Gazprom Says It's Ready to Send More Gas to Europe Under Cheaper Long-term Contracts

Many European nations' gas reserves plummeted to potentially dangerous lows this year thanks to a combination of environmental factors and shortsighted decisions by policymakers. Some officials and media in the US and Europe have blamed Russia for the supply crunch. Moscow has dismissed these claims.

Gazprom remains ready to send additional gas supplies to Europe under long-term contracts which are cheaper than the out of control spot prices currently plaguing the continent, company spokesman Sergei Kupriyanov has indicated.

"All accusations against Russia and Gazprom that we are supplying too little gas to the European market are absolutely groundless, unacceptable, and untrue, or put more simply - are lies and falsehoods," Kupriyanov said in an interview with Russian television on Saturday.

"All of the problems faced by Western Europe [today] were created by themselves, and there's no need to blame Gazprom for them. It's better to look in the mirror," Kupriyanov suggested.

Spot prices for gas hit an all-time high of more than $2,187 per thousand cubic meters in European trading this week amid fears of shortages before cooling. Some officials and media have blamed Russia for the situation, suggesting that Moscow is holding back reserve capacity, presumably for some economic or geopolitical reasons.

Russian officials have dismissed the claims, accusing European leaders of creating the crisis themselves through their preference for short-term contracts, failure to stock up reserves following a cold winter and spring of 2021, lavish spending on wind and solar energy capacities which proved lacklustre, and fierce competition between Europe and Asia for limited energy supplies.

Kupriyanov says Gazprom supplied more gas in to Germany, Italy, Turkey, Bulgaria, Hungary, Serbia, Denmark, Finland, and Poland in 2021 than in 2020, with deliveries to Germany reaching 50.2 billion cubic meters - 5.3 billion more than last year's deliveries.

"At the same time, a number of our clients, in particular France and Germany, have already selected their annual contract volumes, and are no longer bidding for supplies, with Gazprom booking transport capacities based on existing bids, not vice versa," the spokesman said.

According to Kupriyanov, Germany is presently engaged in the reverse flow of supplies out of its underground storage facilities to Poland and further on to Ukraine in the amount of 3-5 million cubic meters per day, even as the amount of gas in its reserves has been depleted by 47 percent, and winter is only starting. "This isn't the most rational decision," the official suggested.

"The cost of such reverse deliveries is something I don't even want to get into. These prices are significantly higher than the prices for contract volumes supplied by Gazprom," he added.

Ukraine stopped purchasing gas from Gazprom in late 2015, and has relied on "European" supplies of Russian purchased by Slovakia, Germany and other countries and then sold back to Kiev at inflated prices.

Kupriyanov noted that Gazprom fulfilled its annual obligations on the transit of gas supplies through Ukraine's transit infrastruture in mid-December, in accordance with its obligations to Kiev and other partners.

Amid the supply crunch, German regulators continue to hold up the inauguration of Nord Stream 2 - the $10.5 billion, 1,230 km pipeline running from Russia to northeastern Germany along the bottom of the Baltic Sea. The pipeline was completed and made partially ready for operation this in the fall, but has yet to receive German and European regulatory approval, with regulators threatening to stretch out the process until the spring of 2022 or even later.

Commenting on the holdup on Friday, Russian President Vladimir Putin suggested that parties attempting to prevent Nord Stream 2 from coming online were acting in a "foolish" manner, "since the delivery of additional gas supplies to the European market would undoubtedly lower spot prices on the market."

Once fully operational, Nord Stream 2 will have the capacity to transfer up to 55 billion cubic meters of gas per year from Russia to a German hub, from where it can be delivered further west and south.

Officials in Germany's new coalition government have threatened to halt the project in the event of an escalation in Ukraine. Meanwhile, US lawmakers led by Senator Ted Cruz plan to introduce new sanctions against the piece of energy infrastructure. The United States already slapped Nord Stream 2 with two separate rounds of sanctions in 2019 and early 2021 in the hopes of terminating it and getting Europe to purchase America's more expensive liquefied natural gas. However, the Biden administration agreed to lift restrictions against Nord Stream 2's Swiss operator this summer in an effort to improve relations with Berlin, which has typically touted the project as strictly economic in nature.