"Today’s developments are going to be a massive shock for gas prices as Europe is now going to struggle to refill its storages ahead of next winter if this reduction is for an extended period of time," ICIS analyst Tom Marzec-Manser described to the FT on Wednesday of the previously reported Gazprom announced major reduction in natural gas flows through Nord Stream 1 to Germany, which took effect Thursday.
At this point, now nearly four months into the invasion of Ukraine, Russian gas flows to European clients have plummeted to their lowest levels since 2014, Bloomberg has noted. But at the same time, Reuters is reporting that "Russia’s Gazprom increased gas supplies to China by 67% in the first five months of this year, the company’s CEO Alexei Miller said on Thursday."
It was also on Wednesday that Russian President Vladimir Putin and Chinese President Xi Jinping held their second phone call since the Ukraine war began. Xi told Putin that China is "willing to continue to offer mutual support (to Russia) on issues concerning core interests and major concerns such as sovereignty and security," as quoted in state broadcaster CCTV.
Just on the heels of the Putin-Xi call, Gazprom essentially declared no gas for Western Europe while assuring "energy stability for Russia's friends". CEO of Gazprom Alexey Miller had this to say before the St. Petersburg International Economic Forum, which is continuing through the end of the week:
"Russia represents energy stability, and also Russia is a supplier of energy stability for its friends," he said.
Miller also spoke of "opportunities" for the "redistribution of world energy resources" – apparently with friendly nations like China or Hungary in mind. According to his words as summarized in TASS:
Miller noted that global gas consumption for 5 months of 2022 decreased by 25 bln cubic meters, where 24 bln cubic meters fell on the EU countries. The EU’s plans to increase the production of biomethane by 17 bln cubic meters will require 60 years, since the existing plants produce only 3 bln cubic meters per year.
Demand for commodities is currently replacing demand for foreign exchange reserves, Miller said. Russia now has a window of opportunity in the redistribution of world energy resources for fair supplies.
As for the Putin-Xi call, Xi praised the "good momentum of development" in bilateral relations since the start of the year "in the face of global turmoil and changes." And notably he said Beijing is willing to "intensify strategic coordination between the two countries."
Crucially, Gazprom had inked an unprecedented natural gas supply deal with China within the first week of the Feb.24 invasion, at a moment the first wave of Western sanctions were being readied and implemented.
As Bloomberg reported at the time of the Feb. 28 Gazprom-China deal in the works: "Gazprom PJSC took a new step toward potentially its biggest-ever natural gas supply deal with China as nations around the world sever economic and political ties with Russia over the country’s invasion of Ukraine."
"The Russian gas giant signed a contract to design the Soyuz Vostok pipeline across Mongolia toward China, Gazprom said in a statement," the report continued. "If Russia reaches a new supply agreement with China, Soyuz Vostok will carry as much as 50 billion cubic meters of natural gas per year to the Asian nation."