Vladimir Putin's 'gas blackmail' is failing as an LNG revolution allows Europe to end its dependence on Russia, says Yale professor

Vladimir Putin smiles.
Russian President Vladimir Putin.Photo by Sasha Mordovets/Getty Images
  • Oops!
    Something went wrong.
    Please try again later.
  • Russian efforts to upend the European gas market are on the brink of backfiring, according to Yale's Jeffrey Sonnenfeld.

  • He said Monday that the relationship between Russia and European buyers is shifting in the EU's favor.

  • "Gas is becoming a buyers market," he wrote.

Russia's plan to wreak havoc on the European gas flows could sharply backfire as the market shifts in the European Union's favor, according to Yale professor Jeffrey Sonnenfeld.

Sonnenfeld wrote in a Financial Times column Monday that the relationship between Russia and Europe has changed, and Europe no longer depends on the Kremlin's energy flows. However, he says, Moscow still depends on European buyers.

"Much attention has been focused on the demand side of the market equation: the reduction or destruction of demand, rationing and switching away from natural gas," Sonnenfeld said. "Basic economic reasoning, however, means we should not forget the supply side."

Sonnenfeld added that upon further analysis, Europe is actually fully capable of replacing Russian supply "without any need for demand destruction or even substitution away from gas." Europe is already purchasing enough gas and liquefied natural gas from alternative sources to make up for the loss of Russian flows.

He estimated that the EU now sources just 9% of its gas from Russia, down from 46% before the war, as pipeline-delivered supplies from Norway and Algeria as well as LNG from the US and elsewhere have helped offset cuts from Moscow.

"It is easy to overlook this revolution because it is still very new. But a review of every large LNG development project, liquefaction terminal and production field shows that this year alone, more than 100bn cubic metres of additional supply is expected to be brought online. This is a 20% increase in total LNG supply," Sonnenfeld said.

And as demand for LNG is declining in other parts of the world, especially in China, the additional supplies should fully replace the gas Europe consumed from Russian pipelines, he added.

However, separate reports have shown that Europe has outbid less wealthy countries in Asia, such as Pakistan, for LNG shipments, leaving them with shortages ahead of winter.

And some analysts have warned that next winter will be more difficult for Europe than the upcoming winter, which is still benefiting from a trickle of Russian gas that will likely be completely cut off by next year.

Still, Sonnenfeld noted that while gas prices remain high, the volumes that Europe has been able to secure on global markets have dispelled fears of a supply crunch and will deprive President Vladimir Putin of $100 billion a year in lost gas revenue.

"Having undermined his country's reputation as a reliable energy supplier, which the Soviet Union maintained even at the height of the cold war, Putin has very little existing export capacity and faces difficulties in building more given icy conditions and the challenges of Arctic shipping. The single pipeline connecting Russia to China carries 10% of the capacity of Russia's European pipeline network, and China is not rushing to build any new ones. So the only losers from this gas blackmail are Putin and his enablers," he concluded.

Read the original article on Business Insider