Cracks in NATO over potential sanctions for Russia are largely based on the energy supply. Russia holds tremendous leverage over some European countries because it provides 40% of the conteinent's natural gas supply.
The region currently has the record lowest level of stored natural gas supplies for this time of year, and electric power prices have already climbed steeply.
Germany, which has long viewed Russia as a reliable provider of natural gas despite policy differences, is a key country to watch given its vulnerability to supply disruptions., European gas markets show signs of "artificial tightness," noting that Russia reduced its gas exports to Europe during the fourth quarter of last year compared to 2020, despite higher market prices in 2021.A Russian invasion of Ukraine and the U.S.
There's potential for boosting LNG supplies into Europe if the Ukraine crisis causes reduced flows or supply interruptions, but it's not a silver bullet."Europe has already taken in a lot of U.S. LNG, although some of it still goes to Asia. There is some LNG exported from Africa that is going to Asia; that could be rerouted to Europe," Nikos Tsafos, an energy expert with the Center for Strategic and International Studies, said via email.
"The big balancer is Qatar: 83% of December exports went to Asia. That’s the gas Europe will try to grab. There are limits to how much can be rerouted, but even a modest shift could make a big difference," adds Tsafos, whosay record high northwestern Europe LNG imports this month don't offset reduced Russian inflows, "underscoring that the supply shortfall in the region has not been resolved.
"[S]hould tensions between Russia and the Ukraine escalate, the initial uncertainty around its impact on gas flows would likely lead the market to once again add a significant risk premium to European gas prices," they said in a note.
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