Crash first. Two European countries sounded the alarm

MOSCOW, 19 Oct — PRIME, Oleg Krivoshapov. European media complain that the industrial sector in Italy and Belgium should think about their future. About how many months there will be enough energy resources for two countries with a fairly powerful manufacturing sector – in the material of the Prime agency.

EU INDUSTRY UNDER THREATS

The work of industrial enterprises in Italy in December this year – February next year is likely to be suspended for some time, and the total duration of downtime during this period could reach 30 days, the Italian newspaper Il Messaggero reported. Such measures will have to be taken in the event of a cessation of Russian natural gas supplies.

Rome envisaged the possibility of such a step within the framework of the general line of the European Union for saving energy resources. And it includes, among other things, a rule on a voluntary reduction in gas consumption (by 15% in the period from August 1, 2022 to March 31, 2023), which, under certain circumstances, may become mandatory at the pan-European level.

The publication clarifies that in the event of a cessation of Russian energy supplies from November 1, Italy will receive less than 6.45 billion cubic meters of gas, and such a scenario will not do without serious problems: the shutdown of industrial enterprises in conjunction with the general rationing of consumption will become inevitable.

At the same time, the situation in Belgian industry has already noticeably worsened, complains the local edition of The Belgian Times, which refers to Eurostat data. Thus, in August, industrial production in the country decreased by 10.3% compared to August 2021. The situation is exacerbated by the fact that this was the fifth month in a row when this indicator decreased relative to the same month of the previous year.
At the same time, in the expert community, as the publication notes, this situation is not surprising, since “there are many energy-intensive companies in Belgium, and the prices for it and the costs of hired workers are growing faster than in other European countries.” At the same time, a rapid recovery in industrial production is unlikely, summarizes The Belgian Times.
Thus, both in the case of the Belgian industry, which is already in an extremely difficult situation, and in the case of risks for Italian enterprises, the source of the problems lies in the acute shortage of energy. At the same time, the main share of natural gas, one of the most important energy carriers for Europe (and irreplaceable for certain industries), until recently came from Russia, until in 2022 supplies began to decline for a number of reasons. This exacerbated the shortage of “blue fuel”: there is a general shortage of it on the world market, because of which it has become prohibitively expensive for many consumers in Europe, including industrial enterprises.

IS THERE A QUICK SOLUTION

For quite a long time, a lively discussion on the topic of energy security has been going on in the EU. For the role of the main threat, those European politicians and mass media, which were unconditionally oriented towards the United States, offered Gazprom. Under the pretext of its alleged monopoly position in the European market, a shift in emphasis was lobbied from long-term pipeline contracts to spot deals, primarily for the purchase of liquefied natural gas (LNG) delivered by special sea tankers. This measure was intended to promote competition among sellers and, consequently, to establish prices that are more attractive to buyers.

However, by mid-2021, it became completely clear that something had gone wrong: there were not enough free volumes, and spot prices began to reach new and new highs. In the future, the situation only worsened. And the explosion of the Nord Stream and Nord Stream 2 pipelines in 2022 generally called into question the safety of gas transportation to Europe from Russia.

But, perhaps, the worries of the Italians and Belgians are in vain, and does the European industry have a hope for providing affordable energy sources during the upcoming heating season?
Aleksey Grivach, Deputy General Director of the National Energy Security Fund (NESF), points out that pipeline gas supplies, in spite of everything, are still more stable and reliable than tanker ones carried out via sea routes. And Sergey Pravosudov, Director General of the National Energy Institute, recalls the idle capacities of the Yamal-Europe gas pipeline running through Poland, and the intact Nord Stream 2 line at the bottom of the Baltic Sea.

Probably, if it were possible to overcome all the political and economic contradictions that led to the shutdown of Yamal-Europe, as well as to achieve the launch of the preserved Nord Stream 2 branch and guarantee its safety, this would significantly reduce the tension on the European natural gas market. However, in the absence of visible prospects for solving these problems, there is an urgent need for an alternative, which, apparently, should be LNG.

However, the president of the National LNG Association, Pavel Sarafannikov, is not too optimistic about this. “In this case, I believe that LNG terminals, unfortunately, will not satisfy demand in Europe,” he says. “In any case, the energy market is a fairly balanced phenomenon, and if there is not enough in one place, then you take from another place, where, accordingly, it decreases. The principle of communicating vessels. That is, if, for example, the reduction in supplies to Japan from Malaysia is compensated by volumes from the United States, then they will not be supplied to Europe.”

THE CHALLENGES FOR EUROPE ARE EVEN BIGGER

Events in Europe are developing in such a way that energy problems will only get worse in the coming months.

The Chinese authorities have ordered state-owned importers to stop reselling LNG to Europe and other Asian countries in order to ensure sufficient volumes for domestic needs in the winter.

This decision by Beijing for Europe only means a new round of problems in the energy arena. China has become the world’s largest LNG importer in 2021, surpassing Japan. And this year, there is a noticeable Chinese export on this market: part of the purchased volumes is simply resold abroad at higher prices. Thus, according to the Nikkei database, China resold more than 4 million tons of LNG in August, which is approximately 7% of all European imports in the first half of this year.

In recent days, gas on the spot market in Europe has fallen in price by almost 60% from the highs of August, but prices are still record high for this time of year, Bloomberg noted. And China’s actions could lead to a reduction in LNG supplies to Europe and exacerbate the energy crisis in the region in the event of a cold winter.

For European industry, this means the loss of some more natural gas, which can be critical: first of all, household heating will be provided. Perhaps to the detriment of the interests of enterprises. In any case, by spring the European industrial landscape may be significantly degraded.