Written by 1:22 pm Europe Economy

Putin facing further economic devastation as graph shows damning European gas trend | World | News

Russia’s invasion of Ukraine sparked an upheaval in Europe’s fossil fuels market. In political tit-for-tats over sanctions imposed by the West, Moscow has been tapering off gas supplies to Europe by shutting down essential pipelines. Almost a year after the conflict began, the EU and UK have come a long way in ridding themselves of Russian oil and gas entirely in what has been a financially devastating blow to Vladimir Putin.

Much has changed in Europe’s energy market since the war in Ukraine began and a raft of sanctions was thrown on the aggressor in 2022.

Historically, the EU had imported around 40 per cent of its gas supplies from Russia. The commodity is essential for economies across the continent – used in everything from heavy industry to the heating of private homes.

Although the Kremlin denies using its gas exports as a retaliatory weapon, the flow to international markets dropped dramatically post-invasion, sending wholesale prices to new heights.

To both reduce the bloc’s energy bill and cut off the revenue stream funding Putin’s war effort, Europe has been weening off Russian gas for almost a year, and by the end of 2022, the European Council claimed less than 15 per cent of the EU’s gas came from Russia.

In recent years, a growing number of pipelines facilitated Europe’s dependency on Russian gas. At the start of the conflict, these could be grouped into three main avenues: Nord Stream under the Baltic Sea, Yamal over land through Belarus, and Urengoi-Pomary-Uzhhorod pipeline via Ukraine.

Since opening over a decade ago, Nord Stream 1 has been the most important, typically supplying 35 per cent of the EU’s demand alone. The majority state-owned energy company Gazprom has the largest stake in the 745-mile pipeline, that runs from the coast near St Petersburg to Germany.

After slashing supplies by 75 per cent in mid-June, the operator shut down the pipeline completely for 10 days in July, citing vital maintenance work. Upon reopening, the flow of gas was soon reduced to a fifth of the usual levels.

In September, Nord Stream 1 and 2 developed leaks within hours of each other as a result of explosions. Who committed the sabotage remains unclear, but Russia blamed the West and closed both pipelines indefinitely.

As a result of a payment dispute with Poland, Gazprom also cut off supply via the Yamal pipeline in May – leaving the transit line via Ukraine the only one in operation.

READ MORE: Russia dealt with trade blow by key ally as Putin plans new attack

According to commodity market aanalystKpler, total EU LNG imports rose by 66 per cent between 2021 and 2022. The US remained the bloc’s largest supplier – responsible for a third of the total alone – and increased its deliveries by 65 per cent.

LNG shipments from Africa also soared almost sevenfold during 2022 – the vast majority coming from Nigeria, Algeria and Egypt.

The UK was far less dependent on Russian gas at the war’s outbreak, and so has been able to impose harsher sanctions faster without the need to find substitute suppliers. In 2021, imports from Russia made up four per cent of gas used in the UK, nine per cent of oil and 27 per cent of coal.

In April, the Government announced plans to phase out Russian fuel imports by the end of 2022. Then, in June, the UK imported no fossil fuel of any type from Russia for the first time since records began, according to the Office for National Statistics (ONS).

Initially, Moscow profited from the elevated price of their gas exports. Gazprom posted a record net profit of £33billion in the first half of 2022, with fossil fuel sales estimated to have contributed £38billion to the Russian federal budget during this time, according to the Centre for Research on Energy and Clean Air (CREA).

The effect of the loss of the European market may have been blunted by India, China and Turkey ramping up fuel imports from Russia, but sanctions have been taking a toll on the country’s economy.

In December, Western allies approved an oil price cap preventing Russia from getting more than $60 (£48) for a barrel of crude oil. A study by the CREA estimates this to be costing Moscow around $175million (£140million) a day.

The Russian economy is highly dependent on its energy sector. Although it has performed far better than analysts had predicted earlier in the year, the IMF suggests GDP fell by 3.4 per cent in 2022. The financial agency this week upwardly revised its 2023 forecast from a 2.3 per cent contraction to growth of 0.3 per cent.

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