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Diversified natural gas market in Europe and sanctions as counteraction of Russian aggression

The United States are still seriously concerned about Russian attempts to monopolize Western energy industry by means of Nord Stream 2 gas pipeline, since it threatens interests and security of the United States. Senator Ted Cruz (R-Texas) stated that if Akademik Cherskiy pipe laying vessel, which is the property of Gazprom Fleet LLC (a wholly Gazprom€’s subsidiary), started running, American sanctions would be imposed against all industries working on the construction, as well as on their supervisory enterprises. A statement, made by Senator should encourage the Congress to consolidate towards protecting interests of the United States.

“€œWe expect that a lot of countries will continue to buy gas from Russia but now there’€™s no competition. Europe can buy its natural gas wherever it wants, including Russia, but there should be more competition among suppliers.”€ If there is only one supplier on a market, de facto market itself does not exist.

Europe has already came up with a plan to impose sanctions against Russian Gazprom. For instance, Turkey, being aware of the consequences, has already been reducing gas supplies by means of Russian facilities in support of LNG supplies from alternative sources. These kinds of supplies are less expensive and more secure, since the Kremlin’€™s interests in Libya have recently diverged from Ankara’s considerably.

Europe is highly determined not to even talk about the sanctions while curtailing Russian gas supplies, in order not to worsen relations with the Kremlin considering its extraneous foreign policy, but to purchase cheaper LNG and change the supplier. “€œBy a vote of 433-105, the members of the European Parliament called for the project to be canceled because, “It is a political project that poses a threat to European energy security and the efforts to diversify energy supply.”

It is unlikely that Gazprom will avoid sanctions, even though it decides to sell some other Russian vessels participating in the project to protect itself from economic losses. The sanctions’€™ wording deliberately leaves some space for interpretation, its breadth provided by politics and enables to sanction Gazprom, the vessels’€™ owner.

To increase sanctions’€™ efficiency, Gazprom should turn out to be dangerous not only as a transit company but, moreover, as a supplier. Dealing with Gazprom should become risky, and pose a threat to its partners. Before the construction of Nord Stream 2 begins, Nord Stream 2 AG project company should submit a new work plan to the Danish Energy Agency, specifying the fleet involved in work, all the necessary documentation, considering vessels’€™ insurance and pipe laying as well. Just a couple of companies on the globe are qualified to give such a kind of insurance, and the majority of them are under friendly-registered jurisdiction. The potential risks for insurance companies to fall under the US sanctions should exceed the possible profits from Gazprom. At the same time Russian insurance companies do not have the essential status and credibility by the Danish regulator. Consequently, the lack of necessary insurance for both, the vessel and the works in the area of Bornholm island, which is a dangerous one, de jure should lead to negative decision of the Danish regulator.

Iran, which has also fell under American sanctions, is seriously affected by similar problems over the insurance for its tankers, the decline in Iranian oil exports is visible. However, in the case of Iran oil supplies did not decrease to zero due to the countries that were ready to let Iranian tankers, without required insurance, in. At the same time it is unlikely that Denmark will follow Iranian model in the wake of serious environmental risks for Copenhagen.

Gazprom was not even able to guarantee the works at Academik Cherskiy for further required diameter pipe laying. Tenders were rescheduled for several month and the possibility to find an underwriter for this sort of works is quite low. Available sources and insiders from Russia allow to suppose that in case Gazprom fails to find the underwriter it possible will use its two vessels simultaneously. Considering the fact that Fortuna pipelay crane vessel does not have a dynamic positioning system, but is adapted to lay pipes of the essential diameter, and the fact that Academik Cherskiy has a dynamic positioning system, but is not able to lay pipes for NS-2, the vessels can be used together by ship-to-ship method. Thus, it would be possible to use Cherskiy’€™s remote positioning system and Fortuna’€™s pipe laying technique.

Denmark is not enthusiastic about the acceptance of conditions of such a kind. In accordance with reports, Gazprom initially made an efforts to persuade the DEA to use Fortuna pipe layer together with auxiliary vessels properly equipped. However, amid high risks Danish regulator dismissed the offer. The same respond will probably wait for an identical scheme of simultaneous using Cherskiy and Fortuna.

European environmental organizations stress that amid codfish spawns near Bornholm Island in July-August any work in the area in those days is forbidden. Provided that, it may need no less than 3 months to put the gas pipeline 160 km length at a speed of 1.5-2 km per day, Gazprom will no longer be capable to start further construction -€“ the construction might resume no sooner than in autumn. By that time, BalticPipe gas pipeline construction will have already started, providing gas from Norway to Poland. Pipes for BalticPipe are already being manufactured, laying work might begin as soon as the fall of 2020, just after codfish spawning is finished. The gas pipeline is just 275 kilometers long, Italian Saipem, the contractor highly experienced in the work in the region, is be able to complete the work in 2 months only. The Danish regulator is probably not to allow simultaneous implementation of two projects, because of the safety issues. Probably the preference would be given to BalticPipe regarding political aspects.

Consequently, considering all the obstacles, Gazprom will not be able to complete construction till the beginning of winter. Meanwhile, during the 1st quarter of the current year Gazprom’€™s supplies have already dropped by 19%. First time ever the corporation reported on losses amounting over 4.2 billion dollars.

The problems, keeping escalate, will temper Russian aggressive foreign policy and cut down spending of funds on military campaigns and arms programs. End of Gazprom’s monopoly will increase the stability of energy market in Europe and eliminate Russia’€™s political leverage and corruptive meddling in the European Union.

The source: IGTDS

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