‘Scary situation’ says former US regulator on pipeline leaks

The apparent sabotage of Nord Stream gas pipelines leading out of Russia underscores Europe’s enormous 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 telephone interview. “This is a risky, risky place to be.”

US and Western officials said the unexplained explosions and leaks on Nord Stream 1 and Nord Stream 2 have marks of sabotage. None of the pipelines were currently in operation, but the incident raises more questions about Europe’s energy supply.

“These leaks kill any hope there was that this pipeline could help them this winter. This is not a way out for our European allies,” said Chatterjee, who is now a senior adviser at the law firm Hogan Lovells. “This will be a problem for several winters to come.”

European natural gas futures soared this week on the pipeline explosion, although they have since retreated from their highs. Still, energy prices have reached crushing levels that risk pushing the European economy into recession.

“So dangerous”

In recent years, Europe has also closed coal-fired power plants and nuclear plants, leaving it more dependent on natural gas from Russia.

But after Russia invaded Ukraine, European authorities canceled plans for Nord Stream 2, a pipeline that was supposed to supply large amounts of gas to Western Europe. And then, this summer, Russia cut off gas flows through Nord Stream 1, apparently in retaliation for tough Western sanctions.

Chatterjee declined to say who might be behind the gas pipeline explosions or what their motivations were, though he admitted it is “very clear” that Russian President Vladimir Putin is “supplying gas”.

“This is yet another example of why it’s so dangerous not only to be stuck with a potential opponent, but to have limited options,” he said.

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

“Existential Battle”

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

“We see this week’s likely undersea sabotage of the Nord Stream 1 and 2 pipelines as a possible wake-up call to the West that no infrastructure is safe and that the Russian leader is prepared to adopt a ‘burn it all to the ground’ strategy to try to make the West to renounce its support for Ukraine and sanctions,” Helima Croft, head of global commodities strategy at RBC Capital Markets, wrote in a note to clients.

Croft, a former CIA analyst, warned that the risk of further power outages caused by Russia remains at “DEFCON 3 levels”, including potentially holding back the country’s oil exports.

“We think more asymmetrical and disruptive acts are coming as we approach winter,” Croft wrote. “This appears to be an existential battle for the Russian leader, and defeat in Ukraine could have potentially very adverse implications for his professional and personal security.”