19 July 2022 - Vladimir Putin answered media questions
Question: Mr President, a serious energy crisis is developing in Europe, which is discussing the possibility of Gazprom cutting off gas deliveries. The company has allegedly issued an official notification to one of its German clients, citing force majeure circumstances.
Are there grounds for accusing Russia of causing this energy crisis? Will Gazprom continue to honour its obligations
Vladimir Putin: First of all, Gazprom has always honoured, and will continue to honour its commitments.
There are no grounds at all for the attempts by our partners to shift or try to shift the blame for their own mistakes on Russia and Gazprom.
What is the situation with energy deliveries? In 2020, in the first half of 2020, gas cost 100 euros per 1,000 cubic metres in Europe. The price rose to 250 euros in the first half of 2021. Today it is 1,700 euros per 1,000 cubic metres of gas.
What is happening? I have spoken about this on numerous occasions, and I do not know if we should go into detail regarding the energy policies of European countries, which underrate the importance of traditional sources of energy and have put money on non-traditional energy sources. They are big experts on non-traditional relations, and they have also decided to make a bid for non-traditional energy sources like the sun and wind.
Last winter was long, there was no wind, and that did it. Investment in the fixed assets of traditional energy producers has decreased because of previous political decisions: banks do not finance them, insurance companies do not insure them, local governments do not allocate land plots for new projects, and pipeline and other forms of transportation are not developing. This is a result of many years, probably a decade of this policy. This is the root cause of price hikes rather than any actions by Russia or Gazprom.
What is going on today? Until recently, we supplied gas to Europe without Turkiye: we supplied around 30 billion cubic metres a year to Turkiye, and 170 billion to Europe, 55 billion via Nord Stream 1, and, if memory serves me, 33 billion were supplied via Yamal-Europe, via the two strings that run through Ukraine. About 12 billion were delivered to Europe through Turkiye via TurkStream.
Ukraine suddenly announced that it was going to close one of the two routes on its territory. Allegedly because the gas pumping station is not under its control but on the territory of the Lugansk People's Republic. But it found itself under the control of the Lugansk People's Republic several months before, and they closed it just recently without any grounds. Everything was functioning normally there, no one interfered. In my opinion, they closed it simply for political reasons.
What happened next? Poland imposed sanctions on Yamal-Europe, which supplied 33 billion cubic metres of gas. They used to take 34, I think, 33–34 million cubic metres a day from us. They shut it down completely. But then we saw that they turned on the Yamal-Europe pipeline in reverse mode, and they started taking about 32 million a day from Germany. Where is the gas from Germany coming from? It is our Russian gas. Why from Germany? Because it turned out to be cheaper for the Poles. They used to get it from us at a very high price, closer to the market price, whereas Germany gets it from us 3–4 times cheaper than the market price under long-term contracts.
It is profitable for German companies to sell it to the Poles at a small premium. It is profitable for the Poles to buy it because it is cheaper than to buy it directly from us. But the volume of gas in the European market has decreased, and the total market price has gone up. Who has won? All Europeans only lost. This is the second point: Yamal-Europe.
So, first one of the routes in Ukraine was shut down, then Yamal-Europe was shut down, now Nord Stream 1, which is one of the main routes – we pump 55 billion cubic metres a year through it. There are five Siemens gas compressor stations working there, and one is on standby. One compressor had to be sent out for repairs. A repaired compressor was supposed to come from Canada, from the Siemens plant in Canada, to replace it. But it ended up under sanctions in Canada. So, one pumping station, just one piece of equipment was out of order because of scheduled maintenance work and it has not been returned from Canada.
Now we are being told that the unit will be delivered from Canada soon, but Gazprom does not have any official documents yet. We must certainly obtain them, because this is our property, it is the property of Gazprom. Gazprom should receive not only the hardware, not only the gas pumping unit, but also the accompanying documents, both legal and technical documentation.
We must be able to see what Gazprom is taking – the turbine’s current condition as well as its legal status, whether it is under sanctions or not, what we can do with it, or maybe they are taking it back tomorrow. But that is not all.
The problem is that at the end of July, on July 26, I think – we can ask Gazprom – another turbine should be sent for routine maintenance, for repairs. And where will we get a replacement from? We do not know.
One more turbine is actually out of order because of some crumbling of its internal liner. Siemens has confirmed this. That leaves two operational units, which are pumping 60 million per day. So, if one more is delivered, fine, we will have two in operation. But if it is not, only one will be left, and it will pump only 30 million cubic meters per day. You can count how much time it will take to pump the rest. How is this Gazprom’s responsibility? What does Gazprom even have to do with this? They have cut off one route, then another, and sanctioned this gas pumping equipment. Gazprom is ready to pump as much gas as necessary. But they have shut everything down.
And they have fallen into the same trap with the import of oil and petroleum products. We hear all sorts of crazy ideas about capping the volume of Russian oil imports or the price of Russian oil. This is going to lead to the same situation as with gas. The result (I am surprised to hear people with university degrees saying this) will be the same – rising prices. Oil prices will spiral.
As for gas, there is another route we are ready to open, which is Nord Stream 2. It is ready to be launched, but they are not launching it. There are problems here as well, I discussed them with the Chancellor about six or maybe eight weeks ago. I raised this issue; I said that Gazprom had reserved the capacity, and that this capacity needed to be used, and it cannot be suspended in mid-air indefinitely.
The answer was that there were other issues on the agenda, more important things, so it is difficult for them to deal with this right now. But I had to warn them that then we would have to redirect half of the volume intended for Nord Stream for domestic consumption and processing. I raised this issue at the request of Gazprom, and Gazprom has actually already done it. Therefore, even if we launch Nord Stream 2 tomorrow, it will not pump 55 billion cubic meters, but exactly half that amount. And given that we are already halfway through this year, it would be just a quarter. Such is the supply situation...
But – I said this at the beginning of my answer to your question and I want to end with this – Gazprom has always fulfilled and will always fulfil all of its obligations, as long as, of course, anyone needs it. First, they themselves close everything, and then they look for someone to blame – it would be comical if it were not so sad.
Read related post which describes the situation in September 2022:
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