International Energy Agency (IEA) Executive Director Fatih Birol has warned the European Union (EU) to be prepared for the likelihood of a total shutdown of Russian gas exports this coming winter.
"Europe (sic) should be ready in case Russian gas is completely cut off. The nearer we are coming to winter, the more we understand Russia's intentions," Birol stated. He called on the bloc's members to broaden the span of measures in preparation for this situation.
According to Birol, the decision of Gazprom to cut 60 percent of gas supplies flowing through the Nord Stream pipeline was "geared toward avoiding Europe filling storage and increasing Russia's leverage in the winter months." The Russian natural gas company meanwhile emphasized the cuts are purely technical in nature. (Related: Russia's Gazprom has cut natural gas flows to Germany by 60% – Western Europe is about to get the "green energy" nightmare it always wanted.)
The IEA has nevertheless blaming Russia of manipulating gas prices since last year, when the cost of gas in Europe peaked to all-time highs.
Birol commented that emergency measures taken by European countries this week, such as firing up old coal-fired power stations, were justified by the scale of the crisis despite concerns about rising carbon emissions. He added that the return to fossil fuels will be "temporary" in order to help conserve gas supplies for the forthcoming heating season.
"I believe there will be more and deeper demand measures [taken by governments in Europe] as winter approaches," Birol stated. The IEA head also brought up the probability of gas being rationed.
Germany, Austria, Italy and the Netherlands declared their plans to step up use of coal for power generation, while Sweden and Denmark announced they would also begin emergency measures to control the use of natural gas.
Earlier this week, Russia declared that it is cutting off gas supplies to five EU countries including Germany – which is the largest power importer.
Aside from Germany, Russia has already halted gas transfers to Poland, Bulgaria, Denmark, Finland, France and the Netherlands. Italy, Austria, the Czech Republic and Slovakia are also suffering from critical supply cuts. Of these, Germany and Italy were hit enormously due to their maximum dependence on Russian gas supplies.
The EU has sanctioned Russian oil and coal, but has stayed away from banning gas imports, attributable in part to its excessive dependence on supplies from Moscow.
Russia redirecting energy exports to BRICS countries
With Western countries severing ties with Russian trade and oil, Russia is said to be in the process of redirecting its energy exports toward nations from the BRICS group of emerging economies. The group is made up of Brazil, Russia, India, China and South Africa.
Russia is trying to forge closer ties with Asia in order to overcome the West's sanctions and replace the markets it lost in the dispute with the EU and the United States.
In a video address to BRICS Business Forum participants, President Vladimir Putin said Russia was talking about expanding the presence of Chinese cars in the Russian market along with the opening of Indian supermarket chains.
"In its turn, Russia's presence in the BRICS countries is growing. There has been a noticeable increase in exports of Russian oil to China and India," Putin stated.
Based on data from the Chinese General Administration of Customs, China's crude oil imports from Russia rose to 55 percent from a year earlier to a record level in May, dislodging Saudi Arabia as China's top supplier, as refiners cashed-in on discounted supplies.
Putin added that Russia was developing alternative systems for international financial settlements jointly with its BRICS partners.
"The Russian Financial Messaging System is open for connection with the banks of the BRICS countries. The Russian MIR payment system is expanding its presence. We are exploring the possibility of creating an international reserve currency based on the basket of BRICS currencies," he said.
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