A lot of controversies have circled the incident that lead to leakages in both Nord Stream pipelines last month. European countries accused the Russian Federation of being behind this act, with the whole purpose being to exacerbate an already critical energy crunch.
While Nord Stream 2 did not get its final certification to operate - as a result of the war in Ukraine - Nord Stream 1 was important because it delivered most of the Russian gas to Germany. Since June, the pipeline worked with interruptions and scheduled maintenance took more time than expected. Although stockpiles have been raised for the upcoming winter, great concerns are voiced regarding what will happen in 2023.
Nord Stream AG provided an update
The company that manages the pipeline, Nord Stream AG, issued a press release on October 4th, 2022, highlighting that “in line with the calculated expectations, the pressure in both lines of the Nord Stream 1 gas pipeline stabilized”. It also claimed that inspecting the damaged sections is not possible, due to the lack of earlier requested necessary permits.
Swedish authorities recently introduced an area ban on shipping, anchoring, diving, using underwater vehicles, and geophysical mapping, in order to conduct a state investigation around the damaged sites in the Baltic Sea. This only deepens the conflict between Western countries, supportive of Ukraine, and Russia.
As adversaries in this conflict, exporting the same amount of energy as in prior years would not serve Russian interests, which is why analysts are very skeptical about whether gas deliveries via Nord Stream will ever resume.
An act of sabotage?
Given up until now leakages of such magnitude have not occurred, Germany already labeled this as an act of sabotage perpetrated by Russia. Energy prices have been volatile this year and each time bad news related to supply was released, the price of gas rose.
Analysts at easymarkets, one of the biggest CFD brokers in Europe, believe that as long as the conflict in Ukraine doesn’t ease, commodity prices will be bid. Even though energy is in the spotlight, both Russia and Ukraine are important exporters of commodities, making importers dependent on supply from other places.
Implications for gas prices heading into 2023
For the time being, European gas and energy prices are easing from the highs, since countries secured the targeted stockpiles. Also, governments acted with measures to cap prices for consumers via deficit spending.
Although these actions serve as short-term relief, the big question remains how they can secure the necessary natural gas and energy in 2023. This year, Russian exports have been relatively steady until June. Things are going to change starting in January when Germany and other countries can’t rely on the Nord Stream pipeline anymore.
Russia claimed gas deliveries can restart only if economic sanctions imposed as a result of the war are removed. That scenario is unlikely for the time being since this is one of the most prominent ways to keep the economic pressure in place.
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