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The EU’s reserves of natural gas hit a historic high Thursday, filling up well in advance of the winter heating season as the bloc continues its dash away from Russian energy dependence.
That leaves the Kremlin scrambling to plug a gaping hole in its finances left by its decision to cut off European customers in the wake of its full-scale invasion of Ukraine last year.
But less Russian gas also opens the EU to the bigger price fluctuations of the global market for liquefied natural gas (LNG).
Gas Infrastructure Europe said Thursday that member countries’ gas stores are now at 90.12 percent capacity — breezing past the 90 percent filling target that Brussels is legally required to meet by November.
“Today’s confirmation that we have met our gas storage requirements so far ahead of schedule underlines that the EU is well-prepared for winter and this will help to further stabilize markets in the coming months,” the bloc’s Energy Commissioner Kadri Simson told POLITICO.
“The EU energy market is in a much more stable position than it was this time last year,” she added, while acknowledging “we have seen in recent weeks that the gas market remains sensitive” and that the Commission will continue to monitor it as the Continent heads toward chillier weather.
The news underlines the EU’s success in shedding its dependence on Russian pipeline gas, which before the war supplied about 40 percent of the bloc’s demand.
Moscow steadily cut off its EU customers, slashing and then ultimately cutting off deliveries through its Yamal-Europe and Nord Stream pipelines, while also reducing the volumes reaching the EU via Ukraine.
The EU responded by shifting to other suppliers and slashing demand.
Russian gas fell to 23.6 percent of EU imports in the first 32 weeks of 2022, and so far this year it’s down to just 8.4 percent. That puts the EU’s commitment to end purchases of Russian gas by 2027 within reach.
“This is definitely a success story,” said Giovanni Sgaravatti, a research analyst at Brussels think tank Bruegel, “for the Commission, for the energy market, but even more so for the governments of member states that responded fairly well to replace 1,000 terawatt hours of missing Russian gas in the space of a year.”
Russian gas has largely been replaced by imports from the U.S., Norway, Azerbaijan and others, bringing prices dramatically down from their 2022 peak. The Dutch TTF gas pricing index hit €320 per megawatt hour last August; it hovered around €38 this week.
However, the cost of gas still remains higher than before the war, when it fluctuated around €20 per megawatt hour, meaning bigger bills for households and lower productivity for European industry.
“Wholesale gas prices may be significantly lower than a year ago when the market was gripped by Nord Stream coming offline, but they remain still noticeably more expensive than historic gas prices over the last decade,” said Tom Marzec-Manser, head of gas analytics at market analysis firm ICIS, warning that traders are still anxious about supply.
“The fact European storages are nearly full earlier than normal — typically they reach this level around October — doesn’t necessarily mean the price will come down further, unfortunately. Stored gas can only get you so far through a winter and if that winter is cold there’s a certain amount of risk, and that’s what keeps gas price elevated for the time being,” he added.
Analysts expect this to be the last winter where shortages are a serious concern, given that increased LNG production capacity from suppliers like Qatar and the U.S. is due to come online midway through 2024.
However, a number of Central European countries, in particular Austria, are still reliant on Russian imports sent through pipelines running across Ukraine. Kyiv has indicated it does not intend to renegotiate the transit deal, which is set to expire at the end of next year. That creates a hard deadline for those still depending on Moscow’s fossil fuels.
The loss of its most dependable European customers has been a big blow for the Kremlin; revenues from energy exports were down 41 percent to $43.4 billion in the first seven months of this year, the Russian finance ministry said. Meanwhile, the ruble hit a 16-month low, and this week crashed through a symbolic benchmark of more than 100 to the dollar.
That makes it harder for Russia to continue to prop up its isolated economy, pay its soldiers’ wages and purchase weapons from abroad. According to Natasha Kuhrt, a senior lecturer at King’s College London’s Department of War Studies, “in the end, the government will prioritize military spending,” while economic woes are mainly “going to mean hardship” for many ordinary Russians.
Meanwhile, Moscow-based research firm Romir on Wednesday published a poll of 3,500 Russians that found almost one in five is having to reduce their spending on food and essential goods to save money, up three percent from the month before.