Aleksey Miller, the CEO of Gazprom, a major Russian energy company, has raised concerns about Europe’s economy. He says that European industrial production is at its lowest levels ever, and the economy is struggling because it no longer has access to cheap Russian gas. This comes as the German government warns that it might experience its second straight year of recession in 2024.
A Shift in Energy Demand
During a recent speech at the St. Petersburg International Gas Forum, Miller discussed what he calls “demand destruction.” This term describes a situation where high prices or limited availability of gas lead to decreased demand. Essentially, when people can’t afford gas, they start looking for other energy sources.
Miller even mentioned that some experts believe Europe is committing “energy suicide.” This means that by not relying on Russian gas, Europe might be harming its own economy. He also pointed out that Germany, once seen as the “economic locomotive” of Europe, is now being referred to as the “sick man of Europe.” This shift reflects how the country’s economy is struggling.
Germany’s Economic Troubles
Germany’s economy shrank by 0.3% last year, and this decline was partly due to a significant drop in gas imports from Russia. The German Ministry for Economic Affairs has predicted that the country’s GDP (the total value of goods and services produced) could decline again by 0.2% this year. If this happens, it will mark a second consecutive year of economic downturn.
Miller believes that the decline in industrial production across the European Union (EU) will continue. He warned that this could lead to even more volatility in the gas market and a potential new spike in prices. This would create further challenges for industries that already struggle with high energy costs.
The Impact of EU Policies
According to Miller, EU policies have caused nearly a 10% drop in industrial production in the bloc, reaching the lowest levels in ten years. He pointed out that industries in the U.S. spend up to five times less on energy than European industries. This puts Europe at a competitive disadvantage.
Before the situation changed, Europe received most of its Russian gas through the Nord Stream pipelines. However, those supplies have stopped indefinitely since a sabotage attack damaged the infrastructure in September 2022.
The Future of Energy in Europe
Today, Russian gas is still delivered to Western and Central Europe via Ukraine, based on a contract signed by Gazprom and the Ukrainian company Naftogaz in 2019. However, Ukraine has stated that it does not plan to extend this agreement when it expires at the end of this year.
As the situation unfolds, the stakes are high for Europe. The struggle to find affordable energy sources could have long-lasting effects on its economy. Miller’s warnings suggest that without a stable supply of gas, Europe may face even more economic challenges in the future. Will Europe find a way to adapt, or will it continue down this difficult path? The answers remain uncertain, but the urgency is clear.
