Stanislav Zhukov has given an interview to Interfax

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The outcome of the talks between the Russian and Hungarian leaders and agreements to boost gas supplies to Hungary prompted a torrent of criticism in Europe and the need to take another look at the gas issue in Europe, or rather the gas crisis, primarily from a political point of view. Stanislav Zhukov, Deputy Director of the Institute of World Economy and International Relations (IMEMO) and a well-known energy expert, discusses the situation in an interview with Interfax Special Correspondent Stanislav Terekhov.

Oil and gas is of such importance in the global economy and in energy that it is hard to separate the influence of economic and political factors, but we can try.

The policies of regulators are behind this severest of gas crises in mainland Europe and in Britain. For two decades now regulators have consistently pursued a policy where the development of natural gas markets and the market for greenhouse gas emissions are secondary to the task of decarbonizing the electrical power industry. This has been the aim of the EU and UK climate and energy strategies, including the EU’s first, second and third energy packages.

Electricity and natural gas market models totally dominated by spot sales were created, and prices in any remaining long-term contracts are pegged to spot market prices. The result of this policy is that electricity and natural gas prices soared as soon as demand steadily began to exceed supply.

The European Commission and industry regulators responded to the crisis by emphasizing its random nature. At the same time non-systematic factors did come into play such as a shortage of wind – Britain has had its calmest spell since 1961; weak solar activity; a fire that affected the power transmission line between France and Britain; and a marked increase in demand for LNG in countries of the Asia-Pacific region where economic performance is still strong.

 Deputy Director of IMEMO Stanislav Zhukov: Gas crisis is obvious result of regulatory failure


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