So here is the the latest on the Three Stooges of Europe, Macron, Scholz, and Draghi, this century’s dimmest light bulbs on the European political scene.
In a move that coincided with the visit to Kyiv, on Friday June 16, Gazprom cut gas supplies flowing through the Nord Stream 1 pipeline to Germany by 40%.
There is a back story to that which didn’t get as much traction and that is, the action taken by Gasprom was due to Canada playing a political game.
Evidently Canada is the only country that can do the needed repair to the broken compressor. The parts were send to Canada to be fixed, Canada received the parts, and then refused to return them due to the sanction!
Don’t ask me why Canada is the only country who can fix the darn compressor, but if I had to guess, it would be because Canada is biggest producer of hot air.
It must also be noted that the whole reason Nord Stream 2 was constructed is because Nord Stream 1 was old and were having issues and everyone and their mother knew that it was a matter of time before Nord Stream 1 would start breaking down.
The cut would have been prevented, had it not been for cleverness of Olaf Scholz (read extreme sarcasm) who stopped short of certifying the “ready to go” Nord Stream 2, because he felt it was incumbent on him to respond to US command “come, sit, stay” and be a good lap dog he is.
Almost simultaneously, Gazprom cut gas deliveries to Italy by 15%, without explanation. Understandably there is indeed no expiation needed for Italy! In the great scheme of European politics does Italy even play a role anymore? In fact I had to look up Mario Draghi to be reminded that he is prime minister of Italy
The last but not least stooge was Macron with over 50% cut but Immanuel doesn’t care as long as he can have a mouth to mouth kiss from Zelensky, a refreshing substitute from bedding his own grandma I suppose.
The overall level of European gas storage is 52% according to GRTgaz. Germany’s gas storage is about 55%, Italy’s is at 52%, and French storage is at 56%, while other countries like Poland say their storage is 95%. The cuts pushed gas future contract prices to over €140/MWh on Friday 6/16/22 at the Dutch exchange.
German and Italian leaders are shocked by the action. And frankly I’m shocked by their shocking. Italian Prime Minister Mario Draghi told journalists that although there is no emergency currently, the reduced supplies “make the build-up of reserves more difficult.” Remember, that filling reserves was an indispensable condition for the EU to implement the threatened gas embargo against Russia next winter.
Italian economist Michele Geraci’s team has calculated that a total Russian gas embargo to Italy would cost a 7% drop in GDP, in addition to the existing negative forecast. I am not an economist, but the sound of Negative forecast in GDP is funny as hell!
Now, if Russia further reduces supplies, Germany and Italy will suffer a severe blow and will be forced to ration gas for industry and households. However, Russia’s gas exports to Europe account for only 2% of its GDP, which Moscow could absorb with minor damage.
There is no way these countries can substitute for those imports in the short term. Even the bit of LNG promised by U.S. Joe Biden won’t come in time. After the explosion that destroyed the Freeport, Texas, LNG hub from which tankers go to Europe, the company has communicated that the hub won’t be operative until late this year. For someone like me who knows how slow repairs happen on the government level in the US, the notion of “late next year” really translates to 2025 conservatively speaking. So the moral of the story is, it would be a cold winter in Germany, France and Italy.