Berlin Airlift 2 with Russian Gas Cutoff
Updated: Aug 4
“It’s déjà vu all over again,” said philosopher and Hall of Fame baseball great Yogi Berra which aptly applies to the present-day Russian weaponization of energy with its tactic of reductions and selective cut-offs of natural gas to its European customers.
A similar Russian cut-off of resources occurred almost 80 years ago, post-WW II, during the Cold War when they blocked all roads and rail traffic that threatened to starve West Berlin’s 2 million inhabitants. This blockade necessitated the infamous Berlin airlift that provided essential food & energy to the citizenry and lasted almost a year (June 24, 1948 to May 12, 1949) before Joseph Stalin relented and opened the road and rail links to the besieged city.
Fast forward to 2022. Putin is channeling Joseph Stalin by recreating the greatness and glory of the Soviet Union. This time Putin has a much wider & deeper hostage base in most of Europe, not just West Berlin, to deprive natural gas which is heavily utilized industry-wide including residential heating.
According to World Bank 2022 estimates, Germany has the world’s 4th largest GDP and is Europe’s largest economy. The comparative highest GDPs are indicated in the chart below:
Country GDP in Trillions ($USD)
The Russian Bear’s Energy Chokeholds
The following chart entitled Russia Tightens Squeeze on Gas Flow to Europe provided by Bruegel (a European think-tank on economic issues) and ENTSOG (European Network of Transmission System Operators for Gas) present Russia’s measure of control. By selectively reducing or cutting off gas supplies to the European economies, they are leveraging this control for the purposes of political & economic behavior modification with respect to the easing of sanctions.
The impacts of future Russian gas cut-offs vary from country-to-country contingent on each one’s dependency on Russian gas and present-day utilization of other energy sources. The following chart entitled How a Russian Gas Freeze Would Curtail European GDPs provided by the IMF presents the varying degrees that gas cut-offs would impact European economies:
European countries are reviewing their contingency plans and scrambling to secure non-Russian natural gas to make up most of the shortfall in liquified natural gas (LNG). The following chart entitled LNG in Europe: Ready or Not provided by Gas Infrastructure Europe presents the number of operational and planned LNG import terminals.
According to Gas Infrastructure Europe, in the first half of 2022, the US has been the world’s largest LNG supplier and playing the energy cavalry with 71% exported to the UK and Europe.
The German Dilemma
In an attempt to mitigate a worst-case scenario of total Russian gas cut-off, Germany has set aside $2.55 billion to rent four LNG processing vessels. These vessels take the chilled liquified natural gas from seagoing tankers, warm it back into vapor and move it ashore. To streamline and accelerate their acquisition and operation, the German government has assumed responsibility for their brokering and financing.
LNG is fungible however its supply is limited because of the dearth of LNG vessels and terminals which will force German and other European countries to outbid their Asian counterparts making acquiring essential energy an extraordinarily expensive endeavor.
Natural Gas Producing Powerhouses
The following chart entitled The Largest Producers of Natural Gas provided by Visual Capitalist presents a comprehensive perspective as to the world’s largest natural gas producers. Most importantly, although the US is the world’s largest producer 88% of it is for domestic use while Russia, the second largest producer, provides Germany almost 50% of its natural gas requirements.
Economic Role Reversal | Africa to the Rescue
Filling in the energy gap in supplementing US LNG supplies are LNG shipments from Africa as outlined in the following chart entitled Can Africa Offer an Alternative to Russian Gas provided by OPEC Statistical Bulletin 2021 and Statista.
It’s ironic that Europe is desperate for alternative LNG sources now seek it from Africa for economic survival when for decades these same former African colonies were dependent on food sources from Europe. Less discussed is the risk is that these African LNG exporting countries are dependent on Russian & Ukrainian foodstuffs and could find themselves in a double bind and blackmailed by the Russian government in refusing or limiting LNG exports.
Europe’s Folly | Sole Source Suckers
Sole sourcing is a recipe for disaster carrying an unacceptably high risk whether it be a change of the source’s management, unfavorable change of source government, natural disasters, supply chain disruptions, etc.
Europe’s political folly of deliberately engaging in a high dependency if not exclusivity on sourcing their energy requirements to an historically, non-democratic state like Russia could be classified as irresponsible.
Russia, like China, have engaged in capitalistic economic policies & practices yet their authoritarian political practices have not changed. The priority of non-democracies has always been political not economic, as their policies are predicated on political not economic objectives. This is possible because autocratic leadership cannot be voted out of office by the citizenry.
The naive hopes by European leadership that “this time it’s different” because of Putin’s extensive exposure to the west as an agent in East Germany and his fluency in German have been dashed. Indeed there was fierce opposition amongst their more savvy, street-smart in their ranks not to become highly energy dependent on the Russian state because of the risk.
Putin’s brilliant and patient tactic in pre-positioning Russia to leverage its energy resources and food production has paid off handsomely by placing Europe in a precarious position.
For this reason Putin has the luxury of triggering economic hell with a flip of a switch creating greater economic carnage than on the Ukrainian battlefield. The Russian military leadership may not carry through his orders on a tactical nuclear strike however they’ll have no qualms about standing by while Putin shuts off gas and energy to Europe particularly as the colder season approaches.
Regardless whether Putin is still in power when winter arrives, the European winter season will be difficult resulting in socio-economic hardship.
More ominously in the long-term, this confirms a multi-generational dilemma because from the West’s perspective, the present-day and future Russian leadership cannot be trusted thanks to Putin’s aggressive efforts to indoctrinate the young leadership and younger generation to carry the torch in the same way as their political forebearers.
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