Professor Samir Dani has revealed that although gas prices rose before the war, Russia exacerbated the crisis, using its resources as “leverage” against European states heavily dependent on Russian gas.
He added that Russia is now pivoting to China, spurred by Europe’s plans to go green and its reluctance to continue buying Russian energy.
The comments come as a report suggests an existing pipeline from Russia to China could completely replace German imports through the Nord Stream 1 pipeline in favor of China.
Although not all German gas imports pass through the pipeline, it could significantly boost Moscow’s revenue at a time when the West is trying to starve the Kremlin of cash.
Dr. Dani is Professor of Operations Management and Deputy Head of Keele Business School and is an expert in energy and natural gas supply and pricing.
He said: “With the current news of Russia cutting Gazprom’s gas to Germany by 40%, they are citing the reason why maintenance and some parts are not available etc.
“However, you can see that Russia has cut gas to other countries, because they don’t pay in rubles. It has become a kind of leverage because they know that Europe is completely dependent on the Europe coming out of Russia.
Many European countries rely heavily on Russian energy imports to heat their homes and power their economies, although there has been a concerted effort to reduce dependence on Russian energy.
Professor Dani said Europe’s reluctance to continue to rely on Russian energy was part of a larger plan to get Moscow to turn to “energy-hungry” China.
He said: “Russia may rebalance to sell more to China because China is really hungry for energy right now. Natural gas or whatever they can find.
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He added: “We have seen recently that there has been political collaboration between Russia and China over a new pipeline for energy, both gas and oil, from Russia to China.” .
“Long term, they may be trying to rebalance their supply because they know Europe has long term plans to go green and natural gas and oil won’t do the trick. ‘they want to have clean energy in the future.
Last month, a report by the Center for Strategic & International Studies (CSIS) looked at what such a pivot to China might look like.
They found that Russia sold about 33 billion cubic meters (bcm) of natural gas to Asia in 2021, compared to an average of 160 to 200bcm to Europe per year, or about two-fifths of Asia’s energy needs. Europe.
However, once the Power of Siberia pipeline starts operating at full capacity, Russia could supply China with around 60 billion cubic meters of gas per year with its existing infrastructure. For comparison, Germany received 57 bcm of Russian gas from the Nord Stream 1 pipeline in 2018.
Although change appears to be underway, Dr Dani noted that it would take time for Russia to replace European gas import revenues.
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He said: “This is a major theme for Russia. Some activities are aimed at pivoting the sale shift from West to East. However, this will take time due to capacity issues, logistical issues and political systems. »
The CSIS report claims that Russia could sell around 120 billion cubic meters of gas to Asia by 2030.
If the war in Ukraine reaches a stalemate and Western sanctions against Russia remain in place for the long term, the sales would likely help support the Russian economy as Europe stops buying its energy.
However, the report notes that Russia will never have “market power” in Asia, that is, it will not dominate the energy market as it has in Europe.