Let’s talk about Russia’s other gas export bonanza


Looking southeast from the Acropolis in Athens, the silhouette of the Pskov tanker barely stood up against the azure waters of the Aegean Sea last week. Inside its navy blue hull, almost 300 meters long, a hidden treasure: a cargo of liquefied natural gas. Ukraine and its Western allies. Dozens of LNG carriers like the Pskov now dock in Europe, ferrying supplies of friendly gas from abroad to keep lights on and homes warm this winter. But the Pskov did not sail to Greece from a Western ally, such as Qatar. Nope; ironically, she sailed from Russia itself. And not from any ordinary Russian LNG port. Instead, it was the first shipment from a new terminal that Moscow is using to sell some of the same gas that only weeks ago it shipped to Germany. The new facility is located next to the infamous Portovaya Turbine Pumping Station on the former Nord Stream 1 pipeline.

The Pskov – and its unlikely origin – is part of a much larger and booming trade that receives very little attention despite its political and economic importance. Almost under the radar, Russia is still selling hundreds of millions of dollars worth of LNG shipments, mostly to the same countries that imposed sanctions on Moscow. It is a powerful weapon in his arsenal of energy weaponry. Although best known for its vast pipeline gas exports, Russia is also the world’s fourth largest LNG shipper, just behind Qatar, Australia and the United States, and ahead of others like Malaysia and Nigeria. . LNG sales are not as important as pipeline exports once were, but are still a source of money. “The Kremlin appears to have won a geopolitical victory by keeping revenues from global LNG sales intact,” says Anne-Sophie Corbeau, a researcher at the Center on Global Energy Policy at Columbia University in New York.

Western countries have imposed sanctions on Russian oil, but they have not touched Russian gas. So almost 80% of the LNG the Kremlin has exported so far this year has gone to European and Asian countries that have imposed some kind of punitive measures against Vladimir Putin. They pay market price for gas and transfer the money directly to supporters of the Russian President. Apart from China, Japan, France and Spain represent a large part of the purchases. On their current trajectory, Russian LNG sales will hit an annual record in 2022, according to estimates based on tanker tracking data compiled by Bloomberg. Between January and September, shipments averaged 2.78 million metric tons per month, compared to an average of 2.62 million for the whole of 2021 and an average of 2.56 million in 2019, before the pandemic.

Spain, the world’s sixth-largest LNG buyer, has imported more from Russia so far in 2022 than any other year. Belgium is also on course to break its own annual record. And France bought around 6% more between January and September than in the whole of 2021.

The purchases show how Russia continues to exploit the Achilles heel of Europe and Northeast Asia: their dependence on natural gas. In Japan, this geopolitical tool is working quietly, with Tokyo taking a half-hearted political response against Russia. While the biggest American and European energy companies such as Exxon Mobil Corp. and Shell Plc left Russia, the Japanese government advised its national energy champions to stay. Japan has also insisted on excluding oil sales from a key Russian energy project from the G-7 oil price cap. LNG flows also show how Russia is playing cat and mouse with its gas buyers in the West, halting some exports. but by keeping the others open, taking record prices and using them as political and economic leverage. It’s part of a hybrid economic war that Putin mastered as a former KGB intelligence officer. Should Europe continue to buy Russian LNG? The moral case is obvious: no. And, above all, not a Russian terminal built to bypass, even partially, the Nord Stream 1 pipeline that has now disappeared. The economic argument is less clear: next year, Europe would need all the LNG it can get hold of to replenish its gas stocks again before the start of a new heating season. As the International Monetary Fund said earlier this week: “Winter 2022 will be tough for Europe, but winter 2023 will likely be worse.” If the war in Ukraine continues, the continent needs the shipments. The benefit to Europe in avoiding a gas shortage next year is probably greater than the benefit to Russia through additional revenue. From a purely economic point of view, perhaps it makes sense to buy in Russia. But the geopolitical case is as simple as the moral case: as long as Europe buys Russian gas, whether via a gas pipeline or an LNG carrier like the Pskov, it will be at Putin’s mercy. It’s a seller’s market – and the seller, none other than the Russian president, can decide at his discretion when to close the floodgates or stop the ships.

More from Bloomberg Opinion:

The great problem of Russian sanctions on the oil market: elements of Julian Lee

Peak oil has finally arrived. No, really: David Fickling

Listening to electricity traders is very, very scary: Javier Blas

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. A former Bloomberg News reporter and commodities editor at the Financial Times, he is co-author of “The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources.”

More stories like this are available at bloomberg.com/opinion


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