Russia’s hybrid war on Ukraine extends to new terrain as Gazprom cuts supply to Europe

Energy war with west has exploded after weeks of tension

The energy war between Russia and the west has suddenly exploded, threatening an all-out power struggle in which the west seeks to cap the price of Russian oil and the Kremlin cuts off the supply of gas to Europe.

The unpredictable dispute, in which both sides deploy unconventional weapons of economic warfare, shows the extent to which Russia’s hybrid war in Ukraine has been extended into new terrain. President Vladimir Putin is testing Europe’s real willingness to see the lights go out in defence of Ukraine’s sovereignty.

Gazprom, the Russian state-owned gas monopoly supplier, on Friday afternoon announced that during a routine maintenance check an oil leak had been discovered in the main gas turbines at compressors on the Nord Stream 1 gas pipeline, which takes gas from Siberia into northern Germany via the Baltic Sea. Gazprom said the leak would take an indefinite amount of time to fix, after innumerable other unusually prolonged breaks for maintenance.

The Russian announcement – seen in the west as a piece of transparent blackmail – came hours after the G7 finance ministers pressed ahead with an elaborate plan, first outlined by the US at the G7 leaders summit in June, to put a cap on Russian oil prices. The aim is to introduce the cap as early as December, depriving Putin of the resources he needs to fund the war past the winter. Until now, Gazprom had hit a sweet spot of dwindling European demand for Russian energy not leading to a fall in revenue, due to the rise in global energy prices.

The news in the G7 finance ministers announcement was that the US had managed to get a previously sceptical Germany to examine the proposal in earnest.

As soon as the G7 leaders meeting ended in June, senior US officials came to London to talk to the Treasury about how the idea would work. London, the centre of the shipping insurance industry, is indispensable to the plan. In essence, it requires shipping underwriters not to provide insurance to any tanker that is planning to sell the oil above a price cap set by the G7.

An audacious piece of market intervention, the plan retains many inherent flaws. Underwriters claim they do not know the price of the oil that the ship they have insured will sell.

For the scheme to work, it may require neutral oil importing countries, such as India to participate, or else Russia will simply find new markets for its oil. The Greek shipping industry in particular would be hit.

Despite the work since the G7, no target price has been agreed and the noises out of the London insurance industry are not enthusiastic. But the plan does now have the enthusiastic endorsement of the UK chancellor, Nadhim Zahawi, and more importantly the US Treasury secretary, Janet Yellen. But it remains a long-term plan on a drawing board.

By contrast, Putin already has powerful destructive levers at his disposal. He has cut supplies to just 20% of normal level on Nord Stream 1, contributing to the vast rise in gas prices. The question is whether he plans to continue toying with Europe by occasionally threatening to reduce supplies, or to instead go for the jugular by turning off gas supplies altogether.

There is a risk that could backfire, not least if the powerful Russian gas industrialists think he is jeopardising their industry. There is an argument that if he intends to damage Germany industry seriously, he needs to strike now.

Germany claims to be ahead of plan in its efforts to fill reserves to 80% of capacity. But German industrialists and politicians have warned cutoffs could lead to blackouts and possible mass redundancies.

Inside the EU there is little doubt that Putin has been manipulating gas supplies for months, just as so many countries warned Germany that Putin would probably do if Berlin became too dependent on cheap Russian gas.

Eric Mamer, the European Commission’s chief spokesperson, said: “Gazprom’s announcement this afternoon once again shutting down Nord Stream 1 under fallacious pretences is another confrontation of its unreliability as a supplier.”

He added: “It is also proof of Russia’s cynicism”.

But Russia, accused of innumerable battlefield war crimes and its economic relations with Germany in tatters, will hardly be shedding tears at such accusations.


Patrick Wintour

The GuardianTramp

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