Page 16 - RusRPTFeb22

What if war broke out?
While the Kremlin has repeatedly denied it has any intention of attacking Ukraine, what would happen if Russia did invade is neighbour?
There is a high chance that the Druzhba (Brotherhood) gas pipeline would be damaged or destroyed in a Russian onslaught. Even if only a smaller flare up occurred, contained in the already disputed Donbas region, there is a tangle of gas pipelines nearby that could get caught up in the conflict.
Given the Kremlin would try and sell this war as a “local conflict” as both the US and Nato have said clearly they will not send troops in to protect Ukraine, then the Kremlin is likely to keep the gas flowing to Europe and make the clear distinction between Planet Business and Planet Politics as bne IntelliNews has reported on many times.
That means ramping up supplies via the Yamal-Europe pipeline across Belarus and Poland from near zero now to 100% to help offset the loss of Ukrainian transit. Smith speculates that Gazprom may even simply turn on Nord Stream 2 without regulatory approval, which as been ready to start operations at short notice for months already, as an emergency measure and just pay the fines later. Europe may even accept this decision simply to keep the lights on.
Could LNG fill the gap? While LNG deliveries provide yet another way to diversify away from Russian piped gas, the LNG business is still too young to make much of a difference. Gazprom sells between 180bcm and 200bcm a year to Europe, which is equivalent to a third of the total LNG production. However, many countries in Asia, such as Japan, are entirely dependent on LNG for their gas. Diverting enough of this gas away to supply Europe – about half the total supply – would send LNG prices skyrocketing and cause a major energy crisis in Asia, says Smith.
“This talk of the potential use of the “Russian gas weapon” has long been overblown, in my humble opinion. The “gas weapon,” to the extent it exists,
16 RUSSIA Country Report February 2022 www.intellinews.com