Former US regulator says Europe faces ‘scary situation’ after mysterious pipeline leaks

New York
CNN business

The apparent sabotage of the Nord Stream pipeline through Russia underscores Europe’s major energy vulnerabilities, former US energy regulator Neil Chatterjee told CNN.

“It’s a scary situation. They’re basically hoping and praying for a mild winter,” Chatterjee, a former commissioner and chairman of the Federal Energy Regulatory Commission, said in a phone interview. “That’s a dangerous, dangerous place to be.”

US and Western officials have said the unexplained explosions and leaks in Nord Stream 1 and Nord Stream 2 have the characteristics of sabotage. Neither pipeline was operational at the time, but the incident raises further questions about Europe’s energy supply.

“These leaks kill any hope that this pipeline could help get through this winter. This is not an escape hatch for our European allies,” said Chatterjee, who is now a senior adviser at law firm Hogan Lovells. “This is going to be a problem for several winters to come.”

European natural gas futures rose this week on the back of the pipeline explosion, although they have since rallied. However, energy prices have reached alarming levels that threaten to push the European economy into recession.

In recent years, Europe has also shut down coal-fired power plants and nuclear power plants, leaving it more dependent on Russian natural gas.

But after Russia invaded Ukraine, European officials scrapped plans for Nord Stream 2, a pipeline that would have delivered large quantities of gas to Western Europe. And then, this summer, Russia cut off gas flows from Nord Stream 1, apparently in retaliation for harsh Western sanctions.

Chatterjee would not say who might be behind the pipeline explosions or their motivations, although he admitted it is “very clear” that Russian President Vladimir Putin is “weaponizing the gas”.

“This is another example of why it is so dangerous to be tied to a potential opponent and have limited options,” he said.

Russia has denied hitting the pipelines, calling the accusation “predictably stupid and absurd.” Moscow has also launched its own investigation.

Still, some on Wall Street believe Putin’s fingerprints are all over the mysterious pipeline explosions.

“We see this week’s possible submarine sabotage of the Nord Stream 1 and 2 pipelines as a warning to the West that no infrastructure is safe and that the Russian leadership is ready to adopt a ‘burn-to-the-ground’ strategy to get the West to stop supporting Ukraine and sanctions,” wrote Helima. Croft, head of global commodities strategy at RBC Capital Markets, in a note to clients.

Croft, a former CIA analyst, warned that the risk of further Russian-sponsored disruptions to energy supplies remains at a “DEFCON 3 level,” including potentially holding off the country’s oil exports.

“We believe more asymmetric and disruptive actions are coming as we head into the winter,” Croft wrote. “This appears to be an existential struggle for the Russian leader, and a failure in Ukraine could have very damaging consequences for his professional and personal security.”