Russia needs the money from the sale of gas to Europe too much to seriously consider cutting off supplies in response to the crisis in the Ukraine, according to the chief executive of the world's second largest utility GDF Suez, as reported by the Financial Times.
Gerard Mestrallet said that more than ever Russia needs the $170bn a year it gets from the sale of hydrocarbons, making up 70 per cent of its exports, which should ensure no supply disruptions in western Europe this winter. "Because of the capital outflow from Russia since the beginning of the crisis, the sale of hydrocarbons is so important now more than ever, absolutely key . . . We need Russian gas and Russia needs the cash from the gas," he said. "We consider that there could be some difficulties between Russia and Ukraine, but question of supply by Russia of western Europe, so far, is not really in question. It is in the interest of Russia to sell its gas."
The above comments come amid fears of an escalating 'gas war' erupting this winter over Ukraine, which could lead to a spike in the price of gas. A third of European gas comes from Russia and half of that supply comes through Ukraine. The last time Russia cut supplies to its neighbour five years ago, it caused serious disruptions as Ukraine drew on gas destined for customers in Europe, and Russia responded by cutting off all supplies, sending prices up in a cold winter.
Mr Mestrallet added that Europe was also in a stronger position now to deal with any disruptions because of new infrastructure such as the Nord Stream pipe, which runs under the Baltic sea to Germany, and the high level of gas in storage. He further noted that GDF Suez was preparing for any potential disruption by activating storage facilities across Europe, but that for France at least Russia represented only about 15 per cent of supply anyway. "It is manageable," he said. Mr Mestrallet, who is part of the Magritte Group of utilities demanding reform of the European energy market, also said that he was optimistic about a "significant step" at the energy summit at the end of October.
The EU is set to agree a target for reducing greenhouse gases by 2030, but is facing opposition from Poland, which derives about 85 per cent of its energy from coal and is reluctant to switch to cleaner gas, which is largely supplied by Russia. In this respect, he observed that his key goal at a European policy level, before his mandate at GDF Suez runs out in 2016, was restoring the collapsed European emissions trading system, which is a way of meeting greenhouse gas reduction targets. "Carbon pricing is the top of all energy policies. If we have the appropriate carbon price it will be an incentive to invest in renewables, it will be an incentive to replace coal by gas, it will be an incentive to invest in energy efficiency," he said.
