11.10.2022 Author: Vladimir Danilov

Qatari and US gas won’t save Europe

Experts estimate that in order to avoid a catastrophic fall in GDP and the risk of a prolonged economic depression, the total public spending by European countries to mitigate the energy collapse unleashed by Washington will have to exceed €1 trillion!  A crisis of this magnitude would result in more bankruptcies and a domino effect in the finance sector, the scaling back of investment programs by businesses and a drop in consumer demand.  The main negative effect will be that a number of the most energy-intensive industries will become uncompetitive due to gas shortages and rising energy costs. Depending on what scenario will unfold, such industries would be forced to reduce production by up to 60% compared to 2021. In turn, the shutdown would result in job cuts that could affect upwards of 1.5 million people.

Under these circumstances, objective No. 1 for Europe is to make its way out of the energy crisis as quickly as possible along with finding gas suppliers to the EU market that are not affected by the anti-Russian sanctions imposed by the Europeans themselves.

Under pressure from Washington, Europe has ditched cheap and guaranteed pipeline gas supplied via Nord Streams 1 and 2. It even acquiesced to the terrorist attack by the US and its accomplices to undermine the two pipelines in the Baltic Sea. Under these circumstances, the EU has been forced to turn its attention to global LNG suppliers in the hope of improving its disastrous energy supply situation by increasing cooperation with them.

Qatar is famously the world’s leading LNG market now, accounting for 26.5% of all shipments. Australia is in second place with 26%, while the US (14.7%) and Russia (10%) are in third and fourth place, respectively.

However, the US, despite its pompous declaration when initiating the gas war with Russia that it would provide Europe with gas, after the Europeans did expel Russia from their market, has already declared that it in fact cannot provide the EU with gas. US shale investors have admitted that the amount of production they have so far is all they can hope for. Therefore, as The Financial Times reported, US shale oil and gas producers have already warned that they will not be able to increase production to help Europe deal with the energy crisis this winter.

As for Qatar, this small state in the Middle East prefers to trade gas with Asia rather than with Europe for a number of reasons. First, because there is a smaller shipment distance. And second, the Qatari leadership is highly sensitive to political demands from the EU regarding energy exporters. In addition, it is also important that China, the main consumer of Qatari gas, pays a premium for every 1,000 cubic meters of LNG.

Against this background, as well as the imposition of sanctions against Russia and a significant reduction in Russian fuel supplies, the cost of gas in Europe continues to rise at a galloping rate. To do something about the rise, the EU has made the utopian decision of reducing gas consumption by 15% from August 1, 2022 to the end of March 2023, even though many Europeans refuse to do so. In addition, the European Commission head Ursula von der Leyen, who is far removed, among other things, from the economic laws in force in the world, has announced that the EU will consider introducing a ceiling price for imported Russian gas amid the energy crisis. However, as might be expected, so far the EU member states have not been able to agree on this measure, which runs counter to any supplier of goods, and indeed to WTO rules.

Under these circumstances, European leaders doubled down on their attempts to, at least on the individual country level, reach an agreement with Qatar on additional gas supplies. For this reason, a number of European politicians of various ranks have already paid repeated visits to Qatar over the past six months.

The US has become involved in persuading Qatar to supply more gas to Europe, including at the expense of its commitments to provide gas to Asia. According to “Washington’s strategists,” it is not difficult for the US to put pressure on Qatar, considering that the largest US military base in the entire Middle East is stationed in that country. This means there is no need to smuggle in, similar to the terrorist attacks against North Streams 1 and 2, appropriate “saboteurs,” explosives, organize the operation, etc. Furthermore, it was with the aim of fully tying Qatar to the US that, during the visit of the Emir of Qatar Tamim bin Hamad Al Thani to the White House in early February this year, US President Joe Biden called Qatar a “major non-NATO ally” and the Emir a “good friend and a reliable and capable partner.” In addition, the US leader promised that Qatar would soon be assigned a “major non-NATO ally” status.

Right now Qatar sells about 5-10 million tons of LNG to Europe. Over the next 5 to 10 years, as Saad al-Kaabi, Qatari Minister of Energy, promised at the Energy intelligence forum conference in London, 12-15 million tons of Qatari natural gas will flow steadily into Europe if the situation remains as it is and if European countries continue to struggle with other sources of energy. For its part, however, Qatar is demanding that the EU sign a long-term contract for LNG supplies, which Doha was encouraged to do by a recent 15-year agreement Germany signed on LNG supplies from the US. Doha is also being persuaded by Europe’s plans to find an alternative to gas from Russia, in which Qatar, with its plans to invest tens of billions of dollars in boosting production over the next five years, could be a key part of the solution. At the same time, Qatar imposes rather stringent conditions, giving buyers little scope to divert supplies, unlike contracts with the US. However, EU leaders have been demanding shorter contracts, demagogically explaining their position by the desire to reduce pollution, which has already brought negotiations on import deadlines to a standstill since March. And as for the EU’s “drive to reduce pollution,” this demagogy by European leaders is nothing short of hilarious, given that more and more EU countries are actively switching to coal.

In a bid to reach a gas deal with Europe, the Emir of Qatar, Sheikh Tamim bin Hamad Al Thani, came to the Czech Republic on October 5 at an official invitation from President Miloš Zeman. This meeting with the Emir of Qatar was important for the Czech and European authorities at large, as the EU hoped that, if the negotiations turned out to be successful, they could establish alternative routes for gas supplies amid the energy crisis. Alternative to Russia, that is. In this regard, the Qatari leader was also scheduled to speak at an informal meeting with EU member state leaders on October 7, and the visit itself was to last several days. However, the meeting turned into a major scandal: on October 5 the sheikh only had time to meet with Miloš Zeman immediately after his arrival in the country and Prime Minister Petr Fialla, before his plane left Prague. As Czech diplomatic sources explained, “the Qatari side has put forward demands that the Czech side cannot meet.”

To further clarify the situation, it should be recalled that Qatar’s geographical location gives it leeway in terms of gas supply channels. Today, up to 68% of Qatar’s LNG production is destined for Asia and 27% for Europe. Europe consumes about 450 billion cubic meters of gas a year, and Russia used to supply about half that volume. Therefore, the US proposal of 15 billion cubic meters of LNG (at higher prices than pipeline Russian gas) as an alternative to Russian gas, made back when starting the gas war in the European market, can only be regarded as a mockery and as a clear non-competitive struggle for the European gas market. Thus, it was already back then clear to everyone, except for some EU leaders like Ursula von der Leyen, Charles Michel and Josep Borrell who are explicitly subsidized by the US, that the US was firmly putting the EU on the line by forcing it to give up Russian gas altogether.

It is also no secret that Russia has been supplying LNG by tankers to the very Klaipeda, Lithuania, which claims it is receiving Qatari gas. In reality, however, Russia and Qatar have a very simple agreement – Russia supplies LNG from Yamal to Lithuania and it is considered Qatari, while Qatar supplies its LNG to China and it is considered Russian. The scheme benefits Qatar because it saves on transport costs and, in these circumstances, Doha will not abandon it for the “noble idea” of saving Europe.

Furthermore, it should not be forgotten that the average volume of standard gas carriers used to transport liquefied gas over long distances is 145,000 cubic meters. From this volume of LNG, 90 million cubic meters of gas are produced after regasification. To replace at least those 55 billion cubic meters of gas lost by Germany after the blockage of Nord Stream 2, 611 voyages are needed, each voyage lasting up to 14 days. However, one gas carrier can only make one voyage per month, and the transport itself costs several hundred thousand dollars, which includes fuel, crew salaries and the ship’s rent.

The US does not have that many specialized tankers in principle to at least compensate the EU for Nord Stream 2.  Therefore, the people of Europe need to seriously investigate this shady deal by the US to initiate an energy crisis in Europe, namely who was the executor of these blatantly anti-European plans of Washington and how much personal profit they made from the poverty and misery of ordinary Europeans.

Vladimir Danilov, political observer, exclusively for the online magazine “New Eastern Outlook.