Russian President Vladimir Putin

EU’s policy to ditch long-term gas deals was a mistake Putin says

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Russian President Vladimir Putin said on Wednesday (Oct. 6) that Europe had made a mistake by favoring short-term contracts with suppliers and dependence on gas exchanges.

European natural gas prices have soared to fresh records amid a recovery in demand particularly from Asia and low storage levels with stockpiles at their lowest seasonal level in more than a decade. European benchmark Dutch wholesale gas for November has jumped almost eightfold since the start of the year, reaching a new all-time high of over 150 euros a megawatt-hour in early hours of Wednesday.

Speaking at a government meeting on energy development, Putin stated: “The practice of our European partners has confirmed it once more that they made mistakes. “We talked to the European Commission’s previous lineup, and all its activity was aimed at phasing out of so-called long-term contracts.” “It was aimed at transition to spot gas trade. And as it turned out, it has become obvious today, that this practice is a mistake.”

Russian energy giant Gazprom has long resisted moving to spot trade in Europe preferring long-term contracts.

Putin also reiterated that Russia “has always been and continues to be a reliable supplier of gas to consumers all over the world – both in Asia and Europe,” adding that Gazprom could make record gas exports to Europe this year, as Moscow is increasing gas supplies, and has already delivered 15% more to the region year-to-date in 2021 than last year. The Russian leader also said that Russian gas transit via Ukraine is set to exceed volumes agreed under Gazprom’s contract with Kyiv and that his country could help stabilize the market.

Gazprom has been accused by a group of European MEPs accused of being behind price rises. The International Energy Agency (IEA) has also blamed the Russian state-owned energy giant of not doing enough to increase its supplies to Europe.

“There is absolutely no Russian role on what is happening on the gas market,” Putin’s spokesman, Dmitry Peskov told reporters earlier on Wednesday on a daily conference call. “There are a couple of reasons (behind the gas crisis) – the way the economy is recovering, how demand for the energy resources is growing, as well gas storages are not filled in,” he said.

Putin also warned that “rash actions” in the energy sector can create “serious disbalances.”
“The current situation in the European energy market is another vivid example that hasty and moreover politically charged steps are unacceptable in any area, especially in matters of energy supply, the sustainable operation of enterprises, on which the sustainability of businesses and the well-being and quality of life of millions of people directly depend,” he remarked.

“We are ready to work on it and would like this work to be done on a purely commercial basis, taking into account the interests of all parties involved in this process,” the head of state said.

Meanwhile, testing of the first string of the Nord Stream 2 gas pipeline has begun. Germany’s energy regulator said some operations could start soon.

At the time of this writing prices of natural gas dropped more than 10% following Putin’s remarks.

With reporting by TASS, Bloomberg, Marketwatch