FT: Call Putin’s bluff – he will not cut off Europe’s gas

In Hans Christian Andersen’s classic tale, two tailors promise to make an emperor a suit that is invisible to unwise people. When the emperor greets his subjects in his new clothes, only a boy has the good sense to cry out: “But, he isn’t wearing anything at all!” Such plain-spoken truth is urgently needed to dispel a myth that hobbles European strategic thinking: that Europe is too dependent on Russian natural gas to risk a serious row with Russia over its escalating war against Ukraine.

As Moscow prepares to instigate a crisis over this winter’s natural gas supplies, Europe can secure its interests by remembering that Russia is dependent on Europe as its primary gas export market – and by preparing to weather the winter without buying Russian gas.

This spring, while Russian-backed separatists in eastern Ukraine were gearing up for action, President Vladimir Putin tried to intimidate European leaders by suggesting that the Kremlin might redirect natural gas from Europe to China in retaliation for any EU sanctions. On May 21, Mr Putin suddenly reversed a decade of resistance and caved in to Chinese demands for a lower gas price, accepting $350 per thousand cubic metres. That is 42 per cent less than the price Lithuania pays – so low that it risks depressing natural gas prices throughout the Far East, including for future Russian sales to Japan. Moreover, Moscow will have to borrow $50bn to pay for new pipelines and other infrastructure, costs that must be repaid out of the paltry revenues.
MORE