'The Lamps Are Going Out All Over Europe'

German Chancellor Olaf Scholz was in Canada recently begging Justin Trudeau for Liquified Natural Gas. “Canada is our partner of choice,” said Scholz, adding “we hope that Canadian LNG will play a major role” in his country's attempt to wean itself off Russian energy.

Trudeau was characteristically dismissive, saying there has “never been a strong business case” for exporting Canadian LNG to Europe. Of course, he was also letting himself off the hook for his government's entrenched anti-resource-sector policies: Canada currently has not one single LNG active export terminal, and Canada's regulatory framework is responsible for the outright rejection of sixteen of the eighteen proposed terminal construction projects since Trudeau took power. In any event, Scholz had to content himself with a far less value hydrogen trade agreement.

Humiliating, but what else could he do? Beggars can't be choosers, and Germany is very much a beggar. As we've discussed before, Germany's mad environmentalist politicians pushed the country into transitioning to "renewable" energy sources which don't produce anywhere near the amount of power necessary to run a first world country, let alone the largest economy in Europe. The only way to make the transition "work" was to import large amounts of Russian gas to make up the difference. Now they're trying to break their reliance on that so as to comply with Western sanctions imposed in the wake of Russia's invasion of Ukraine, and it isn't going well.

And Russia knows it -- that's why they've cut down LNG flows to Germany by 60 percent, blaming mechanical problems while ostentatiously burning $10 million worth of natural gas per day at the mouth of the Nord Stream pipeline rather than sending it to Germany. It's their way of reminding the Germans who really needs whom. Putin can afford to cut them out because western sanctions have contributed to a worldwide energy scarcity, driving up prices significantly to nobody's benefit but Russia's.

The story is much the same throughout the continent -- in Poland people have been lining up in their cars for multiple days in the hopes of buying rationed coal to get them through the next several months (the E.U. has also embargoed Russian coal imports). The manager of Finland's power grid has begun telling the country to "prepare for shortages this winter." The British were recently informed that their heat and energy costs would increase by 80 percent as of October 1, and their national grid managers, too, have begun to talk more about shortages than cost.

Belgian Prime Minister Alexander De Croo recently said that Europe could be looking at ten years worth of tough winters, as far as heat and power were concerned. Dutch energy prices are currently sitting at "15 times the average for this time of the year," according to Bloomberg. Italy, which is also heavily dependent on Russian energy, is already on the brink of a debt crisis -- what will their economy look like after months of rolling black-outs, frozen pipes, and freezing people?

Sir Edward Grey in 1915: déjà vu vu all over again.

French President Emmanuel Macron speaking of the difficult months ahead, asked his countrymen to “accept paying the price for our freedom and our values,” referring to the cost of Europe's unreservedly supporting Ukraine in its conflict with Russia. Andrew Stuttaford rightly points out that "European voters are... entitled to wonder why they should continue to support politicians who left them so exposed to Russian blackmail in the first place." He's got that right -- this crisis has been brought about almost entirely by a western elite who cared more about rubbing elbows with Greta Thunberg and her comrades than about their national interests or the welfare of their countrymen.

It looks like they're about to get their reward.

Never Trust a Junkie

It seems like every day Germany inadvertently contributes to the case against environmentalism. As we've had occasion to discuss before at The Pipeline, over the last few decades Germany, driven by environmental concerns, has been shutting down their (essentially zero carbon) nuclear power plans with an eye towards a total transition to green energy as soon as possible.

Unfortunately, technology being what it is, running a first world nation of 80 million people on wind and solar energy is currently impossible. So to make up the difference in energy supply and demand, Germany has taken to 1) burning massive amounts of (carbon intensive) coal and 2) importing massive amounts of oil and natural gas from Russia.

Of course, Russia then invaded Ukraine, making itself a pariah state. The E.U. hit it with a host of economic sanctions, as did the United States. The object of these was to tank the Russian economy -- which is heavily reliant on oil and gas revenues -- forcing President Putin to back down. And Germany, led by new chancellor Olaf Scholz, has been directing the charge. They've issued full-throated condemnations of Russia's actions and pledged to double their military spending in response. They've even announced a new policy towards Russia known as Zeitenwende, or "Sea Change," suggesting that they're going to end their reliance on Russian energy as soon as possible.

Olaf Scholz: tough talk, no action.

But actions speak louder than words, and CNN reports that Germany is desperately searching for ways to circumvent anti-Russian sanctions. They are particularly desperate the find a way to meet Russia's demand that existing oil and gas contracts be paid for in rubles rather than euros, a strategy that they've employed -- rather successfully -- to counter western sanctions and keep their economy afloat while the war continues.

Gas distributors in Germany and Austria told CNN Business that they were working on ways to accept a Russian ultimatum that final payments for its gas must be made in rubles, while complying with EU sanctions.... Buyers could make euro or dollar payments into an account at Russia’s Gazprombank, which would then convert the funds into rubles and transfer them to a second account from which the payment to Russia would be made. Germany’s Uniper said on Thursday... that it believes a “payment conversion compliant with sanctions law” is possible.

It helps that Germany is essentially the most important member of the E.U. and as such it has a lot of say over how sanctions will be enforced. So this comes as no surprise:

The European Commission issued guidance to EU member states last week saying that is “appears possible” that buyers could comply with the new Russian rules without getting into conflict with EU law. EU governments are likely to allow the payment mechanism to go ahead, Eurasia Group said in a note on Thursday.

Which is to say that Germany is going to find a way to keep paying for Russian energy, keeping the ruble afloat and ensuring that the war in Ukraine continues, no matter what Chancellor Scholz says when he's on camera. They're addicted, and addicts are unreliable.