ECONOMY
Europe Says Goodbye to Gazprom
January 7, 2025
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Mikhail Krutikhin
Oil and gas market expert
Mikhail Krutikhin writes that Ukraine’s closure of the Gazprom pipeline is the penultimate step towards the complete liberation of European countries from Gazprom, a supplier that has turned natural gas into an instrument of political pressure and blackmail.
The original text in Russian was published in The Moscow Times and reprinted here with the author’s permission.
Major existing and proposed Russian natural gas pipelines to Europe in 2009, a stark contrast to the near-total halt of exports today. Source: Wiki Commons
Gazprom is a supplier that has perfidiously broken almost all contracts and agreements it has signed and refuses to pay fines for violating its commercial obligations.
To get involved with such an unreliable partner is to disrespect yourself.
The decision to cut ties with Gazprom did not occur because sanctions were imposed on Russian gas. No one declared a boycott or embargo on the Russian gas export monopoly. The reduction in supplies began around the spring of 2011, on direct orders from Russia’s political leadership, and not due to any market circumstances.
First, Gazprom stopped pumping gas into its underground storage facilities in Europe, signaling to consumers that they might not have enough fuel at their power plants this winter. Then the Russian company stopped trading gas on electronic platforms.
And then, Vladimir Putin suddenly announced that payment for gas would only be accepted in rubles, and some consumers in Europe refused to change the corresponding conditions in their contracts.
After that came the shutdown of export pipelines: first to Finland, and then to Germany via Poland. Gas pumping through Nord Stream 1 was halted under some far-fetched pretext (even before the explosions in the Baltic Sea).
From January–November 2022, Russian gas exports to non-CIS countries decreased by 45%…
Moscow explained their treatment of gas consumers by saying that as a result, “Europeans will freeze to death in their homes,” and gas will cost 5,000 euros per thousand cubic meters. This is what Deputy Chairman of the Russian Security Council Dmitry Medvedev promised in the summer of 2022 (until 2008, he was Chairman of the Board of Directors of Gazprom). Putin himself echoed his sentiment, demonstrating that he intends to punish Europe for imposing sanctions and supporting Ukraine.
It was almost as if it didn’t occur to the Russian president that in addition to Europe’s dependence on Russian gas, Russia is also dependent on the money earned from supplying it.
Interestingly, Putin's decisions that led to the collapse of Russian gas exports and Gazprom's bankruptcy were analyzed and predicted even before the campaign to “freeze” Europe began.
In October 2019, I participated in a conference at The Fletcher School of Tufts University dedicated to developing the concept of “weaponized interdependence” formulated by two American researchers, Henry Farrell and Abraham Newman. They pointed out that not only the dependence of one party on another, but also, oddly enough, the interdependence of the parties on each other can become a tool for achieving political goals.
Roughly speaking, in certain circumstances, there may be one desperate idiot who
does not care about his own losses, as long as he can spite his partner.
Using these discussions as a foundation, a book was published. My chapter, “Russia’s Gazprom: A Case Study in Misused Interdependence,” was entirely devoted to interdependence, or more precisely, to the mutually beneficial ties that the USSR, and then Russia and Europe, had been building for decades, establishing gas supplies for the West in exchange for money, goods, and other objects of economic cooperation.
This interdependence was remarkably durable.
To get involved with such an unreliable partner is to disrespect yourself.
The decision to cut ties with Gazprom did not occur because sanctions were imposed on Russian gas. No one declared a boycott or embargo on the Russian gas export monopoly. The reduction in supplies began around the spring of 2011, on direct orders from Russia’s political leadership, and not due to any market circumstances.
First, Gazprom stopped pumping gas into its underground storage facilities in Europe, signaling to consumers that they might not have enough fuel at their power plants this winter. Then the Russian company stopped trading gas on electronic platforms.
And then, Vladimir Putin suddenly announced that payment for gas would only be accepted in rubles, and some consumers in Europe refused to change the corresponding conditions in their contracts.
After that came the shutdown of export pipelines: first to Finland, and then to Germany via Poland. Gas pumping through Nord Stream 1 was halted under some far-fetched pretext (even before the explosions in the Baltic Sea).
From January–November 2022, Russian gas exports to non-CIS countries decreased by 45%…
Moscow explained their treatment of gas consumers by saying that as a result, “Europeans will freeze to death in their homes,” and gas will cost 5,000 euros per thousand cubic meters. This is what Deputy Chairman of the Russian Security Council Dmitry Medvedev promised in the summer of 2022 (until 2008, he was Chairman of the Board of Directors of Gazprom). Putin himself echoed his sentiment, demonstrating that he intends to punish Europe for imposing sanctions and supporting Ukraine.
It was almost as if it didn’t occur to the Russian president that in addition to Europe’s dependence on Russian gas, Russia is also dependent on the money earned from supplying it.
Interestingly, Putin's decisions that led to the collapse of Russian gas exports and Gazprom's bankruptcy were analyzed and predicted even before the campaign to “freeze” Europe began.
In October 2019, I participated in a conference at The Fletcher School of Tufts University dedicated to developing the concept of “weaponized interdependence” formulated by two American researchers, Henry Farrell and Abraham Newman. They pointed out that not only the dependence of one party on another, but also, oddly enough, the interdependence of the parties on each other can become a tool for achieving political goals.
Roughly speaking, in certain circumstances, there may be one desperate idiot who
does not care about his own losses, as long as he can spite his partner.
Using these discussions as a foundation, a book was published. My chapter, “Russia’s Gazprom: A Case Study in Misused Interdependence,” was entirely devoted to interdependence, or more precisely, to the mutually beneficial ties that the USSR, and then Russia and Europe, had been building for decades, establishing gas supplies for the West in exchange for money, goods, and other objects of economic cooperation.
This interdependence was remarkably durable.
“However, with Vladimir Putin’s rise to power, Moscow began to use gas supplies for political purposes, to put pressure on ‘unfriendly’ states and to encourage potential or actual Kremlin satellites.”
In the same paper, I noted that Europe demonstrated a high degree of resistance and survival in response to these attempts. Russia’s weaponization of interdependence, I wrote in conclusion, accelerated the evolution of the energy sector in Europe, which demonstrated flexibility and resilience and became less dependent on the whims and wills of their unreliable and unpredictable Russian partner.
This was one perspective of the future that, to my deepest regrets, came true entirely. Europe has stood firm, and Russia, with all the blackmail perpetrated by the will of its leader, finds itself in an economic hole.
This was one perspective of the future that, to my deepest regrets, came true entirely. Europe has stood firm, and Russia, with all the blackmail perpetrated by the will of its leader, finds itself in an economic hole.
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