Germany’s gas bill shows its close relationship with Russia

April 25, 2018 11:10 amComments Off on Germany’s gas bill shows its close relationship with RussiaViews: 50

Germany gas billGermany has paid less for import of Russian natural gas than most other major buyers, according to the data of the Russian customs agency. Only the UK, which itself produces the large part of the gas it consumes, has lower import costs among.

The German Chancellor Angela Merkel tries to strengthen energy relationship with Russia, opposing the US pressure to punish Vladimir Putin’s intervention in the Western elections. Germany supports projects such as Gazprom’s pipeline Nord Stream 2, against which some other European countries and the United States opposed because it will further strengthen Russia’s influence in the region.

Germany is Europe’s largest gas market and its traders have done a good job by re-negotiating prices with Russia. Although lower prices may reflect strong diplomatic ties, they also show that Gazprom may be flexible if it has to compete in Europe.

Germany receives more than half of its gas from Russia, paying an amount of just over 10 billion USD over the past year. The lower prices in Germany may also be due to the country’s better links with alternative suppliers – especially Norway and the United Kingdom – compared to Italy and Austria.

Gazprom and its largest customer in Germany, Uniper, have refused to comment on the issue.

The relationship between policy and gas prices is not certain. The Merkel government does not unambiguously support Russia, outlining plans to develop a LNG industry and asking Russia to maintain the same supplies to Europe via Ukraine.

Britain has no long-term gas supply agreements with Gazprom. Germany would pay about 1 billion EUR more if its rates had risen at the same pace as those in Italy or France.

Gazprom is trying to charge Uniper more after a few years of price concessions. In February, the company filed an arbitration request to increase prices. It is unclear whether any price changes have been made since 2017 and that the Customs has refused to provide further data.

Russia relies on oil and gas to finance over a third of the state budget and gain experience in mixing its energy policies with broader policy goals. Two years ago, Putin stepped up energy cooperation with western European countries, especially Germany, especially as diplomatic relations worsened because of the conflict in Ukraine.

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