Russia-EU relationship

Europe gave Gazprom a big gift, by Alexander Berezin for VZGLYAD, 03.02.2022.

The most important decision for the Russian energy industry was made by the European Commission. Nuclear and gas energy have been declared "transitional green energy sources". Behind these words lies a game changer that should bring additional revenues to Gazprom - even if it does not increase fuel supplies to the European Union. How?

Calling this or that type of energy “green” and “sustainable” would seem to be just words. But in the increasingly ideological world that its western part is becoming, the ideological label is very, very significant. European companies could not invest in new gas projects in the field of fossil energy, because natural gas and oil were considered "environmentally unsustainable solutions." Now that "moral embargo" has been lifted, and significant investment can pour into this area. The statement “The European Commission believes that during the transition period there is room for private investment in gas and nuclear energy” are words that really change the rules of the game.

At the same time, investments in gas projects are allowed until 2030, and in nuclear projects until 2045. Already from this it is clear that the decision on the issue of gas was extremely difficult for the EU. Europe does not want to extend investments there for more than eight years.

Outrage of the Greens

Bas Eyckhot, Green MEP, was categorical about the decision: “I have never seen such a strategic mistake by the Commission. As far as gas is concerned, I do not understand this decision at all. It is not clear what its value is."

Greenpeace described the decision as an "attempted robbery". “This anti-science plan represents the biggest environmental laundering exercise of all time,” said Ariadna Rodrigo, spokesperson for the organization. "The inclusion of gas and the atom in the 'sustainables' is increasingly difficult to explain by anything other than a concession to two desperate industries with powerful political friends."

Representatives of the "greens" insist: gas is not needed, there is already renewable energy that can replace it, it is necessary to strengthen investment in it. A step to the left, a step to the right from this policy is assessed by them as a deviation from the only true line of their party.

What actually caused the decision

However, the Greens are wrong. The reasons why the European Commission made such a decision lie on the surface. They are that wind and solar power plants cannot generate electricity when they need it - but they can only do it when there is wind and sunlight. In winter, the average production of photovoltaic cells in Europe is three times lower than in summer, and windmills during periods of calm - frequent this year due to La Niña - generally produce zero.

Against this background, a gas-fired power plant is something completely different. It works when it is needed, and even if there are some failures in the supply of methane, reserves from underground gas storage facilities in Europe will last at least a week.

Opponents of nuclear energy in the West like to use this analogy. Nuclear power plants, they say, are like a car that is much cheaper to fill than conventional ones, but they are more expensive to buy and take many times longer to wait than a conventional car. By the way, it is somewhat reminiscent of the usual (and the most popular electric car in the world) Tesla Model 3, but we are not talking about that now. It is more interesting to continue the comparison towards solar and wind power plants.

They are like a car that only travels at full speed during the day or in strong winds. On a cloudy but windless day, he barely crawls, and on a calm night, he doesn’t ride at all. The dealer offers to fix this by buying a trailer with a lithium battery that allows you to drive for several hours - or even several days - even in a calm winter. But here's the problem: the cost of the trailer is higher than that of the car itself.

The cheapest lithium energy storage is the Tesla Megapack , and even that costs a million dollars for a three-megawatt-hour unit. To replace them with just a day of operation of one gas thermal power plant for 250 megawatts (rather average power), you need to pay $ 1.7 billion for 1,700 "megapacks". Meanwhile, a gas thermal power plant of this capacity costs about $250 million.

European countries had the opportunity to build solar and wind farms without restrictions until their capacity began to approach half of generation. Once it became significant, a stabilizing solution was needed.

Lithium batteries can be such a solution for every solar power plant and thermal power plant - but they will be needed for a trillion dollars only in Europe. Or it could be new gas-fired power plants worth tens of billions of dollars to compensate for the generation gaps of new windmills and solar cells. Who will choose a car with a trailer more expensive than the car itself? Who will choose to pay a trillion where you can pay ten times less?

A chance for Rosatom...

At first glance, it seems that the decision of the European Commission is carte blanche for Rosatom, especially since it is already building nuclear power plants in Finland, Hungary, and so on. European players in the nuclear field - and American ones as well - are not competitors for him. The United States has not built a single nuclear power plant from scratch in the 21st century, and an attempt to do this in South Carolina ended in the bankruptcy of Westinghouse and the loss of nine billion dollars (the nuclear power plant was never built). The French are trying to build two nuclear power plants - one in France, the other in Finland, but so far the progress has been moderate: construction has been going on for 15 years, budgets have been exceeded many times, but there is still no electricity.

This sharply distinguishes the situation from Rosatom: its reactors are being built abroad at moderate prices - about four thousand dollars per kilowatt of power, and the construction time of about five years is by no means 15+, like that of its Western competitors. It turns out that now Rosatom will be able to build reactors in Europe?

Not certainly in that way. It is worth recalling that for Western countries we are strangers, and they will never treat us as equals. Finland is building a nuclear power plant with Rosatom not because it wants to, but because the European Pressurized Water Reactor , which the French have been building there since 2005, has not yet started working. It is scheduled to do so in February 2022, with the estimated cost rising from €3 billion to €8.5 billion.

It was only when they faced this dreadful reality from an economic point of view that the Finns decided that they could allow Rosatom to build a new reactor. We decided not to be held hostage by the loss of his Western competitors' ability to quickly build nuclear power plants. But those are the Finns, who have been quietly cooperating with our country since Soviet times. They are pragmatists and they do not have their own nuclear industry.

And in Western Europe there is one. France really wants to build a nuclear power plant. Paris does not need any reactors other than its own construction - even if they take three times longer to build and cost ten times as much as Rosatom's. Belgium and Germany are closing their nuclear power plants, Great Britain, due to its well-known prejudices, will die from the cold before ordering a reactor to the Russians. The same applies to the USA.

The new decision of the European Commission may only affect the fact that the construction of new reactors in Finland and Hungary will not be banned for Rosatom. It will not be possible to develop new significant markets in Europe due to this. And it doesn't matter to Europe that economically Western European new reactors are a dead end, while Rosatom's ones are the other way around. Politics once again outweighed the economy.

....Or for Gazprom?

The question arises: why doesn't politics outweigh economics in the gas sector? It would seem that other Western countries are demanding that Germany close Nord Stream 2, but Germany is against it. Does this mean that common sense can still prevail in Europe?

Alas, no, it doesn't. Few people know, but Germany began to buy gas from us (even under the USSR) not for economic, but for political reasons. This idea was actively promoted by German Chancellor Willy Brandt. The general idea was that Moscow was naturally aggressive and could attack Western Europe at any moment without any reasonable reason and drown the whole world in blood. But if you buy raw materials from them, " Smart Elzy " thought , then there will be no attack. Another German chancellor, Helmut Schmidt, justifying another expansion of gas imports from the USSR at the start of the Afghan war, said : "People who trade with each other don't shoot each other."

Of course, this position has nothing to do with reason. And the point is not only that the Kremlin did not plan to attack Western Europe at all. The USSR was the main transit trading partner of Germany until June 22, 1941, but this did not prevent Hitler from attacking. It's just that German chancellors these days know little about the history of their country, and, of course, ours. The Germans were captured by the caricature myth of warlike Russian barbarians.

Today the situation has changed a little: Germany cannot stop gas imports and avoid the collapse of its energy sector. Windmills and solar panels play too large a share in it, so gas consumption in the German energy sector is growing steadily. Something needs to be done to close the gaps in wind generation.

The new decision of the European Commission is to some extent a balm for the soul of Gazprom. Now it turns out that new gas projects, including pipelines, will not be labeled “environmentally unsustainable” until at least 2030, which means that foreign partners will not simply turn away from them. The construction of new gas-fired thermal power plants potentially increases the sales market for the Russian company. True, how much it will be able to occupy this market is still a question.

The fact is that lately Gazprom deliberately carries out deliveries only under long-term contracts. Europe does not want to conclude new contracts of this kind - does not want this at any cost, in the truest sense of the word. Moreover, it has already been stated that after 2050 all long-term gas supply contracts for the EU will become a thing of the past. The idea here is that by that time their energy sector will not need gas. Therefore, they are ready to buy gas from Gazprom only within the framework of existing long-term contracts - or on the spot market, where its prices are constantly changing.

In past winters, Gazprom supplied gas to spot markets, and the prices for it there were not high as a result. This time there are no deliveries - and prices are several times higher than last year.

Yes, now, after the decision of the European Commission, it will become easier for Europeans to build new gas thermal power plants to support windmills and photovoltaic cells in moments of their natural weakness. But if the Russian gas company does not change its policy, then it will not be able to start supplying more gas to the West. Because no one will change the volume of long-term contracts anyway. If the EU wanted to do this, they would have signed new contracts a long time ago and would not have had colossal prices for gas and electricity this winter.

Nevertheless, the growth in fossil fuel consumption due to the EC decision will still be a boon for Gazprom and the Russian budget. In order to provide gas to new TPPs, the Europeans will increase purchases on the spot market. And since we are no longer supplying almost anything there, prices there will continue to remain high. The price in long-term contracts - at the insistence of the EU countries themselves - is pegged to the spot market. That is, in the end, the new solution will support the income of the Russian company, even if it does not increase the volume of gas exported by it by a single cubic meter.

https://m.vz.ru/economy/2022/2/3/1141820.html

Rodion_Romanovic wrote:For people that believed that Meloni would have been better for the Italian russian relationship...please look at this tweet from yesterday...


https://twitter.com/GiorgiaMeloni/status/1574862655067660295?t=3SX0dUKpk6yo3qClYA6nrw&s=19