If there were any lingering doubts as to whether something akin to a worst-case scenario is now the base case in Europe’s ongoing energy crisis, they were put to bed Tuesday.
“It’s hard to imagine these are coincidences,” Denmark’s prime minister Mette Frederiksen said, addressing natural gas leaks in Danish waters. The Danish military released footage showing bubbles in the Baltic. The source: The Nord Stream network.
The leaks were discovered by a Norwegian F-16 interceptor response unit, according to Defense Command. “Nord Stream 1 has two leaks northeast of Bornholm and Nord Stream 2 has one leak south of Dueodde,” officials said Tuesday.
Tensions were exacerbated by a dispute between Moscow and Kyiv over fuel transit payments. Naftogaz is pursuing arbitration, and Gazprom isn’t pleased about it. If Russia sanctions Naftogaz, it could jeopardize a portion of remaining gas flows to northwest Europe. Benchmark gas prices jumped 20% (figure below).
“Gas pipeline breaks are extremely rare,” Kristoffer Bötzauw, Director of the Danish Energy Agency remarked, in a press release documenting the evolving drama in the Baltic. “Therefore we see reason to raise the level of preparedness as a result of the incidents we have seen over the past 24 hours.”
Following the onset of Vladimir Putin’s “special military operation” in Ukraine, the Kremlin spent five months curbing flows through the system as part of an effort to slowly suffocate Europe in retaliation for draconian Western sanctions. Late last month, Gazprom announced three days of unscheduled “maintenance” to the Nord Stream 1, a pretext for the complete cessation of flows through the link, which Moscow (implausibly) blamed on an oil leak.
Let me dispense with the obvious: The West didn’t dynamite the Nord Stream. But Putin might’ve. The Swedish National Seismic Network detected a pair of significant underwater explosions on Monday very close to the leaks, registering 1.9 and 2.3 on the Richter scale, respectively. “There’s no doubt that these are blasts or explosions,” Björn Lund, a lecturer in seismology at SNSN told SVT, which, after obtaining the coordinates of the explosions, confirmed that “they’re in the same area where the gas leaks were registered.”
Although SNSN wouldn’t “speculate” on what caused the explosions, a German security official said the evidence suggests “a violent act” or, more to the point, sabotage. German authorities are investigating the leaks as deliberate attacks.
Mateusz Morawiecki, Poland’s prime minister, was unequivocal. “We don’t know the details yet, but we can clearly see it’s an act of sabotage,” he said, speaking (appropriately) at an event inaugurating a new undersea link connecting Poland to Norway through Denmark. Morawiecki went on to suggest the leaks “probably mark a new stage” in the Ukraine conflict.
Putin has stepped up attacks on Ukraine’s critical infrastructure amid setbacks for the Russian military. Last week, Moscow escalated the situation materially, when Putin called a partial mobilization and declared his support for the forced annexation of occupied territory via what Western officials quickly derided as sham referendums.
Following inflammatory remarks from Dmitry Medvedev, US officials warned the Kremlin (again) against deploying nuclear weapons. Medvedev opened the door to such an escalation by claiming Russia would be within its rights to use nuclear arms to defend the newly annexed territory. Medvedev referred to the annexations as “irreversible.”
Now, some worry Putin is set to begin a campaign of sabotage aimed at European infrastructure outside of Ukraine, either through cyberattacks or outright. “Inside the energy industry, policymakers and executives whisper that their concerns about the coming winter aren’t restricted to gas supplies, but also encompass cyberattacks and sabotage against the energy distribution network,” Bloomberg’s Javier Blas wrote Tuesday, in a very good opinion piece. “For months, officials and executives have discussed the risk in private. Now, the nightmare appears to be coming true.”
Plainly, these events mean the Nord Stream is closed for the winter, and maybe forever. Nord Stream (which in this case just means Gazprom) described the damage as “unprecedented” and said “it’s impossible to estimate the timeframe for restoring operations.”
State media in Russia appeared to blame the CIA. RIA Novosti, for example, called the US “an active opponent of Russian gas supplies to Europe.” If Anthony Blinken was aware of a clandestine US intelligence operation, he did a good job of feigning ignorance. “There are initial reports indicating this may be the result of some kind of sabotage,” he mused, repeating the media’s own reporting back to it.
Kremlin propaganda outlets also suggested Ukraine might’ve been involved. Kyiv feared “losing revenues from the transit of Russian gas,” the narrative goes. I’d dryly note that no Russian gas was in transit. Because Putin cut it off.
Occam’s razor applies here. With apologies to The New York Times, which haplessly ventured that “it was not immediately clear who would benefit from ruptures in the pipelines,” it’s absolutely clear who benefits. The fact that the pipelines weren’t operational is irrelevant. These kinds of escalations can drive up energy prices, which in turn puts more upward pressure on sky-high inflation in Europe, further imperiling government finances.
Producer price inflation in Germany was 46% last month. Costs for electricity redistributors rose 278% versus August of 2021. Natural gas distribution prices rose almost 210%. Berlin nationalized Uniper last week. In the UK, Liz Truss is staring at an uncapped liability tied to an energy price cap pledge. The pound and the euro are in free fall.
Again: It’s blatantly obvious who benefits. Putin benefits by pushing the UK and Europe even closer to the precipice of economic oblivion. Beyond that, the implicit threat of physical attacks on infrastructure is terrifying for the populace. Putin’s war machine, you’re reminded, runs on terror tactics. Just ask Aleppo.
On Tuesday, Mykhailo Podolyak, a senior adviser to Volodymyr Zelensky, called the leaks “a terrorist attack planned by Russia.”
Isn’t it the US that benefits? Now Germany doesn’t have the option to capitulate and back off from supporting Ukraine in exchange for cheap Russian gas. Meanwhile US is building LNG terminals and gains market share in Europe.
Hardline Russian contingent a possibility.
There was some mention about the awkwardness of the conscription announcement.
Probably Putin.
@Bay Watch You can’t possibly be serious. You think the CIA swam out into the Baltic, dynamited the Nord Stream under the noses of Denmark, Sweden and Norway, in an effort to dupe Germany into supporting Ukraine for longer than they otherwise might all in a revenue generation scheme for US LNG?
Folks, let me just be as upfront as I can be about this because I think people need a reality check and there are a lot of new readers here over the past two months who might not be apprised of my position: The counter-narrative on Ukraine that you’re exposed to on social media and on various portals, including some finance-focused portals based in the US, is Kremlin sponsored. In some cases directly. Much of the retweets and sharing you see is bot activity aimed at amplifying the message and sowing distrust among the electorate in Western democracies. Through that echo chamber, otherwise sane people are inadvertently roped into Kremlin propaganda.
I’m avowedly against Kremlin counter-narrative or even the appearance of it. I won’t countenance it. There are plenty of web portals that will. This isn’t one of them.
thanks, H.
And lest I should come across as unduly capricious, I’d kindly ask readers to consider that although I do have a lot of “everyday” people reading the site from their personal computers, phones, etc., a sizable portion of my subscriber base is what I’d call “staid” professionals. So, people at the office. At actual desks. Not “on the desk” where that’s some reference to hungover traders staring at terminals. I have to respect the fact that people come here for reliable, fact-based coverage — the sort of coverage you can have on your work computer without worrying about it. I’m not suggesting the comment above was especially egregious (it obviously wasn’t). It’s just that I’m very careful to respect the fact that most people accessing this site at work are just trying to get information. Good information. If that means occasionally missing an actual conspiracy, that’s fine with me. I can always go back and chuckle at how naive I was if it turns out later there was something afoot that I missed. What I can’t do, though, is take it back if I put something out there that’s speculative and untrue. That better-safe-than-sorry approach is a good one. I promise it is. Especially in the 2020s.
And another thanks. Your two responses here are exactly why I subscribe.
Cheers, Heisenberg! Like Biscuit, I also very much appreciate your diligence and accuracy. And I agree with erring on the side of caution you in regard to the many discreet stems and twigs of Russian messaging.
I’ve enjoyed your perspectives and writing for several years. I plan to stick around and make contributions to the conversation when I can.
Bay watch did not say anything similar to “CIA swam out into the Baltic, dynamited the Nord Stream under the noses of Denmark, Sweden and Norway”. Bay watch just points out who will be benefit. If you disagree, you should argue that US did not benefit from this, not making the points which Bay watch did not say.
I’m not going to entertain this any further. The US doesn’t benefit from this. It’s ridiculous. The US doesn’t need to dream up a scheme to secure an incremental LNG revenue stream at some future date when Europe is already willing to buy as much natural gas from producers other than Russia as anybody is willing to sell them. You think Europe is just going to go happily back to Russian gas after all this? The last six months has been a desperate, all-hands-on-deck effort to secure alternative supplies so that they never have to depend on Moscow again. And how else would that happen by the way? “Swim” is obviously not supposed to be taken literally, but somebody had to sabotage it if it was indeed sabotaged. Unless you reckon it was telekinesis. Also, I guess the fact that it happened within the same 24-hour window that Russia (through Gazprom) threatened to sanction Naftogaz is a coincidence? I’m closing the comments on this article for obvious reasons. I don’t have time to police them.
If he can’t have it, he’s going to destroy it.
Perhaps it was the fearsome special forces of the Qataris or Emiratis (this is a joke:)
Hmm. I think this is good news.
I expected the winter to be so hard for Europe and Germany in particular, that there was a real risk of the EU caving to Putin. Germany’s Mittelstand could be hollowed out by energy prices, Europe’s electrical grid may break down, European countries may start barring energy exports to their neighbors, populist parties may pursue an every-country-for-itself policy.
But if Putin has irreversibly cut off Russia’s ability to pipe gas to Europe, in large quantity anyway, then the gains from caving diminish.
Closer to home, I’ve been adding back to energy as the stocks have been hit. Crack spreads are turning up, US storage is low, SPR releases will end (soon), Freeport liquefication trains will restart (4Q, 1Q?), China could ease off on the Covid lockdowns and rely more on its mRNA and nasal vaccines, Saudi may get serious about turning oil prices up, and, as stated, Europe is going to be desperate for energy this winter and possibly next.
IDK, I think I’m with the NYT here. If it was Russia it would have made a lot more sense to go after pipe from Norway to Poland that just inaugurated today. If Putin is still confident of eventual victory he wants the pipelines intact for when Germany and the EU cave in. While prices spiked today I would expect they will return to where they were since there is no real change to the supply picture. That being said, suggestions that it was the US or Ukraine are even more ludicrous.
Just how much provocation is Germany willing to put up with before they start shipping Leopards and other heavier weaponry in useful numbers? Merkel had to be dragged into the lightest of sanctions after Putin shot 300 europeans out of the sky back in 2014. 8 years later, after a complete severing of energy ties, a barbaric invasion/“de-nazification” of a country led by a Jew, and attempts to ensure that Europeans freeze to death over the coming winter, the best Scholz can come up with is more sanctions and some antiquated artillery?
The whole German psyche is broken. 80 years of guilt has ruined it. Which is ironic, since the primary lesson of WW2 is supposed to be that the Holocaust was not a product of some uniquely-German mindset, and insisting that it was gives fascism a free-reign across the rest of the world. Everyone is capable of becoming a willing executioner (Goldhagen’s discredited pop history aside), and the only way out is to stand up to fascists and demagogues at the outset, before the momentum of death becomes too great to stop without another armageddon.
Maybe the shock of a cold winter is just what Germany needs after 80 years of self-flagellation.
H-Man, couldn’t agree more, the Russian (KGB) playbook always reads the same. Freeing Ukraine from Nazi’s, invasion of Georgia to save the people, elections in Ukraine for annexation. Dream up some excuse, put some lipstick on it, walla it is no longer a pig. Why take the blame for cutting off the gas to Germany when you can blame the CIA for blowing up the pipeline? These fantasy tales by the Kremlin are done to assuage the general population of Russia which hasn’t taken kindly to mobilization. I mean the Russian people can count. So the Kremlin press release on mobilization said they has lost 5,000 soldiers in Ukraine, why are you calling up 300,000 soldiers?