The impact of Russia on the EU may be overestimated

Text/Zhu Runmin

After this winter, the EU will have more time and space to reduce the dependence on Russia's natural gas and speed up the process of getting rid of Russia's natural gas.

With Russia's continuous reduction in the natural gas exports of Europe, the European Union's response policies have continued to increase. The outside world feels that the EU members are not only in the deep water, but will also face the suffering of the severe winter in winter. Especially on July 25th, Russia's Natural Gas Industry Co., Ltd. (Gazprom) announced that it has further reduced the gas transmission capacity of the Beixi Pipeline to 20%of the gas transmission capacity due to the "technical problem" of the gas turbine, which further exacerbated the natural gas supply gap in EU member states. And Russia's natural gas exports to the EU has developed in a completely cut direction. Of course, the European Union has also taken measures a few days ago, including an agreement in the quarrel: "voluntary" of various countries will reduce the use of natural gas this winter by 15%.

According to statistics from British Petroleum (BP), in 2021, Russia's natural gas exports to EU member states for natural gas exports of 149.7 billion cubic meters, accounting for 39.6%of the total natural gas imports of EU member states, and 37.74%of the total natural gas consumption of EU member states.

We might as well make an example. If Russia completely cut off the natural gas export of the EU during the year, what will the European Union do?

First of all, how many Russian alternatives can the European Union find. According to a report released by the International Monetary Fund (IMF) in July 2022, in the next 12 months, it can replace 60 billion cubic meters, 20 billion cubic meters and 10 billion cubic meters by increasing liquefied natural gas imports, pipeline natural gas imports, and power supply. Russian gas can also replace 17 billion cubic meters of demand through the consumer side, thereby replacing a total of 107 billion cubic meters of Russian gas, which is 70%of the total amount of Russian gas imports in 2021. In this case, after the Russian gas was completely interrupted, the EU's natural gas annual supply and demand gap was 45 billion cubic meters, which was equivalent to 11.32%of the EU's annual demand for natural gas. Of course, Russia has not completely interrupted natural gas exports to Europe. Beixi No. 1 pipeline still maintains the level of Euqi at 33 million cubic meters per day. The gap between the natural gas supply and demand of EU member states has further dropped to 34 billion cubic meters. Even according to relatively pessimistic predictions, the International Energy Agency (IEA) forecast, the EU can only find 42%of Russian gas substitutes, with an annual supply and demand gap of 86.8 billion cubic meters, which is equivalent to 22%of the total demand for natural gas in the European Union. The situation will inevitably bring greater difficulties to EU member states, but it will not be a hurry.

Secondly, the market mechanism may ease the impact of natural gas supply gap. Since September 2021, the prices of natural gas have fluctuated all the way, reaching a record high, and the inhibitory effect on natural gas demand is very significant. According to the industry data agency AGEB, due to factors such as rising prices and high operations, Germany -the largest Russian natural gas importer in Germany -the largest EU economy and EU member states, and the energy consumption in the first half of 2022 decreased by 3.5%year -on -year. Among them, natural gas dropped from 64.7 million tons of standard coal to 55.1 million tons of standard coal, a decrease of 14.7%. From the largest energy sources in the first half of 2021 to the second largest energy, below oil consumption. According to the forecast of the International Monetary Fund, due to the surge in natural gas prices and high operations, compared with 2021, the demand for natural gas in Europe and industry in 2022 will decrease 4 billion cubic meters and 13 billion cubic meters, respectively. Affected by this, in the case of Russia's natural gas reducing supply, the natural gas inventory of EU member states will not rise. Related data show that as of July 24, 2022, the EU member states' natural gas inventory was about 7.5 billion cubic meters, accounting for 67%of the total database capacity, and ranked third in the same period since 2012.

It is true that Russia unexpectedly reduced or even interrupted natural gas exports to Europe, which will inevitably form a surprise and impact on EU member states. The European Union is inevitable. Economic growth slows down or even shrink. However, comprehensively analyzing the EU's potential for replacing the source of supply, the potential of compressed consumption demand, and the ability to withstand all countries. EU member states can eventually survive the peak season of natural gas demand for this winter and spring. For the push, the European Union will have more time and space to reduce the dependence on Russia's natural gas and speed up the process of getting rid of Russia's natural gas.

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