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    Putin hints at extra Russian gas flow to Europe


The market reacted strongly to the Russian president's comments.

by: Joseph Murphy

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Putin hints at extra Russian gas flow to Europe

Russian president Vladimir Putin said on October 6 that Russia was ready to help stabilise conditions on the global energy market, hinting that Gazprom might step up gas exports to curb record high gas prices in Europe.

Wholesale gas prices rallied to an unprecedented $1,937/'000 mearlier today, after going from strength to strength in recent months on the back of a sharp increase in demand and constrained supply. While Gazprom says it is meeting its contractual obligations with customers, it has been accused of withholding additional supply to drive up prices.

Putin insisted in a government meeting that Russia was a reliable energy supplier, instead blaming European energy policy for exacerbating the gas crisis. It was the previous European Commission, he said, that pushed over the years for the phase-out of long-term, oil-indexed pricing and an increase in gas-on-gas and short-term pricing.

"Our European partners...made mistakes," he said, pointing to the shift in pricing. "As a result, now the gas price has broken all historical records; today it is already nearing $2,000/'000 m3 – ten times more than the average price last year.

"Russia has always been and is a reliable supplier of gas to its consumers all over the world, in Asia and Europe, and it always fulfils its obligations in full," he said.

Addressing government officials, Putin said he wanted to hear proposals on how the global energy market could be stabilised. "We are ready for such work and would like this work to be built on an absolutely commercial basis, taking into account the interests of all participants in this process."

Putin added that Russia expected to exceed its contractual obligations for gas transit via Ukraine. But he said that doing so was economically unprofitable, and that Gazprom could save $3bn annually by pumping gas to Europe via "newer systems," in reference to the Nord Stream 2 pipeline.

The market reacted strongly to Putin's comments, with the contract for November gas delivery at the Dutch TTF hub slumping to under $1,400/'000 m3 by 12:00 GMT.