“Frost War” on the outskirts of Europe… and Moscow hunts down the “Seven” decision with “Nord Stream 1”

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Europe today is on the cusp of a war of another kind, the “Frost War”, as the old continent may witness a colder winter this year, as the energy conflict between the West and Russia has become more complex, and its dangerous repercussions exceeded the borders of Ukraine, when the Group of Seven tried to strike a new blow. For Russian energy revenues and “bending” the Kremlin’s arm, Moscow sought to fortify itself by shutting down the Nord Stream 1 pipeline, as a cautionary move, and threatening to halt gas supplies to the European Union if Brussels went ahead with setting a ceiling on the price of Russian oil.

Russia canceled a deadline for the resumption of the flow of gas through the “Nord Stream 1” line, which was scheduled for Saturday, which exacerbated Europe’s problems in securing fuel for the winter season, which is approaching.

The Kremlin threatened to stop selling oil to any country that applies the maximum price for Russian oil, describing the measure as “completely absurd.”

On Friday, the Group of Seven formally agreed to impose a ceiling on the price of Russian oil in order to reduce the revenues of Moscow’s war in Ukraine while maintaining the flow of oil to global markets.

Moscow hardened its position on the West’s actions, while keeping the door to diplomacy open. This was demonstrated by linking the Russian energy giant, Gazprom, the reason for the re-closure of the Nord Stream 1 pipeline to a technical error that resulted in an oil leak in the wires.

The shutdown of the Nord Stream 1 pipeline increases Europe’s difficulties in securing fuel for the winter, at a time when Europe is facing an increase in the cost of living due to rising energy bills.
No gas for Europe

Moscow blamed sanctions imposed by the West after the Ukraine war for obstructing the routine operations and maintenance of Nord Stream 1, which passes under the Baltic Sea to supply gas to Germany and other European Union countries.

On Friday, the Russian “Gazprom” group suspended the work of the Nord Stream 1 pipeline, which is vital to supplying gas to Europe, after it was scheduled to resume work today, Saturday, following the maintenance process.

Gazprom discovered these technical problems during a technical examination conducted with representatives of the German Siemens group that manufactured the turbine.

And posted on the Telegram application, an image showing wires surrounded by a dark liquid.

Gazprom is no longer able, as it says, to provide a time frame for the resumption of safely pumping oil to Europe, so it has suspended the transportation of gas through the entire pipeline, until “the repair is completed.”

However, this justification did not convince Brussels, which described the reopening of Nord Stream 1 as an “excuse” that Russia uses as an economic weapon to respond to the issue of setting a price ceiling for its oil, as well as the sanctions imposed by the West.

war of words

The war of words between the West and Russia escalated, as former Russian President Dmitry Medvedev wrote on the “Telegram” application: “There will simply be no Russian gas in Europe,” in response to statements by European Commission President Ursula von der Leyen about setting a ceiling on the price that Europe pays for Russian gas.

The Europeans accuse the Kremlin of using gas as a means of pressure on it because of its heavy dependence on this energy source, but Moscow denies this, citing technical problems resulting from sanctions or delays in paying dues.

Sanctions prevent Russia from recovering the turbine that was sent to Canada for repair, while Germany, where the turbine is supposed to be installed, asserts that Moscow is obstructing the recovery of this basic piece.

Moscow was not spared from the war of words launched by Washington towards the Kremlin, as the White House accused Moscow of using energy as a tool to pressure Europe, with the old continent approaching the imposition of a ban on oil imports from Russia.

A spokesman for the US National Security Council, in an email to Reuters, was not surprised about the closure of the pipeline that transports gas to Europe, saying with regret: “It is not surprising that Russia continues to use energy as a weapon against European consumers.”

The Russian Deputy Prime Minister-designate for energy issues Alexander Novak warned that this intervention in the oil market will destabilize the oil industry, the oil market.. European and American consumers, according to Russian news agencies, will be the first to pay for it.

As for France, a member of the Group of Seven, it has gone to soften the position of its partners, as the French Ministry of Economy announced that the technical work is still in progress, and it is clear to us that no final decision can be taken before consultation and a unanimous opinion among the 27 member states European Union.

The European Union has set a goal of reaching this agreement in accordance with the timetable agreed upon in the framework of the sixth package of European sanctions against Russia, which means December 5 for crude oil sales and February 5, 2023 for oil products, according to the European Commissioner for Economic Affairs Paolo Gentiloni.

Inflation and oil

The rate of wholesale price inflation in the euro area jumped to a new record, as economic data published on Friday showed that the rate of producer price inflation (wholesale) in the euro area rose to a new record during last July, with the significant rise in energy prices, which increases pressure on the bank. The European Central Bank to move more strongly to curb inflation during the meeting of the Board of Governors next week, according to the European statistics agency “Eurostat”, noting that the wholesale price index in the region, which includes 19 countries of the European Union, rose by 37.9% annually, last July, After rising by 36% during last June, according to the revised data, while the initial data indicated a rise of 35.8 percent.

German Finance Minister Christian Lindner expects a cap on Russian oil prices to have a direct impact on energy prices.

And if this is linked to the expansion of production in the oil-exporting countries, “inflation can be curbed very significantly.”

a stifling crisis

Germany is facing a “suffocating” energy crisis, following the announcement by the Russian company “Gazprom” that it will not resume the supply of gas through the “Nord Stream 1” pipeline that passes through the Baltic Sea at the present time.

The German Federal Network Agency stressed the need for German precautionary measures to confront the crisis.

German sports clubs are facing a much more difficult situation than it was at the beginning of the Corona virus pandemic, due to the significant increase in energy prices.

Boris Schmidt, president of the Freiburger Kreis association, told the Frankfurter Allgemeine Zeitung newspaper on Friday that the signal of help from the federal and state governments to mitigate the effects of price hikes has been absent so far.

ArcelorMittal, Europe’s largest steel producer, has shut down two production plants in northern Germany due to a sharp rise in energy prices.

And the group announced on Friday that “from the end of September, the group will shut down one of its blast furnaces at its flat steel site in Bremen until further notice.”

Ornamental plant cultivation in the Netherlands’ greenhouses has been hit hard by rising energy costs, with many farmers saying they will exit the sector, the Royal Flora Holland Marketing Association said on Friday.

French electricity giant EDF has pledged to restart all its nuclear reactors by winter to help the country through the widespread energy crisis exacerbated by the war in Ukraine, according to French Energy Minister Agnès Pannier-Runacher.

complicated matter

The European Union is expected to ban the import of crude oil from Russia in early December and refined products two months later, in punitive measures against Moscow, and the mechanism of imposing a ceiling on Russian oil prices is likely to be a complicated issue.

The United States, Germany, France, Italy, the United Kingdom, Canada and Japan wrote in their statement that “the price ceiling will be set at a level based on a series of technical data and will be decided by the alliance as a whole before being put into effect.”
Practically, Russia will sell its oil to these countries at a lower price than it currently adopts, but it remains higher than the production price, until it finds an economic benefit in continuing to sell it and thus not cut off its supplies.

The challenge is to include as many countries as possible in this measure, because imposing a ceiling on oil prices, according to experts, will only be feasible if the major importing countries participate in it, in reference to the role of China and India.

The G-20 summit, to be held on November 15-16 in Bali, will constitute a pivotal date for achieving this consensus.


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