Russia seeks to use Nord Stream 2 domestically to boost markets as Europe eschews oil

Russia seeks to use Nord Stream 2 domestically to boost markets as Europe eschews oil

Russia is seeking to ease tensions in its market caused by massive international sanctions and gas boycotts by opening the Nord Stream 2 gas pipeline domestically.

The West has relied heavily on the threat to shut down the controversial pipeline to try to preserve Ukraine’s sovereignty in the run-up to the invasion.

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E.ON, Europe’s largest energy network operator, has rejected demands to shut down the Nord Stream 1 gas pipeline as part of sanctions against Russia for invading Ukraine, the company told the Rheinische Post newspaper on Monday. (AP Photo/Dmitry Lovetsky, File/AP Newsroom)

Moscow rejected the threats and announced on February 21 its recognition of the “independence” of the separatist regions of Luhansk and Donetsk in eastern Ukraine.

The next day, Germany blocked certification of the $11 billion pipeline, and two days later Russian President Vladimir Putin announced his “special military operation” in Ukraine.

Russian energy giant Gazprom has since decided to use part of the pipeline to boost domestic consumption.

“The reformatting of the Nord Stream 2 infrastructure will be a significant help for the Russian market and the gasification of the regions,” Russian state media said on Friday.

The publication said the move would create “opportunities to launch new gas projects” across Russia.

Nord Stream 2 pipeline

Pipes of the Nord Stream 2 gas pipeline landing facilities are pictured in Lubmin, northern Germany, February 15, 2022. (AP Photo/Michael Sohn, File/AP Newsroom)

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Deputy Director of the National Energy Security Fund Alexei Grivach said the move does not mean Russia is abandoning the Nord Stream 2 pipeline, but said that given the uncertainty of the project, it will use the pipeline as she can now.

Nord Stream 2 would have brought gas from Russia to Europe via Germany via a pipeline that ran under the Baltic Sea – bypassing a once heavily used pipeline that goes to Ukraine.

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According to the US Energy Information Agency, in 2021 Russia was the largest natural gas exporting country in the world.

US and European allies attacked Russian oil exports after its deadly invasion of Ukraine and vowed to cut oil ties with Moscow.

The United States has blocked all future purchases of Russian oil, while several European countries have taken steps to completely halt oil purchases by the end of 2022.

The European Union, Russia’s biggest energy importer, further proposed this week to ban all Russian oil from Europe.

But even with sanctions and boycotts on its biggest silver producer, Russia is still set to reap a substantial revenue boost from its energy export profits this year.

Bloomberg Economics predicted in April that Russia could still see a 36% increase in profits from last year, largely due to soaring inflation rates.

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Russian President Vladimir Putin (Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP, file/AP Images)

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Nations that encompass the Organization of the Petroleum Exporting Countries (OPEC) and Russia have refused to increase oil production despite soaring global energy prices caused by post-pandemic inflation and the Moscow War in Ukraine.

This means prices at the pump are likely to remain high as countries like Saudi Arabia, the United Arab Emirates and Russia experience an economic bonanza this year.

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