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Europe Feels The Heat As Russia Standoff Risks Energy Crisis

The Sunday Telegraph

Behind the glass-paned curve, desks stand bare. They used to house traders, employed by one of the most powerful energy companies in the world, negotiating the deals that resulted in cargoes of liquefied natural gas arriving in Britain. But now the chairs are empty.

It wasn’t long ago that Russia’s Gazprom had one of the biggest energy trading teams in the City. But soon the gas giant will announce plans to pull out of the West as relations with the British Government sour. The rumoured move to St Petersburg may have been decided before the alleged Kremlin kill-order to poison a double agent in Salisbury, but it is now a gesture loaded with menace.

Freezing Siberian storms and even frostier relations with the Kremlin have left Europe pondering its co-dependent relationship with Russia in which both are bound by an economic addiction to fossil fuels.

Russia supplies a third of Europe’s gas, and the flexing of energy market muscle is a consistent tactic in the country’s geopolitical playbook.

Britain may say it is out of reach of Russia’s energy grip, but it sounds increasingly hollow after a winter marked by multiple gas price shocks. Whether the UK imports gas directly from Russia or not, its close links to European markets mean our gas bills could take a hit regardless.

It is a threat the Government readily admitted to in 2016 but is now eager to play down. Former energy secretary Amber Rudd issued a clear-eyed warning ahead of the EU referendum, saying that “countries such as Putin’s Russia use their gas as a tool of foreign policy; threatening to cut off supplies or drastically increase prices”.

Despite this threat, a combination of global energy market dynamics and politics has created an economic dissonance in Europe that could leave the continent vulnerable to Russia’s last-resort tactics.

Jack Sharples, from the European University of St Petersburg, says that while it is unlikely that Europe could be as badly hurt as Russia’s more dependent neighbours, such as Ukraine and Belarus, there is still a looming threat.

“The threat to European energy security is not the turning off of gas taps, but I think the greater threat is excessively high prices in uncompetitive markets,” he says.

Still, it is theoretically possible that Russia might choose to hike its gas export duties in response to a dramatic worsening of relations.

“That would be the nuclear option for Russia,” says Sharples. “If they decided to punish Europe by using energy supplies as a weapon then I think Europeans would quickly find the political will to look elsewhere. It would be painful. It would be horrendous. And it would take time. But once that shift is made it would be very difficult to put the genie back in the bottle from a Russian perspective.”

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