THE INTERVIEW WAS PREPARED SPECIFICALLY FOR THE PROGRAM "INTERNATIONAL REVIEW" (RUSSIA 24)

What will the practice of administrative setting of oil and gas prices lead to? How will Europe's energy supply be built? Is Russia ready to abandon European and Western consumers? Will the green agenda survive this stage? Irina Gayda, Academic Director of educational programs at the Skoltech Center for Energy Transfer and ESG, answered Fyodor Lukyanov's questions for the International Review program.

– The G7 countries have agreed to set a ceiling on prices for Russian oil, and the EU is discussing similar measures for gas. What consequences can this lead to?

– With a reduction in the supply of Russian pipeline gas to the European market from Europe, we will see even greater interest in replacing Russian LNG energy carriers. Nevertheless, there is nowhere to take it. In the Asian market, demand for LNG has slightly decreased due to its already very high cost. But in any case, there is simply nowhere to get the necessary amount of LNG right now – even if demand for non-gas in Asian markets continues to fall. In this regard, on the one hand, it will be necessary to resort to very harsh austerity measures, which will primarily affect the EU industry, and on the other hand, to increase cooperation with LNG suppliers from regions such as the United States and Qatar. It is not yet clear how far this will be achieved in the absence of the EU's desire to conclude long-term contracts.

– If we do not supply gas to Europeans, where do we put it?]

– Unlike oil, it is much easier to suspend gas production – this decision does not entail such negative consequences as the suspension of operation of some wells in oil fields. In this sense, Russia has the largest gas storage facility in the world – our wonderful fields. We can just wait, build the necessary infrastructure, expand exports to those regions of the world where economic growth continues and, consequently, energy consumption increases. Of course, we can continue to develop cooperation with other regions, with China.

– Today, something is happening that was simply unimaginable at the beginning of the year – the lightning-fast energy separation of Russia and the EU. But cooperation in the energy sector has been the basis of our relations for more than fifty years. At the same time, there is a feeling that it will not be possible to return the situation to its former course. Will the situation with energy supply in the world also completely change?

– The EU has long been a market with stagnant energy consumption – there have been trends of falling demand, in particular against the background of an active turn of European policy towards low-carbon energy and renewable energy sources. Therefore, the reversal of our export flows to the East was inevitable at some stage, and this, in my opinion, was realized by all market participants.

Of course, what could have been done smoothly and without major shocks for both manufacturers and consumers is likely to happen in a much more "ragged" mode. What, unfortunately, is not always thought about in the discussion about a green future is the question of what interdependence with suppliers of rare earth metals will look like. This market is also very monopolized, and a significant part of the processing of rare earth metals and, in general, all metals necessary for green transformation, is currently concentrated in China. Mining is also largely carried out either in China itself, or in countries in Africa and Latin America. Accordingly, we will soon see another race for resources.

– The green Agenda, which has long defined Western philosophy, is currently experiencing a severe crisis. The issues of energy supply come to the fore, and what it will be is no longer so important. Is the green agenda now total energy saving?

– You are absolutely right. In my opinion, there has been an acceleration of energy transfer. If we leave aside tactical issues, for example, how to survive the coming winter, we can already record a movement towards a faster energy transformation – its supporters have more arguments. If earlier consumers were told that they need to pay for the transformation of the energy system, because they need to protect the planet, now the idea is being sold that this way energy independence from external suppliers is ensured.

– You mentioned that the extraction and processing of rare earth metals are concentrated mainly in China and, as they were previously called, "third world countries". It turns out that we benefit from this state of affairs? These are not unfriendly countries.

– In my opinion, the green agenda itself is very beneficial to Russia. Firstly, gas is one of the lowest carbon energy carriers among all hydrocarbon carriers, and in all models of energy transfer, gas was given a very significant place before the current price shocks. Secondly, Russia is very strong in nuclear energy, and this is another type of energy that is low-carbon and quite stable in many respects in addition to greenhouse gas emissions. Thirdly, Russia, as a country with large spaces and rich water reserves, is very suitable for the development of mechanisms for obtaining energy from alternative sources. In Germany, the current problems in the development of renewable energy are largely related to the lack of construction space – obtaining a permit for the construction of the next fleet of solar or wind power plants can take up to nine years, which corresponds to the period of development of a gas field and is almost approaching the date of construction of a new nuclear power plant.

– The decision on the oil price ceiling, apparently, has already been made. Are there resources to ensure its implementation? For example, there is talk of banning insurance for oil transportation. Is it really possible to implement this?

– It is important to note that some discount on Russian grades of oil has been observed on the market since the very beginning of the February events. It was associated with increased risks, the need to change logistics routes, and potential reputational consequences for companies working with Russian hydrocarbons. But, as we can see, both international and partly our sources say that there has not been a significant reduction in exports, there has been a reorientation of flows – the oil market has always been very flexible and adaptable to changes. Of course, some decline was inevitable, infrastructure is still a rather inertial thing, but in any case, the reduction was not in the volumes that one would expect.

Again, the complete replacement of Russian oil with oil from other suppliers is impossible today. Unlike gas, American producers are not ready to produce liquid hydrocarbons in such volume. We are hearing signals from OPEC that it is ready to cut production.

– In other words, the cartel of consumers to annoy suppliers does not seem real today?

– Let's be honest, until China and India join, the opinion of other market participants is unlikely to be decisive.