Putin’s spectacular act of self-sabotage has killed the Kremlin’s biggest market

As talk of an end to Russia’s war in Ukraine grows among Western diplomats, and Volodymyr Zelensky comes round to the idea of what he calls a “just peace”, the true human cost of Vladimir Putin’s neo-imperialist land grab remains a source of great debate.

In recent days, the Ukrainian president has stated that 43,000 of the country’s soldiers have been killed and 370,000 wounded. It was Kyiv’s first disclosure of total casualty figures since Russia’s full-scale invasion began nearly three years ago, ending a policy of not wanting to reveal any information that could embolden the Kremlin on the battlefield.

Vladimir Putin with Gazprom chief executive Alexey Miller. Russia’s energy empire is crumbling.Credit: AP

Zelensky pointed out that Ukraine’s losses were dwarfed by its far bigger enemy: “198,000 Russians killed and more than 550,000 wounded,” he claimed. White House analysts think the number is much higher on both sides.

What cannot be disputed is that one of the casualties of Putin’s war is Gazprom, the state-backed energy behemoth that was for decades Russia’s biggest money-spinner and the most striking symbol of the Kremlin’s influence abroad.

In choosing to bring war to the EU’s doorstep, Putin gambled that Russia’s grip on the continent’s energy supplies would endure – maintained by weak European leaders unwilling and, in some instances, unable to turn their backs. It was a high-stakes bet that has failed.

The decision this week of the Austrian government-backed OMV to terminate a long-term gas supply contract with Gazprom could deliver the final crippling blow to Putin’s dwindling energy empire.

Gazprom was already a pale shadow of its former self. Before the war, Russia was Europe’s single biggest supplier of natural gas by a huge distance. But within six short months of declaring war on Ukraine, its share of the European market had all but evaporated from 40 per cent to single figures as, one by one, Ukraine’s allies dramatically scaled back their reliance on Moscow.

Russia suffered a further setback when saboteurs sent Russia’s two Nord Stream pipelines – built at a cost of €18 billion ($29.7 billion) – to the bottom of the Baltic Sea.

With demand for Gazprom’s products sinking, flaring at its plants has become more commonplace. One plant close to the Finnish border was spotted burning more than 4 million cubic metres of gas a day – equivalent to $US10 million ($15.7 million) at market prices. Analysts believe the flaring at a new liquefied natural gas plant in Portovaya, north-west of St Petersburg, lasted several months as large quantities of Russian gas went unsold. “They couldn’t sell it elsewhere”, Miguel Berger, the German ambassador to the UK, gleefully declared.

Russia’s big vulnerability is energy prices.Credit: AP

It is not a coincidence that as Gazprom’s influence has waned, so too has its appeal to investors. The company has lost more than two-thirds of its value on the Moscow stock exchange. A reprieve for its share price is hard to envisage, as its customer base shrinks even further still.

The loss of Viennese patronage following a dispute over outstanding supplies will be felt keenly. While most of Europe has quickly turned its back on Putin’s pariah police state, Austria has walked a tightrope of “military neutrality”. The country has stopped short of openly supporting Moscow but has been careful not to damage a lucrative relationship stretching back decades by providing tangible support for Kyiv.

Karl Nehammer, Austria’s chancellor, was the first Western leader to visit Putin after Russia’s invasion of Ukraine, and Alexander Schallenberg, Austria’s foreign minister, has branded calls for a complete decoupling from Russia “delusional”.

As other EU countries have turned to Norway, the US and Qatar for energy imports, Austria remained almost completely reliant on Russian supplies. The government-backed energy supplier OMV is one of few large, long-term buyers of Russian pipeline gas on the continent left.

So OMV’s decision to end that deal is more than just the conclusion of a mutually beneficial financial arrangement – it marks the end of an era, too, that began more than half a century ago in 1968, when Austria became the first Western European country to import Soviet gas, via its Baumgarten facility near the border with Slovakia.

In choosing to bring war to the EU’s doorstep, Putin gambled that Russia’s grip on the Continent’s energy supplies would endure... It was a high-stakes bet that has failed.

Despite trashing its reputation as a reliable energy supplier, Russia hawks insist Gazprom has the might and the reach to quickly rebuild exports by forging partnerships in other parts of the world – chiefly Asia, where the region’s power players have refused to abide by Western sanctions and cease trading with Moscow.

A pact signed between Russia’s state-backed oil firm Rosneft and Indian refining giant Reliance for the delivery of nearly 500,000 barrels of Russian crude per day, just as OMV was pulling the escape hatch, will embolden the optimists. Worth $13bn, it is the biggest-ever energy deal forged between the Kremlin and New Delhi.

Yet analysts doubt that a pivot to Asia can ever replace the business that Russia once did in Europe. The logistics are far more complicated, for a start. Funnelling gas to Europe was made possible by a sprawling network of high-pressure pipelines. These pipes enabled it to pump gas thousands of miles underground.

Europe was next door, however, and most of what Russia sends to Asia is in the form of liquefied natural gas (LNG). Some of it can be delivered underground, but much of it has to be transported by sea, making the shipments far more vulnerable to sanctions.

The Kremlin is late to the party, too, in trying to become a major energy exporter to the region – competing with long-established Middle East producers, including Saudi Arabia, who will defend their market share aggressively.

In the meantime, there is no going back for Russia in Europe. Its energy prowess was viewed as a powerful weapon, but in Putin’s reckless hands, it quickly became one of the country’s biggest vulnerabilities. In an act of spectacular self-sabotage, the Kremlin has killed its biggest market.

Telegraph, London

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