09.11.2021 Author: Yuriy Zinin

Gas Crisis in Europe: an Outlook of the Arab World

GER943233

The current turbulence in the European gas market has attracted the attention of the Arabs closely watching the gas price situation. After all, the Arab oil-producing countries account for 56% of oil reserves and almost 27% of natural gas globally. In 2020, according to local data, they produced 28% of oil and 15% of natural gas on the planet, and the revenues they generate in the process constitute the primary source of their budgets and development.

In its recent statement, the Organization of Arab Petroleum Exporting Countries (OAPEC) voiced the belief that the crisis in Europe is fraught with a threat to the stability of the entire global gas market, especially on the eve of winter. The organization stressed that it was monitoring the unprecedented increase in the gas prices on the continent.

The causes of the crisis are discussed in the media and social networks of the Middle East. Some commenters reference Western media and experts who blame it on Russia’s desire for supremacy in the energy field in the name of its geostrategic and political goals. At the same time, a military vocabulary such as “gas war, aggression, weapons,” etc., is used.

Such speculations muddy the situation for those authors who approach the situation more objectively, viewing it as a manifestation of the market situation. They explain the surge in prices mainly by the fact the European economy has been gradually recovering from the recession caused by the coronavirus pandemic. As a result, several industries and services have been closed, their activities reduced. The incipient recovery has raised the energy bills, as the volumes of production and delivery remained the same. In addition, the demand for gas has increased in Asia as well.

Referring to the discussion of who is to blame for the rise in gas prices in Europe, the authors cite data that reserves of liquefied gas in storage facilities have been the smallest in the last ten years. This rise is due to a 39% reduction in the number of contracts awarded this year compared to a year ago, meaning that gas and energy companies share responsibility for the decline in supply on the market.

There is no evidence that Gazprom decided to cut its supplies via Nord Stream 1. It is not in Russia’s interest to impose sanctions against itself. Especially as Russia needs income from the export of these products. It will increase after Nord Stream 2, the construction of which has been completed, as stated by Al-Quds-Al-Arabi. Meanwhile, European political groups, together with the United States, set on a cold war against Russia and China, are trying to use any weapon to obstruct the launch of Nord Stream 2.

The current crisis in the world market is an artificial crisis caused by the desire to restrict gas supplies from Russia as part of the new Cold War.

By delaying its start-up, Europe is using natural gas as a political weapon against itself. The crisis in the gas sector is oppressing the economies of all states, hitting their indicators, spurring inflation, etc.

According to the Head of the Quorum Centre for Strategic Studies, Tariq Al-Rifai, no country would benefit from the current twists and turns in the gas market, including Russia. Qatar Energy Minister Saad Al-Kaabi said his country is not rejoicing over the rise in gas prices. Instead of it resembling a swing that soars up and down, it is better to see the gas price as reasonably balanced.

At the same time, many Arab experts note Russia’s interest in supplying gas under long-term contracts, which helps stabilize the market.  According to OAPEC data, the European market prefers to rely on short-term deals on the spot market for 80% of its LNG purchases.

The European market has followed this line for more than ten years, exposing consumers to price fluctuations. Arab producers and liquefied gas suppliers are mainly focused on long-term contracts linked to Brent oil prices. They feel that it guarantees stability in the markets and puts a barrier in the way of sharp price fluctuations.

The current crisis has demonstrated that efforts to generate alternative energy to replace natural gas, oil, and coal entirely are not enough to meet the world’s demands, Arab experts agree.  Moreover, the measures of crisis-hit governments to reduce taxes and introduce various benefits for oil and gas producers will only pull away some of the investment needed to develop alternative sources. So betting on these sources in the medium and long term is not justified.

When Europe fears a gas shortage, “Russia is throwing it a lifeline by announcing that Nord Stream 2 will soon become operational. It seems that the Russian gas pipeline will be the only hope in solving the gas crisis strangling the Old World,” notes the Emirati portal Ain Al-Ahbariyya.

Yuri Zinin, a senior researcher at the Center for Middle Eastern Studies, Institute of International Studies of the Moscow State Institute for International Relations, exclusively for the online magazine “New Eastern Outlook”.


×
Please select digest to download:
×