Before discussing this, let me walk you through how we got here in 2-3 sentences.
Russia invaded Ukraine and as a result, the West sanctioned hell out of Russia and made it the number one sanctioned country on Earth. They forgot that Russia is not Iraq or Syria or Venezuela that is not gonna respond to their sanctions. Russia pushed back and demanded payment for its gas in its own currency - rubles.
After March 31st of this year, if the EU doesn’t pay for the Russian gas in rubles, Russia will turn off its valves.
As the headline above says, the G7 countries have rejected Russia’s proposal to pay for gas in rubles. In other words, they would rather freeze.
If you think this is a smart move by the EU, you are in for a big surprise. Let me show you how:
“ Never underestimate the ability of corporate America to make money out of chaos.” - Richard Medhurst.
Rather than paying for Russian gas in rubles, the EU has struck a gas deal with the US. According to the deal, the US will export an additional 15 billion cubic meters to the EU this year. This sounds a lot until you see how much the EU imports from Russia.
In 2021, the EU imported 155 billion cubic meters of gas from Russia. The deal with the US can’t even provide 10% of what the EU was taking from Russia now. Where are they going to get the other 90% from? Is it going to fall from the sky?
The thought that the EU can easily replace Russian gas with American gas is nothing more than a thought. It’s not possible as we saw above.
One of the members of G7 - Germany - doesn’t even have the LNG (Liquified Natural Gas) terminals. How will they take in the American gas if they don’t even have the necessary infrastructure to do so? You might be thinking that they can just build terminals. Let me tell you one thing: it takes 5 years or so to build such terminals.
Another way for a country like Germany to import gas is to use Floating Storage and Regasification Units (FSRUs). Basically, these are ships that are used to transport gas through the sea. In the entire world, there are only 50 such ships and of them, only 8 are available to be used. On top of this, one ship costs around $40M to $60M per year.
This is how screwed the EU is without the Russian gas. How can the EU bureaucrats be this dumb?
Russia will simply turn off its valves and sell the same amount of gas to the East, to the countries like China and Mongolia, and be paid in rubles. It will not impact Russia, but Europe will suffer. Russia doesn’t need to blink.
When I say “Europe will suffer”, what I mean is that the civilians like you and me will bear the pain. Not the politicians. Not the bureaucrats. Not the policymakers.
Seriously, they are far dumber than I ever imagined. (they = the Western politicians/bureaucrats.)
FINAL THOUGHT….
Is this a disaster in making for the European people?