The Global Multicentralized Competition System & the Way to achieve EU Energy Autonomy

With the end of the second Russian-Ukrainian war, a new global multicentralized system of increased competition is now emerging on the planet, which will be characterized, among other things, by the intensification of the securitization of the international energy and financial system respectively.

The main aspects of this securitization will be expressed through:

1. The EU operation to disarm Russian gas, although Russia will continue to receive tens of billions of dollars from the take or pay clauses in its long-term contracts, which have been signed by dozens of European companies. In most of those that extend over time and after 2030, the take or pay clause reaches 80%.

2. The intensification of China’s control over the world’s stocks and infrastructure for processing critical energy metals (rare earths) that enable energy transition.

3. The acceleration of Russia’s independence from European hydrocarbon markets, as Russia will turn to Asia and the world liquefied natural gas markets with an emphasis on the LNG markets of Turkey, Pakistan, India, Vietnam and above all the Chinese LNG market. Already in 2021 52% of Russian oil exports and 30% of gas exports were exported outside the European Union.

4. Acceleration by Russia, India and China and other BRIC countries of the de-dollarization of international trade in gold, precious metals and their national currencies, while creating alternative payment systems that will bypass SWIFT by shielding the measure as far as possible their international foreign exchange reserves.

If Russia “weaponized” its gas exports to the EU, the US and the EU are “weaponizing” their influence on the financial markets and international trade and foreign exchange flows to stifle the Russian economy and block its access. to over 300 billion in foreign exchange reserves. This did not go unnoticed by China.

Regardless of what happens to the currency of payment of Russia’s spot contracts to the EU, confidence among Gazprom’s European partners appears to have been shaken.

Between October 2021 and February 2022, Russia deliberately reduced its flows to the EU by 25% -37% compared to the same period last year, refusing to offer additional quantities of gas through auctions in spot markets and to fill the gas depots controlled within the EU.

In the absence of other alternatives, European Member States began pumping gas from their storage facilities, further reducing the liquidity that was only partially offset by the rapid imports of liquefied natural gas over the same period.

As a result, prices soared before the outbreak of the war to levels even ten times those in the US or twice those in the Asian markets. If the mild winters and massive imports of liquefied natural gas, which by two-thirds came from the US via cargo redirection, had not helped, it is likely that the fullness of the EU’s gas storage facilities would be very close to zero at this time. and not at 25%.

Increasing US imports of liquefied natural gas is an important part of the solution in the short term, but it will not be a panacea for a definitive solution. The additional 50 billion cubic meters of gas mentioned in the European Commission’s announcement by 2030 are a wish list at this stage, if they are not committed under long-term contracts of a specific duration and a specific pricing formula based on the US benchmark HenryHub. Buyers will be able to bring substantial alternatives to Russian gas to the EU after 2025/2026, but the question is at what cost?

Solutions to achieving Europe’s energy autonomy

Should Russian gas exports to the European Union be cut off, the EU should immediately return to lignite-fired power generation and the reopening of nuclear power plants, all of which would mean a setback and a delay in the implementation of the green energy transition plan. The biomethane and hydrogen solutions mentioned in the RePowerEU project are very ambitious and very long-term to help solve the immediate energy problems of the coming years.

The solution to the European energy problem goes through:

  1. the imposition of a Pan-European price cap in times of similar crises,
  2. The establishment of a European oligopoly for common markets,
  3. The creation of joint strategic gas reserves,
  4. and the liquidity that an energy RRF or an energy Eurobond would give.
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The Liberal Globe is an independent online magazine that provides carefully selected varieties of stories. Our authoritative insight opinions, analyses, researches are reflected in the sections which are both thematic and geographical. We do not attach ourselves to any political party. Our political agenda is liberal in the classical sense. We continue to advocate bold policies in favour of individual freedoms, even if that means we must oppose the will and the majority view, even if these positions that we express may be unpleasant and unbearable for the majority.

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