by Jorge Vilches for the Saker blog
Europe today does not have – or possibly never had – an effective vision of the no-nonsense existential strategy it required to subsist in peace. Furthermore, as if not aware of the coming debacle, EU leaders firmly insist on their failed policies. Now, former Chancellor Gerhard Schroeder proposes to solve the EU’s self-inflicted ´gas crisis´ by launching the Nord Stream 2 (NS2) gas pipeline… although German authorities have repeatedly rejected the idea.
Today the EU is governed by childish impulses necessarily leading to confusion and self-harm. First the EU imposes highly crippling sanctions on its Russian partner and then demands from her full natural gas delivery — even under the current most special situation — while flagrantly violating well-known contract clauses. Accordingly, it is obvious that the assumed European ´energy crisis´ does not really exist as such, be it for natural gas, oil, distillates, coal, uranium rods… or whatever others for that matter. Because if a genuine “energy crisis” truly existed, Europe would not have full access to tangible energy from Russia, which is not the case. Actually, Europe has an enviable, excellent access to high quality, decades-proven, swift, trouble-free, close-by, door-to-door delivery of truly cheap energy from fully-vetted Russian vendors willing and able to reliably deliver the goods as they always have since decades yonder.
But besides being immature, the EU can also be highly creative. For instance, by playing games with sacrosanct contractual requirements for the famous peripatetic Siemens NS1 turbine # 073… now stranded at Mülheim an der Ruhr after a yet unfinished maintenance episode at very distant Siemens Canada facilities of all places. Accordingly, Russia´s Gazprom has now officially rejected to accept delivery of turbine # 073 on the basis that
“The sanctions regimes of Canada, the EU, the UK and a mismatch of the current situation with the existing contractual obligations by the Siemens side make delivery of the 073 engine to the [ Russian ] Portovaya compressor station impossible”. Gazprom claims that essential documents have not been presented stating that turbine 073 is not under sanctions. “Words are not enough”.
Furthermore, the Minister of Natural Resources of Canada Jonathan Wilkinson declared that “Canada grants a time-limited and revocable permit for Siemens Canada to allow the return of repaired Nordstream 1 turbines to Germany…” So, no direct return to Russia — which is a clear breach of contract — and also under time-limited and revocable conditions which is an additional contract violation simply because turbine # 073 is still not sanctions-free and thus uninsurable. Spokesman Dmitry Peskov made clear that the turbine had been sent to Germany without Russia’s consent and that in the current situation Moscow should now have to make sure that the turbine “cannot be stopped remotely”… Sabotage cannot be excluded while Germany is actively sending weapons to Ukraine to kill Russians.
what happened ?
EU sanctions have shut down several Russian pipelines thus completely tying down Gazprom´s hands. Ukraine and Poland effectively closed off the Yamal-Europe pipeline. Ukraine did it overtly for strictly political reasons while Poland by refusing to pay under the new gas-for-Roubles scheme. Also, the NS1 pipeline is still suffering the Siemens-Canada tumultuous service problems. Besides, Gazprom is unable to fully use another pipeline route as Ukraine has been rejecting its transit applications. In sum, Europe has pro-actively shut itself off from Russian gas. Go figure…
et tu Siemens ?
Siemens Energy is the NS1 turbine manufacturer squarely and contractually responsible for the regular maintenance and proper functioning of all NS1 turbines, property of Russia. Siemens has now officially declared what Gazprom has been saying all along, namely that only one of five NS1 turbines is truly operational and able to deliver gas. Of course, this means that Europe is able to receive only 20% of Russia´s badly-needed natural gas as the condition of the four other remaining NS1 turbines is still undefined. According to former German Chancellor Gerhard Schroeder, the reduction in the NS1 flow rate capacity is entirely Siemens’ fault, not Gazprom´s. Sanctions obviously still apply to turbine # 073 and surely to any other Russian-related piece of equipment or produce or program or whatever Russian.
et tu Gazprom ?
Vitaly Markelov, deputy head of Gazprom, said that Siemens has not fulfilled its obligations to adequately maintain NS1 engine and thusly several pieces of equipment are currently idle. Besides, Gazprom claims it has not received from Siemens the required, well-known, complete package of documents allowing transportation, maintenance service and repairs of Russian-owned equipment. The EU keeps playing lots of childish games while winter gets ever closer. If Gazprom were to accept the turbine it would be liable for illegally breaking the EU sanctions regime plus other unfavorable complications. Lots of tricky lawfare involved while the EU can’t stop digging an ever deeper hole for itself. What´s bloody wrong with Europeans ? Why do they insist in choking down on their own vomit ? EU sanctions were rolled back regarding insurance on freight vessels with Russian oil, right ? So go for it you ignorant fools, now.
Gazprom says: “The current anti-Russian sanctions are hindering the successful resolution of the issue of the transportation and repair of Siemens gas turbine engines for the Portovaya compressor station, which supplies gas to European consumers through the Nord Stream pipeline.”
the NS2 “solution”
In the whole history of worldwide warfare, no help was ever made readily available by any enemy. Let alone would such help ever include the life-blood of Europe´s economy, including vital products and energy. So Russia right now is not Europe´s “enemy”. Today European industry and households are simply undergoing a fake ´energy crisis´ (not) of their own making by decisions made by un-elected EU politicians who do not represent Europe´s best interests. Now, former German Chancellor Gerhard Schroeder insists in a Stern Magazine interview the NS2 pipeline with Russian-made turbines would immediately solve Europe´s — possibly terminal — ´energy crisis´ come winter 2022 – 2023.
three NS2 problems
But there are three major “problems” to be solved. Number one problem is the absurdly required US political approval of the idea as broadly explained below. Problem number two is time is up as the NS2 certification and commissioning process would have to start right now — meaning yesterday – in order to possibly make it soon enough as neither problem #1 or #2 are simple nor quick to solve. Why so ? Well, one reason the dependency on US authorization of anything meaningful for Europe which is now clearly exposed for all to see. This also includes among other things any European trade and investment decisions with Russia. Furthermore, due to serious and most valid technical reasons, several weeks are required before any natural gas can flow from Russia to Germany through the NS2. Otherwise, the risks of serious accidents and/or malfunctioning could mean the sudden end to any possible successful solution of the problem at hand. People at large – and even top ranking specialized politicians – many times think that oil & gas feedstock flows can be turned on and off with the flip of a switch (not). Of course, all of the above furthermore requires German cooperation and correct decisions such as not using NS2 terminal facilities for any other purposes than those originally intended with specific design criteria and construction technology in mind. This is of utmost importance because German officials have already announced their idea of ´speeding up´ and supplementing the installation of LNG terminals with available NS2 hub-heads to support non-Russian LNG gas imports.
And problem number three is that at this very late stage of the game Gazprom could only deliver 25% of its nominal design capacity. In May, Russia´s President Putin specifically advised German Chancellor Scholz that Gazprom had contractually reserved the NS2 delivery capacity which needed to be effectively purchased as it could not remain suspended in mid-air indefinitely. Thus, President Putin then also warned Chancellor Scholz that Russia was forced to soon redirect half of the NS2 volume for domestic consumption and processing. Therefore, even if Gazprom were to be duly authorized to launch NS2 tomorrow morning, it would pump only 50% of its original nominal design capacity. And given that we are already more than halfway through 2022, that would be just be 20-25%…or less.
The US does not leave Europe free to make rational decisions, simply because Europe constitutes a heterogeneous group of vassal states still under US military occupation. The NS2 natural gas pipeline runs under the Baltic Sea from Russia to Germany right besides the currently problematic NS1. Its construction was recently completed but the pipeline was denied certification and commissioning by German authorities prior to the crisis in Ukraine. Despite former Chancellor Gerhard Schroeder´s insistence, the German government has repeatedly said that launching NS2 now is absolutely out of the question. It is impossible to make this stuff up…
the EU perfect storm
“Europe is facing a perfect storm: energy prices are up, economic growth is down and winter is coming ” officially stated by Mr. Josep Borrell, the EU’s top diplomat and High Representative for Foreign Affairs and Security Policy.
Add to that the ever-lower Rhine River water levels – almost impassable by barges of any draft — and you get the idea. This ultra-low Rhine level tremendously restricts – and may possibly cut-off altogether – the very badly-needed coal shipments to the now absurdly RE-commissioned coal-fueled power stations. Of course, also this impacts the physical delivery of everything – not just fuels and inputs thereof — with necessarily much higher costs requiring non-available trucking freight. “The risk here is the trade of huge quantities of commodities that would otherwise be used to stave off an economic crisis become logjammed on the Rhine as low water levels make certain parts impassible. Shipment costs for coal are therefore increasing, which in turn inflates the costs of operating coal plants.”
The low water levels are already forcing “irregular operation” at a Uniper 510-megawatt Staudinger-5 coal-fired power plant through the first half of September because fewer and fewer barges have been able to deliver coal as stockpiles dwindle. Rhine water levels below 40 centimeters at Kaub would halt shipments via inland waterways to the power plant, forcing highly expensive and inefficient shipments by land. Many other key industries are seriously affected.
The Rhine River directly affects trade and industrial logistics of several key European countries namely, Austria, Switzerland, Germany, France, and the Netherlands while indirectly affecting many others or, in some cases, all the others. In particular, the über-important German inland transportation system – and therefore its entire supply chains network – depends upon normal levels of Rhine River waters. Because it´s not only a matter of sourcing the right quality, quantity and price of any produce. It is just as important to receive it Just-In-Time at process destinations such as refineries or power plants as explained later. Simultaneously, all European stakeholders are competing with each other tooth and nail struggling to find, contract and retain exactly the same resources in order to solve the same unexpected problems all at once and by the same date.