Russia shuts down Nord Stream 1 pipeline

This is an audio transcript of the FT News Briefing podcast episode: Russia shuts down Nord Stream 1 pipeline

Marc Filippino
Good morning from the Financial Times. Today is Thursday, September 1st, and this is your FT News Briefing.

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This show is all about Europe and the war in Ukraine. First, we’ll talk about Russia’s decision to cut off gas flows to Europe. Then the EU’s decision to cut off tourist flows to the bloc. Plus, our defence and security correspondent John Paul Rathbone will tell us about Ukraine’s new counter-offensive. I’m Marc Filippino, and here’s the news you need to start your day.

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Russia says it’s just doing maintenance. But the three-day shutdown of the Nord Stream 1 gas pipeline to Europe is seen as another move by Moscow to squeeze Europe as winter creeps closer. Moscow has been restricting gas supplies over the past three months, and in that time, gas prices have more than doubled. But the FT’s David Sheppard says this latest move wasn’t a surprise.

David Sheppard
It was announced that this was coming last week. Though, we did see gas prices spike after that point. You know, there’s multiple reasons that gas prices are spiking. It’d be dangerous to try and attribute that solely to the announcement of the shutdown. So it wasn’t a complete surprise, but we have seen additional steps that have come from Russia in recent days that have kept people on edge. There has been a contract dispute with France’s Engie who have seen supplies from Russia cut at this point, disputes over whether they’re paying the correct amount of gas and so on. This all feeds into this atmosphere of, you know, the weaponisation of gas supplies and just the general breakdown in relations we’re witnessing right now.

Marc Filippino
So, David, gas prices have actually fallen this week. What kind of impact will this shutdown have on the market? Will it push prices back up again?

David Sheppard
If the shutdown is prolonged, prices will likely rise again. At the moment, the market’s looking at this and saying, OK, prices spiked in advance of the shutdown. It’s almost like the classic trading thing of buy the rumour, sell the fact, right? The prices moved in advance of the shutdown and now the shutdown is here. At the moment, the market is pricing in the expectation that it will probably come back within three days or so. Russia’s methods of squeezing supplies to Europe are more subtle than just saying everything’s offline, shut it all down, it’s gone. Because Russia, many people in the industry and the gas market believe, wants to retain leverage. If you cut supplies entirely, you lose that leverage over Europe, the countries that you sell to in Europe.

Marc Filippino
David Sheppard is the FT’s energy editor.

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Yesterday, EU foreign ministers agreed to suspend a long standing visa agreement with Russia. This will make it harder for Russians to visit Europe and its free travel zone. The FT’s Henry Foy covered the ministers meeting in Prague. Right after it ended, he filed a story to the FT, walked over to a soundproof booth and gave us the lowdown. Hi, Henry.

Henry Foy
Hey, Marc.

Marc Filippino
So, what exactly happened in Prague?

Henry Foy
So today, the older foreign ministers from the EU sat down to talk about how they’re going to deal with what eastern member states states that border Russia say is a challenge to their national security, which is hundreds of thousands of Russian tourists that have entered the EU through their countries on land because flights are grounded as tourists since the war in Ukraine began. What I reported last week was that they were going to agree to rip up this visa facilitation agreement that the EU has with Russia. It’s been in place since 2007, which basically makes it easier and cheaper for Russians to get visas that’s now been ripped up as we reported. And again, what I reported this morning, which is that the member states had said to the EU, look, either you guys support us in bringing in measures to make the border less porous or we’re just going to do them anyway and you’re just going to have to live with the consequences. So today the EU, the 27 countries, agreed with those five border countries — Poland, Latvia, Lithuania, Estonia and Finland — and said, OK, we’re ripping up the visa deal. That’s going to mean Russians have to pay a lot more money, might take a lot more time to get their visas. It’s going to reduce the number of visas we give out. And you can bring in national measures on your borders that will slow or even in some cases stop the entry of Russians into your territory.

Marc Filippino
So, Henry, who is this punishing? Is this punishing Vladimir Putin for invading Ukraine? Because it doesn’t seem like this has any effect on him personally.

Henry Foy
Well, that’s right. And that’s why these measures really are a Rubicon crossing moment for the EU. Up until now, western sanctions have targeted big business, the Putin regime, oligarchs. These measures directly target ordinary Russians, upper middle-class Russians, Russians with enough money to holiday in the EU, but ordinary Russians nonetheless. And what ministers have said up until today and indeed since this deal was announced, was, look, while the Russian government is conducting war crimes and unspeakable atrocities in that country, it’s not OK for ordinary Russians to be enjoying the beaches, the bars, the town squares of Europe and acting like it’s business as usual. And these states do say that there is a potential national security risk from these tourists. But in general, the vibe seems to be they just don’t like them being around while their government is waging an illegal war.

Marc Filippino
Is there any pushback from EU countries who don’t want a complete ban?

Henry Foy
Yeah, and I think it’s really important to note that this really is a big political victory for those five eastern states. France and Germany, traditionally the two biggest and most influential powers in the EU, had argued against what they called wide sweeping changes to the EU’s visa regulations and indeed said that we should be clever about Russian visas. We should use them as a leverage against Moscow rather than just all out banning them. So really interesting that actually the EU has this time sided with the eastern states and perhaps significantly showing a more and more hawkish side for the future. But we wait to see what the next round of sanctions will bring and whether the EU’s policy will continue to target ordinary Russians.

Marc Filippino
Henry Foy is the FT’s European diplomatic correspondent. Thanks, Henry.

Henry Foy
Thanks a lot, Marc.

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Marc Filippino
This week, Ukraine launched a counter-offensive in the southern part of the country. It’s trying to take back the city of Kherson from Russian control. This is Ukraine’s first major counterattack since the start of Russia’s assault on the country in February. To find out more, I’m joined by the FT’s John Paul Rathbone. He’s in Ukraine. Hi, JP.

John Paul Rathbone
Hi there.

Marc Filippino
So JP, I want to talk about Kherson, but first you’re in Ukraine right now and specifically you’re in the capital of Kyiv. What’s it like there?

John Paul Rathbone
Well, it’s a beautiful city. It’s late summer, clear skies. The bars are full. There are restaurants that are fairly busy. I went, I walked down Khreshchatyk St, which is one of the main thoroughfares on Sunday, and there were people breakdancing and busking and singing. And I was talking to some of the people there and they had interesting reactions. One woman told me, I hate this music. She was talking about the breakdancing and the hip hop. I think it’s great these kids are going on, but I also did understand what’s going on. And there was another man who was cradling his head in his hands and saying, I hate this, I hate this don’t they know there’s a war going on. And then there was a younger person who was saying, it’s important that we all lead our lives. Life has to go on. The economy has got to move. There’s not an obvious sense of war. There’s some smashed up buildings on the outskirts, but not an obvious sense of fighting, which is going on somewhere else in the distance.

Marc Filippino
And of course, hundreds of miles to the south of you, there’s this big counteroffensive going on. Ukraine’s trying to take back the city of Kherson. What do you know about this so far?

John Paul Rathbone
So Kyiv and Ukrainian officials have been talking about a counteroffensive for a long time, couple of months, and nothing seemed to happen. But then this week, on Monday, the army said they were launching a counter-offensive on Kherson, which would be Ukraine’s first serious counter-offensive since the war began. And there’s something of an operation blackout. So we don’t really know what’s happening, but there’s lots of images, hard to verify on social media, and there is definitely something afoot. And there would be, it’s a major move.

Marc Filippino
Now, can you remind us how important Kherson is? Why would it be such a critical city for Ukraine to recapture and for Russia to hold?

John Paul Rathbone
Well, it’s got symbolic significance and political significance because it was the first city that was captured. And it’s also got military strategic significance. It stands in between the Crimea, which is Russian-held, and Odesa, this key port, which belongs to Ukraine. And it’s got a commanding position that basically dashes Russian, any Russian hopes of capturing Odesa and consolidating its control of the Black Sea coast. And it also has a commanding position strategically over the Crimea. So it opens lots of possibilities for Ukraine and shuts down quite a few possibilities as well for Russia.

Marc Filippino
So realistically, does Ukraine have a shot at retaking Kherson?

John Paul Rathbone
So the Ukrainians have a slight edge in terms of manpower, although not in equipment and heavy weaponry. They’ve been following quite an unusual tactic. This isn’t going to be a sort of sweeping world war to manoeuvre with lots of tanks and artillery and planes. It’s quite a different approach where the Ukrainians have basically tried, sort to strangle the Russians by using highly precise artillery and missile strikes on their supply lines and infrastructure. So that’s the approach to kind of strangle the Russian troops, corrode their effectiveness until they sort of lose the will to fight, and retreat. That’s the theory, more or less as we understand it.

Marc Filippino
John Paul Rathbone is the FT’s defence and security correspondent. He’s in Ukraine right now covering the conflict. Thanks, JP.

John Paul Rathbone
Thanks.

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Marc Filippino
You can read more on all of these stories that at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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