Gas in Europe has tripled in price due to anti-Russian sanctions: why the victims

The countries of the continent are destroying their own economy for the sake of geopolitical ambitions

Europe has calculated the initial losses from the destruction of energy cooperation with Russia. In 2022, the Old World paid for the export of natural gas more than three times as much as a year earlier. Anti-Russian sanctions have forced the Europeans to increase the supply of fuel from other producing powers, putting the costs on ordinary consumers. The damage from such a decision will have to be shared by both ordinary people and entrepreneurs. According to experts interviewed by MK, Western industrial holdings, due to higher generation costs, will reduce the production of finished goods and begin a global search for new stable oil and gas exporters, while the townsfolk will have to feel every kilowatt spent on their wallets.

The geography of the countries in which the EU members purchased natural gas last year has expanded significantly. Instead of ten states that provided the consumers of the continent with fuel, and, accordingly, with electricity, in 2022 EU members had to buy gas from almost three dozen states, spending at least 208 billion euros on the purchase of hydrocarbons. Last year, Europe had to allocate only 62.5 billion euros for similar purposes. Now the price for “Blue Fuel” in the EU countries is about $470-550 per thousand cubic meters. Meanwhile, as European Commissioner for Energy Kadri Simson said, the coming year for European countries will be difficult without Russian gas supplies and proposed to reduce energy consumption by another 15%.

Fedor SIDOROV, private investor:

“The exponentially increased energy costs of the EU countries have already led to a slowdown in the development of the global financial system. The population, faced with an increase in tariffs (by an average of 3-5 times), saves, which brings down consumer demand. As a result, the Eurozone economy is losing its most important revenue items, as companies are forced to reduce output when domestic demand falls. Business has also felt the impact of high commodity prices. Across Europe, the production of a wide variety of products has been reduced: dozens of enterprises, including the largest, have completely stopped. Some states have had to nationalize energy companies (in France and Germany), and inflation in the EU rose to a record level of more than 10% last year. In some countries (Lithuania, Latvia and Estonia), inflation has crossed the threshold of 20%. The European Central Bank now has to absorb the consequences of these events by raising interest rates, which further reduces demand and slows down the economy, as the cost of loans is growing. European officials admit that the era of low energy prices (provided in large part by Russian gas and oil supplies) is over. In the future, the EU countries expect only stable high prices, which will be a strong factor for reducing GDP for at least the next two years. Meanwhile, Europe cannot save much on energy resources – liquefied fuel coming from the USA and other producers is more expensive than pipeline gas from Russia. The commissioning and use of existing European nuclear power plants is a matter of a long time and billions of dollars, and “green technologies”, the use of which in Europe is growing every year, do not always give an economic effect.”

Dmitry ALEKSANDROV, Head of Analytical Research Department, IVA Partners Investment Company:

“The Europeans have not calculated all the losses they will have to face. Energy-intensive and low-margin enterprises, such as the production of nitrogen fertilizers and large-capacity chemical plants, will be under attack due to the increase in hydrocarbon costs. Energy companies will feel the damage, as will the financial stability of many other industries that government energy subsidies help fight inflation.

Savings on purchases require increasing the number of sources of supply and reducing price volatility, but cutting off Russian pipeline gas makes this a difficult task. At the same time, now the level of reserves in Europe is high, the cost of hydrocarbons is declining, and the threat of a continental recession may help avoid the price surge that happened in the fall of 2021 (gas prices reached $3,000 per thousand cubic meters). The Europeans will survive this year, but then everything will be much more difficult and expensive.”