Russian President Vladimir Putin delivers a speech during a ceremony honoring the country’s Olympians and Paralympians at the Kremlin in Moscow, Russia April 26, 2022.
Maxim Chemetov | Reuters
DAVOS, Switzerland — Russian President Vladimir Putin’s negotiating position is “not as strong as he claims” and Europe has leverage against him, according to billionaire investor George Soros.
In a letter to Italian Prime Minister Mario Draghi, Soros said Putin is “obviously blackmailing Europe” by threatening – or in fact – cutting gas supplies.
“That’s what he did last season. He stored gas rather than supplying gas to Europe. It created a shortage, raised prices and made him a lot of money, but his negotiating position is not as strong as he claims,” Soros wrote. Monday.
Russian officials were not immediately available for comment when contacted by CNBC on Wednesday.
Russia recently cut off gas supplies to Finland, saying the country does not pay for it in rubles. The move came after Helsinki announced its intention to join NATO – the defense alliance that Putin opposes.
Bulgaria and Poland also stopped receiving Russian gas a few weeks ago. Following Russia’s invasion of Ukraine, Moscow announced that “unfriendly” countries should pay for Russian gas in rubles – a policy that allows the Kremlin to back its own currency.
However, Soros’ message is that European countries also have leverage against Putin.
George Soros, Hungarian-born American investor and philanthropist.
Fabrice Cofrini | AFP | Getty Images
The EU, which includes 27 countries, receives around 40% of its natural gas supplies from Russia, making it difficult for the bloc to stop buying it overnight.
But, according to Soros, the EU is also a very important market for the Kremlin and Putin needs gas revenues to support his economy.
“It is estimated that Russian storage capacity will be full by July. Europe is its only market. If it does not supply Europe, it must close the wells in Siberia where the gas comes from. Some 12,000 wells are concerned. it is time to close them and once they are closed they are difficult to reopen due to the age of the equipment,” Soros said in the letter.
He added that Europe must undertake “urgent preparations” before using its bargaining power. “Without that, the pain of a sudden shutdown would be politically very difficult to bear,” he said. “Europe should then impose a heavy tax on gas imports so that the price to the consumer does not fall.”
Leon Izbicki, partner at Energy Aspects, agrees that Russia’s gas storage is close to being full.
“Russia entered last winter with record stocks of around 72.6 billion cubic meters and is aiming for an even higher winter 2022 underground storage target of 72.7 billion cubic meters,” he said. added Izbicki via email. “Although we don’t have visibility on Russian underground storage, it seems plausible that Russia could already achieve this goal this summer.”
He added that Russia lacked flexibility in its gas storage and lacked the means to divert gas from Europe to, for example, Asia due to a lack of pipeline infrastructure.
Meanwhile, European countries are scrambling to find alternatives to Russian gas since the invasion of Ukraine. The EU and the United States, for example, signed an agreement in March to ensure that the region would receive at least an additional 15 billion cubic meters of liquefied natural gas (LNG) this year.
This, coupled with recent supply cuts from Poland, Bulgaria and Finland – as well as international sanctions – means that Russia is inevitably already selling less gas to Europe.
“We expect gas flows to Europe to reach around 98 billion cubic meters this year, up from 141 billion cubic meters last year,” Izbicki said.