Some talk of Alexander…


Vladimir Putin’s on a high, celebrating victory by opening Nord Stream-2 on Alexander Nevsky day. Meanwhile, his best friends in the EU are running low on gas. So what message is the Kremlin trying to send?

The Kremlin makes no secret of the fact that it is pushing for a clear win in the geopolitical battle with the US and EU over the Nord Stream-2 (NS-2) pipeline. Never one to miss an opportunity to use (or misuse) history, Russian president Vladimir Putin intends to declare victory in style – by opening the NS-2 on September 12th.

Now, that’s the feast day of St Alexander Nevsky, a big name in medieval Russian history: a heroic prince, he made his name battling Germans and Swedes (for which read “the West”), defeating the Livonian Knights in the famous Battle of the Ice in 1242, immortalised in the Eisenstein film beloved of another Kremlin strongman, Joseph Stalin. (Admittedly, Alexander was a tribute-paying vassal of the Mongol Golden Horde at the time, but, hey, at least they weren’t Westerners!).

For Mr Putin, it would seem that Alexander is a multipurpose sort of chap. Thrown out of his native Novgorod, he became Grand Prince of Kiev, so Russia claiming his legacy is one in the eye for the pesky Ukrainians as well (as if NS-2 isn’t enough). He was canonised as a Russian Orthodox saint (nearly four centuries after his death) for beating off those Teutonic Catholics, so that conciliates Mr Putin’s clerical friends as well. And, chronically up to no good in the Balkans, Mr Putin may even have an eye on Bulgaria, whose main Orthodox cathedral also bears the name of Alexander Nevsky – as a symbol of Russia’s role in driving the Ottomans out of Bulgaria.

Taking stock

Well, so much for history. Meanwhile, there’s a more prosaic Battle of the Ice going on right now – or at least a battle on how Europe is to avoid getting cold if there’s an icy winter.

We’ve argued before in this blog that the level of stocks in underground gas storage facilities (UGS) is a crucial factor in this, and, an expert website, is predictably interesting on the subject. One of its key indicators is “(current) storage surplus vs five-year average”: this expresses how much gas a country has in its UGS facilities as a percentage of how much it had, on average, at the corresponding points in the preceding five years.

Now, vulnerability is a complex thing, defined by a lot of factors. But, broadly speaking and other things being equal, if you’ve got less gas in your UGS now than you had at this stage of the last five years, you’re more vulnerable. And vulnerability so defined varies greatly among the 18 countries covered by (the 17 EU countries with significant UGS capacity plus the UK). Greatly – and interestingly.

Conspicuously better placed than in recent years according to the latest (September 6th) data, for instance, are Latvia (38% more) and the UK (+31%), while Poland and Belgium are also more than 10% positive. However, there’s also a group whose stocks are significantly lower – by a margin of 20% or more – than the five-year average. These are Bulgaria (20%), Denmark (30%), Germany (32%), Austria (40%) and the Netherlands (41%).

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Radically different absolute volumes are denoted by these figures, of course: Bulgaria’s 20% represents a drop to 362.5 million cubic metres (the volume now held in the Chiren UGS, operated by national transmission system operator Bulgartransgaz). But Germany’s fall of 32% is to stock just a little shy of 13.3 billion cubic metres. And Bulgarian readers might be reassured to know that, in terms of the percentage of national UGS capacity these current stock figures represent, Bulgaria is on a par with Germany (at 60%) – and considerably ahead of both Austria (48%) and the Netherlands (50%). The champion in this respect, incidentally, is Poland, with stocks equivalent to 93% of UGS capacity – a sensible precaution, perhaps…

However, the really interesting thing is that, in context, this is a very strange quintet – or quartet, anyway. Set aside the Netherlands: the Dutch receive a lot of their gas via Nord Stream, but they don’t need to worry too much about vulnerability, since they have non-Russian options to remedy low levels of summer gas stocks, namely access to liquefied natural gas (LNG) and indigenous gas production.

But that’s not true of Germany, Austria or Denmark. And in practice it’s not true of Bulgaria either, since national gas company Bulgargaz is proving ludicrously slow to develop and take advantage of non-Gazprom alternatives (Azeri gas and LNG).

So these are the four most “vulnerable” states, if vulnerability is defined in storage terms. Yet they are probably also, for one reason or another, all pretty near the top of Mr Putin’s Christmas card list. Germany and Austria are among the EU states cosiest with Russia, and their respective chancellors, Angela Merkel and Sebastian Kurz, are the political guarantors of NS-2. Denmark is a little less up-front, but the country has been remarkably cooperative about permissions in the implementation of NS-2 – and a conspicuous foot-dragger about Poland’s efforts to access Norwegian gas by pipeline. And Bulgaria, like Germany, is a “fellow-Streamer” of Mr Putin’s – collaborating, in this case, in the two Turk Stream (TS) pipelines.

Now, the Kremlin scheme would seem to be a no-brainer: low levels of gas reserves should make these countries vulnerable by reason of extreme dependence in the cold winter months, for both base- and peak-level consumption, on gas coming via NS-1 and NS-2 (or, for Bulgaria, TS-1 and TS-2). Lack of access to the total capacity of these pipelines will jeopardise critical supply flows. But why should the Kremlin be preparing to do that to such good friends?

Well, contingency plans for dealing with governments in Germany and Bulgaria that are less compliant than those of Mrs Merkel or Bulgaria’s departed prime minister Boyko Borisov might explain something. But the most likely reading is that Mr Putin has no plans whatever to make Germans, Austrians or Danes (or even Bulgarians) shiver: it borders on absurdity to suppose that Mrs Merkel or Mr Kurz is unaware of Moscow’s gameplan. In all likelihood, they will have received guarantees that Gazprom will meet their gas needs.

The logical conclusion of which is that Moscow, Berlin and Vienna are partners in a classic “brinkmanship” play, in which Germany and Austria continue to enjoy a privileged relationship with the Kremlin. At the same time, Mr Putin intends to exert pressure on those of the other EU member states that will need a good stiff talking-to if they are to agree to Gazprom’s terms for using NS and TS.

When Mrs Merkel’s legacy as chancellor comes to be assessed, her somewhat eccentric interpretation of the concept of “EU energy solidarity” will surely be high on the list of topics…

Ilian Vassilev

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