine, almost in its entirety, went to the European Union, not to the developing and poorest countries. Only two ships delivered grain under the UN World Food Programme – the very programme that is supposed to help countries that need help the most – only two ships out of 87 – I emphasise – transported 60,000 tonnes out of 2 million tonnes of food. That’s just 3 percent, and it went to the developing countries.
What I am saying is, many European countries today continue to act as colonisers, exactly as they have been doing in previous decades and centuries. Developing countries have simply been cheated yet again and continue to be cheated.“
You certainly won’t hear that in the dinosaur media which has made great efforts to praise everything that Ukraine has done and condemn everything that Russia has done in the past seven months.
Here are Putin’s comments on the importance of Russian energy sources, how they have benefitted Europe and how Russia can choose to sell its resources to nations which co-operate with the Kremlin:
“First of all, our energy resources should be used to move our country forward. This includes all primary energy sources and all mineral resources. But we have these in ample supply and can meet the growing demand of everyone who is willing to work with us. This is good and lucrative cooperation for our partners and very beneficial, too, including for the European countries, because our pipeline gas is by orders of magnitude more competitive than the liquefied natural gas brought in from across the ocean. This is clearly so.
Using natural gas from the Russian Federation for decades, the leading European economies clearly had advantages of a global dimension. If they believe they have no use for these advantages, that’s okay with us and does not bother us in any way, because the demand for energy around the world remains high. It is not just about our friends from the People’s Republic of China, whose economy is growing fast, as I said and everyone in the world is well aware of, the demand for energy is growing. We are ready to cooperate with any country. There are many such countries around the world.
Of course, the European market has always been considered a premium market, but the international situation is rapidly changing, and it recently lost its premium status with the onset of the Ukraine crisis. Even the Europeans’ US partners have redirected their LNG tankers to Asian countries…
We will also engage in liquefying gas and selling LNG all over the world. As you see, I have already cited an example of the first Arctic LNG-1 tanker (from a deposit in the Arctic, of course). Everybody is buying it. They will buy it, it will be profitable for them. So we have no problems at all. If European countries want to give up on that, losing their competitive advantages, this is up to them. Let them do it.“
Further to Europe’s energy relationship with Russia, on September 5, 2022, Ursula von der Leyen, the EU’s ++++ tweeted the following:
…and here on September 7 which shows just how desperate the situation in Europe could become this fall and winter as energy supplies do not meet demand:
Europe’s ridiculous and ill-conceived plan to put a price cap on Russia’s natural gas got this response from Putin when asked this question by the moderator:
“Ilya Doronov: Will price caps on gas be a heavy blow on us?
Vladimir Putin: Well, this is yet more stupidity, one more non-market decision without any prospects. All administrative restrictions in global trade lead only to disproportions and price hikes. What is happening now in European markets is the result of the work done by European specialists and the European Commission. We always insisted that prices be formed based on long-term contracts and be tied to the same market category as prices on oil and oil products, to the same basket. Prices on oil and oil products are formed by the market and the price of gas in long-term contracts is linked to this price. Why? Because this production requires big investments and those who invest in production must be sure that the product will be sold. This is why Gazprom is generally interested in long-term contracts.
They kept telling us: “No, this isn’t market-based. You should use prices in the spot market as a benchmark.” We tried to change their mind – I personally was doing this in Brussels. I said: “Don’t do this because natural gas trade is a special segment of the world market. Those who produce and sell it and those who buy it must be confident that their relationship is reliable.” “No,” they said, believing the price at the time was too high. A hundred dollars per 1,000 cubic metres seemed to them to be an extremely high price at the time and later they said the same about the price of US$300. That is what prices were like back then. Today, let’s see, the price has exceeded 3,000 euros. We kept saying: “Don’t do this.” Yet, they practically forced their companies to opt for pegging to spot [prices] and imposed the same on us – imposed! Now a large part of the gas price is determined by spot [transactions].
We did not ask for this – the Europeans imposed this on us. First, they imposed these truly idiotic decisions regarding gas trade, and after seeing what is happening now, they started thinking how to get out of it. So, how? They want to cap the price, resorting to administrative measures. More absurdity and nonsense that will send prices skyrocketing in world markets, including the European market. Nothing can be achieved in the economy and global trade using administrative measures.“
To put Putin’s comments into perspective, here’s what has happened to the price of Russia’s natural gas over the past year:
“You asked about someone making some decisions to limit prices for our oil and gas which is an absolutely dumb thing to do. Should someone try to move it forward, it will do no good for the decision-makers.
There are contractual obligations and contracts for delivery. Will there be any political decisions that run counter to contract clauses? We will ignore them and suspend deliveries if these decisions are inconsistent with our interests, our economic interests in this case. We will then stop supplying gas, oil, coal, or fuel oil, suspend all our deliveries and fully comply with our contractual obligations. Notably, the people who are trying to impose things on us are not in a position to dictate their will to us. Let them come to their senses. This is how the economy, including the domestic economy, works.“
What Putin is saying is that the owner of the resource sets the terms.
And, here’s the key:
“Following up on those who we talked about earlier, we will not be supplying anything outside of contracts. We will not do anything they are trying to impose on us. What we will do instead is just sit there and keep saying a famous line from a Russian fairy tale, “Freeze, freeze, the wolf’s tail.”
Putin is referring to “The Fox and Wolf” Russian fairy tale of which one version includes this:
By and by the Wolf came running up.
“Hello there, Sister Fox!” he called.
“Hello yourself, Brother Wolf!”
“What are You doing, Sister Fox?”
“Give me some!”
“Go catch them yourself.”
“I can’t, I don’t know how to do it!”
“Well, that’s your business, You won’t get as much as a bone from me.’-
” Won’t You at least tell me how to do it”
and the Fox said to herself:
“You wait, Little Brother! You ate my little bull and now I’ll pay You back for it!”
Then she turned to the Wolf and said:
“Go to the river, put your tail into an ice hole, move it slowly back and forth and say: ‘Come and be caught, fish, big and small!’ That way you’ll catch all the fish You want.”
“Thank You for telling me,” said the Wolf.
He ran to the river, let down his tail into an ice hole, moved it slowly, back and forth and said:
“Come and be caught, fish, big and small!”
And the Fox looked out at him through the reeds on the bank and said:
“Freeze, freeze, Wolf’s tail!”
Now, there was a bitter frost out, and the Wolf kept moving his tail back and forth and saying:
“Come and be caught, fish, big and small!”
And the Fox kept repeating:
“Freeze, freeze, Wolf’s tail!”
There the Wolf stayed catching fish till his tail was frozen fast to the ice, and when that happened the Fox ran to the village and cried:
“Come, good people, and kill the Wolf!”
And the villagers came running with pokers, prongs and axes. They fell on the poor Wolf and killed him.
And as for the Fox, she still lives in her hut as snug as You please.
Putin does note that European leaders could subsidize consumers for the high prices that they are paying for energy, however, this will ultimately be problematic given that consumers will continue to consume as they did prior to the shortages which will lead to even higher prices and shortages. There is also the option to cut consumption but, Putin states that this is “a dangers proposition from the social point of view, since it can lead to a rupture”, already in evidence from the large number of demonstrations in Europe, and that the only way to navigate this situation is to follow the letter of the contracts that have been signed.
Europe’s leadership would appear to be completely useless in the face of the oncoming energy crisis, defining the very concept of kakistocracy. It would appear that their agenda is being driven by Washington and its corporate partners who would love nothing more than to expand Europe’s imports of American LNG. European decision makers will find themselves experiencing greater and greater levels of anger from Europeans who are being forced to reduce their energy consumption just as the cold weather of late fall and winter are looming. Eventually, I predict that Europeans will tire of their governments’ support of Ukraine once the pain becomes too bear.
If you are interested, here is Putin’s speech at the Eastern Economic Forum in its entirety: