Putin ready to send more Russian gas to Europe, blames flawed policies for shortage

MOSCOW (Bloomberg) - Russia is ready to deliver all of the natural gas that Europe needs, said President Vladimir Putin, blaming the continent’s current energy crisis on flawed policies rather than a lack of supply.

Europe’s largest gas supplier is raising deliveries in line with requests from its customers and is “prepared to discuss any additional steps” to stabilize the region’s markets, Putin said at Russia Energy Week in Moscow on Wednesday. However, he also criticized the continent for introducing “systematic flaws” into its energy system then “blame shifting” when things went wrong.

Russia already boosted gas shipments to Europe by 15% in the first nine months of the year, and “if we are asked to increase more, we are ready,” Putin said. “We increase as much as our partners ask us to. There is not a single refusal, not a single one.”

Export Drop

A spike in gas and power prices is wreaking havoc in Europe’s economy. Putin’s first verbal intervention into the market last week eased the rally, but they’ve rebounded since. Dutch front-month gas, the European benchmark, advanced as much as much as 8.9% to 93.35 euros a megawatt-hour on Wednesday.

With the region’s own gas production declining and competition with Asia for lifquefied-gas cargoes toughening, extra volumes from Russia this winter could offer some relief. While state-run gas giant Gazprom PJSC has been fulfilling all of its long-term supply contracts, it has been delivering less than customers in Europe would have wanted, leaving their gas inventories very depleted.

Putin said European customers made a mistake by relying on supplies from the short-term market to fill their gas storage facilities, instead of securing long-term contracts. Reserves supplies of energy are even more important as the proportion of weather-dependent wind and solar power increases, he said.

“The European gas market does not look to be well balanced and predictable,” Putin said in a speech at the conference. In Russia’s domestic market “such problems are impossible to imagine.”

While Gazprom’s production last month was at highest in more than a decade for this time of year, its exports to key foreign markets were lowest since at least September 2016, based on historic data and calculations compiled by Bloomberg and Interfax. The producer said it was overwhelmed by domestic demand, in large part due to a massive storage-injection campaign at home and cold September weather in several regions.

“Russia fully fulfills its contractual obligations to our partners, including in Europe, and ensures guaranteed, uninterrupted gas supplies in this direction,” Putin said. New pipeline projects including the controversial Nord Stream 2 gas conduit will “ensure the stability and predictability of gas supplies in the volumes needed by European countries for years to come.”

The price instability in recent weeks, in which gas prices jumped 60% over a two-day period, aren’t in the interests of anyone, even countries that are major energy producers, Putin said.

“A sharp, multiple increase in energy prices puts enterprises, the economy, and utilities into a situation of radically increasing costs, forcing them to reduce energy consumption,” he said. “Which means that high price conditions can eventually turn into negative consequences for everyone, including producers.”