Russian General Frost and the unpredictable stupidity of Europe

MOSCOW, 04 Oct 2021, RUSSTRAT Institute.

October 1, 2021 should go down in history: on this day, the price for gas in Europe exceeded $1,000 per 1,000 cubic meters and amounted to $1,199. Judging by the dynamics, this is not the limit. Faster, higher, stronger. Winter is ahead, the Russians have called their General Frost to help again – in revenge for all the Western dirty tricks. Well, what can I say? Ugh, ugh, knock on wood.

It is worth noting that the rise in gas prices means stagflation in Europe and, accordingly, everything that goes with it. The whole gentleman’s set of geopolitical problems. Recently, Sandu in Moldova was hounded by the opposition for the fact that while she is riding through Western summits and participating in all sorts of anti-Russian declarations, her native Moldova cannot withstand the new gas price reality. It is cold, hungry, expensive and bad. It is necessary to subsidise from the budget, but where can the money come from for it? Transnistria right now is the last thing Moldova is worried about.

Gazprom’s contract with Moldova expires on October 1, 2021. It is now known that Russia will democratically supply gas to Moldova at a price of $790 per thousand cubic meters. This is not a new contract, but an extension of the old one until the end of October. Conditions are still September’s. What happens further, negotiations will show.

Gazprom simply “suspended” Moldova. In May 2021, the International Arbitration Court at the Chamber of Commerce and Industry granted Gazprom’s claim to Moldovagaz, where the Moldovan government owns a little more than 30% of the shares, in the amount of $370.5 million for gas delivered in 2017.

In addition, Gazprom reminds that if Moldova considers Transnistria its own, so it must pay $7 billion for the gas supplied over these decades. And here there is also the price increase at times – a year ago Moldova received gas at a price of $148.87 per 1 thousand cubic meters, including transport costs to the border. But today, for $790, it is necessary to thank and understand that this is a short-term privilege.

The basis of the gas price for Moldova in the summer was the prices in Germany in the NCG storage. There, during this period, prices were going down. While in winter (80% of Moldova’s total gas imports), the price of gas was tied not to the price in the EU, but to the price of diesel fuel and fuel oil. Hence such nice prices.

But they were given to the former leadership of Moldova. With the current one, the conversation will be different, and how short it will be would already depend on Sandu. Since the contract will be long-term, the negotiations will be the same. They will be affected by a lot of conditions. Until the parties agree, Moldovagaz will have to survive on spot short trades on the stock exchange. With the current exchange prices for gas, Sandu risks not working as the president of Moldova as long as these negotiations will go on. And the US Embassy will be able to help only with a kind quiet word.

This is very difficult for Moldova, but it is its choice. For who is it easy for now? It is much harder for Europe, where Moldova aspires so much to be. The West will not help Moldova. Unexpectedly, the deep European periphery appeared to be in a better position than the centre. It turns out that there are situations when it is more profitable to be outside of Europe – who would have thought such a thing? 

In Ukraine, it is also funny. It receives Russian gas at a price higher than the European one. While winter is ahead. Nord Stream 2 has been launched, but if the cold will embarrass all the efforts of the Third Energy Package, then there will be need to close eyes to it – along with the phantom pains of Ukraine. If the EU continues this policy, then even Nord Stream 2 will not save them. The products of their economy will become uncompetitive.

In general, the impact of gas prices turned out to be very underestimated from the point of view of geopolitics. Everyone thought that Russia would behave like an evil house manager from a comedy movie. But things had turned out differently. Russia did not shut off the valve. The West itself switched to spot contracts and arranged hara-kiri for itself.

All the projects of the West in relation to Eastern Europe are called into question. It is not clear how to engage in expansion when events fraught with internal political upheavals are taking place in the economy. In Europe, there are already rolling power outages, factories are shutting down, people are freezing in their homes, old people are quietly dying of colds in cold houses, warehouses are overstocked because of the unaffordable cost of manufactured products. What’s next?

I don’t even want to make predictions – anyway something that no one could have foreseen, will happen. Bismarck once said that it is impossible to fight against Russia because it will respond to any ruse with unpredictable stupidity. It seems to be the opposite now. Russia should not fight against Europe because Europe will respond to any Russian ruse with its unpredictable stupidity. Or someone is able to comment differently on what is happening?

Institute for International Political and Economic Strategies – RUSSTRAT

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