Evincing Russian President Vladimir Putin’s escalating preparations for war, Russia boosted the gas reserves of its Kaliningrad exclave on Tuesday.
As reported by Kommersant, the Marshal Vasilevskiy gas resupply vessel docked with Kaliningrad’s offshore terminal. According to Gazprom, the vessel, which is the only one of its kind, has “174,000 cubic meters of reservoir capacity.” It’s a reflection of Putin’s concern that Kaliningrad may be cut off from overland gas supplies if Russia re-invades Ukraine. Russia’s fear is that Lithuania may shut off pipeline flows into Kaliningrad.
Two further points stand out.
First, as Kommersant correctly noted, this is neither cheap for Gazprom nor obviously necessary for Kaliningrad. Liquefied natural gas prices in Europe are soaring, and unlike Western European reserves, the exclave’s reserves remain adequate. Gazprom will almost certainly lose millions of dollars on this resupply. In turn, this resupply action suggests that Putin anticipates or is guarding against a prolonged showdown with the West. At the margin, the Marshal Vasilevskiy’s trip to Kaliningrad is a further sign that Putin may intend to capture Kyiv and seize control of Ukraine.
Second, we must remember that Gazprom is not so much a corporate energy giant as it is an extension of Putin’s imperial state. CEO Alexey Miller is understood by the U.S. and British intelligence services to follow Putin’s orders to the letter, acting as his energy viceroy. The two meet regularly, including last week. Put another way, Miller does what he is told even if a particular action does not make commercial sense. This explains why Gazprom has suspended thermal coal supplies to Ukraine and is reversing gas flows through its Yamal pipeline to Germany. Putin wants to increase energy supply-price pressure on Europe so as to deter the prospect of a unified Western sanctions response to his looming invasion of Ukraine. Gazprom would not be resupplying Kaliningrad absent Putin’s directive.
Where does this leave us?
Well, while the Biden administration has struggled to understand the Russians’ energy extortion strategy, the United States has means of response. As Bloomberg reported, Russia is struggling to boost oil output even as prices soar. This is largely a consequence of inadequate investment and productivity in the Russian oil industry over many years. U.S. sanctions limiting Russia’s access to high-quality oil infrastructure products and oil servicing companies would further degrade Russia’s energy infrastructure. That’s the way to play Putin at his own game.
