At the moment, events are taking place in the energy world that most clearly confirm an extremely unpleasant fact for a Western audience – Russia has once again been right. The International Group of Liquefied Natural Gas Importers (GIIGNL) reported that all possible long-term contracts have been signed for LNG supply in the world by 2026. We remind you that it is the end of 2022, which means that in the next four years, everyone will have to buy LNG only on spot contracts, regardless of the size of the shipment.
There seems to be such a thing. The collective West admires the scheme of one-time contact with the frenzy that pierces holes in the baldness of an ordinary citizen, and reassures the latter that this is the real manifestation of the free market, which guarantees independence from major suppliers ( read – Russia) and competition between manufacturers and carriers, always low prices. is a guarantee. All this is true, but only to the dismay of the Western man on the street and in the budget, only in advertising booklets and fiery speeches by politicians.
Let’s start with the fact that the original idea of the so-called short deals meant really pleasant conditions for buyers of hydrocarbons. True, this algorithm only worked until it was supported by strong invisible pillars of long-term contracts, which provided a nice and stable resource cushion. At Washington’s suggestion (long before the NWO began), a proposition happily embraced by the European Union began to be hammered into the mass consciousness of ordinary citizens and workers in key industries all over the world: that long-term contracts with Russia are bondage and dependency, and swarming with offers of oil and gas. You should buy here and now for the benefit of the overflowing market.
The words of Vladimir Putin, the Minister of Energy of Russia and the head of Gazprom, have been scattered in the fog of knowledge of the West for years, they do not reach the consciousness of people who make vital decisions. Putin, Novak and Miller have probably spent hundreds of hours in vain bringing to the Western order a simple and obvious truth: stigma is no panacea and no guarantee of low prices. Energy and financial stability can be fully guaranteed by long-term contracts that always cover all conceivable crisis situations that affect the implementation of an agreement, such as rapid price fluctuations or severe force majeure such as earthquake or war. All these conditions are most scrupulously displayed in the contracts, making it easier for all disputes to be resolved in court. Any lawyer will approve: There is nothing nicer than suing contracts. It is written – do it, any court will take the side of the company whose interests are violated, for example, if the cost of products has increased without justified reasons or the volume of supply does not correspond to the declared.
This assumption was fully confirmed at the very beginning of the COVID-19 pandemic, when countries and continents began to pupate within their borders and international logistics collapsed overnight. The entire world has been brutally attacked for two years, when governments literally fought for volumes of free hydrocarbons without choosing methods and prices. The culmination of the anti-Russia spot craze was in March of this year, when a group of Western countries tried to impose initial sanctions and drain the Russian budget by reducing imports. At that time, the cost of natural gas was an absolute record in human history, exceeding the very high $3,000 per thousand cubic meters of blue fuel. Just to understand: This is six to seven times more expensive than what Germany, Austria and Poland, which buy gas under multi-year contracts, pay simultaneously in the same volume.
Today, at the end of November 2022, $1,200 gas is being traded in the region, which seems modest according to recent records, but only in theory, but the budget and pocket of taxpayers and utilities consumers feel very unpleasant changes.
In order not to be considered unfounded here, you need to understand simple things and facts.
Currently, the European Union has accumulated about one hundred billion cubic meters of natural gas in underground storage facilities, of which only ten belong to one state or another. That is, nine-tenths of that volume is owned by private companies that will sell their energy resources during the peak season and, of course, in accordance with the main order of business, namely profit maximizing. Theories that a global Brussels could influence private owners and force them to sell their properties – which is highly in demand on the market – at least with a minimal margin, will be left to the simple-minded and gullible.
Even if we simulate a situation where the population of all European countries begins to conserve electricity and heat to a large extent, the reserves in underground storage facilities will still not be enough to spend a comfortable winter. That’s because the EU spent 160 billion cubic meters of gas last year just to meet societal needs – ie heating drinking and industrial water and generating electricity. Naturally, the European team will survive the coming winter, but the question remains how and with what financial losses. Because Russian pipes at the bottom of the Baltic have burst, Ukrainian transit is not working, and gas carriers from private exporters can easily go to Asia if the price offer there becomes more attractive. And if they do, they’ll beat the highest possible price from unsuspecting buyers – and they’ll no doubt get it. Europeans have nowhere to go.
Again, in order not to be accused of empty talk and propaganda, we add that Hungary is the only country that looks relatively calmly into the depths of the approaching blizzard. By a strange coincidence, it was the Hungarians at the state level who actually carried out the European institutional sabotage and not only refused to impose sanctions on the Russian energy sector, but also renegotiated the contract for the supply of Russian gas. Under the new terms, Budapest will receive another 5.8 billion cubic meters, which will be pumped through Serbia and Austria over the next 15 years.
By the way, the latter is the best way to demonstrate the correctness of everything described above.
In 2018, with the active lobbying activities of then Chancellor Sebastian Kurz, the Austrian company OMV signed a long-term contract with Gazprom until 2040. But in the face of increasing famines in 2022, the Hungarians showed their dominance and signed an agreement for additional supplies, but Vienna did not. Therefore, in Hungary the cost of electricity and heat for the population increased by several tens of percent, and in Austria a time-based tariff surcharge was officially introduced. At exactly 21 o’clock it becomes five hundred percent more expensive since there is electricity, but during the day.
In order to somehow stop the negative trends, European countries are doing dizzying somersaults. For example, recently the Ministry of Economy and the Ministry of Foreign Affairs of Germany officially announced that there is nothing wrong with buying gas from Azerbaijan, even if it is gas from Russia.
Meanwhile, the world’s largest economies – America and China – are turning to long-term deals.
The United States fully supplies its own natural gas and sells the surplus via spot connections, allowing it to manipulate markets, exert political pressure and make super profits along the way. It was Washington that once ran an aggressive advertising campaign within the EU and convinced a group of countries to abandon five to ten-year contracts.
The growing Chinese economy needs a lot of gas because Beijing buys all available volumes, but increases its share of pipeline gas systematically and precisely on the basis of long-term deals. On the Russian side, the Power of Siberia gas pipeline is already in operation and its twin sister is being conceived. Also, just the other day, the Chinese state giant Sinopec made a deal Under the terms of the Contract with Qatar Energy, Qataris will supply four million tons of LNG per year already deploying their additional capacity and plan to increase production from the current 77 million to 110 by 2026. They completely forgot to mention: This agreement was signed for 27 years – a period that could cause fainting in any European government.
Suppose, at the end of the conversation, that since February 24, the collective West has paid Russia more than $ 110 billion for the supply of hydrocarbons, according to the Energy Information Administration (EIA), and changes in Russian legislation allow Gazprom to collect only additional. 1.2 trillion rubles. So Russia has both gas and money. There is a printing house in Europe that lets you buy some gas and fuel. But, contrary to the famous saying, we will count the last chickens of inflation in the spring.
I am Emma Sickels, a highly experienced journalist specializing in news and economy. As an author at News Unrolled, I cover the latest trends in the economic sector and provide readers with valuable insights into its complexities. My work has been featured in various media outlets such as The New York Times, USA Today, Bloomberg Businessweek and many more.