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Now, for the first time in 17 months, European natural gas futures prices have dropped below 50 euros per megawatt-hour (MWh), reaching the lowest level since September 2021, having plummeted by over 80% from the peak of 350 euros per MWh last August.

According to data, the Dutch TTF natural gas futures price has once fallen below 50 euros per MWh, and so far this year, the Dutch TTF natural gas futures price has dropped by about 35%!

This means that Europe is facing the most severe energy crisis in decades, which has now been completely lifted. This also means that Russia misjudged Europe's ability to adapt quickly as a gas buyer, and Russia's energy counter-sanctions against Europe last year have failed!

So why is it said that Russia has made the right move and placed the right bet? Let's continue to look down.

Let's first talk about why the price of natural gas in Europe has fallen?

1. The result of the US dollar interest rate hike.

Since last year, the US dollar has continued to raise interest rates, which has to some extent curbed the rise of global inflation. This week, inflationary pressures have further fueled market expectations for the Fed to continue raising interest rates, so the US dollar index continues to rise. Coupled with the significant increase in US commercial crude oil inventories, these factors have put pressure on international energy prices. In addition to the decline in European natural gas prices, New York oil prices have also fallen by 4.24%, and London Brent oil prices have fallen by 3.92%.

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2. Europe has ample natural gas reserves.

At present, the EU's gas storage facilities have reached 65%, far higher than the average level of the same period in the past five years. According to analysts cited by Bloomberg, the filling rate of European warehouses at the end of the entire winter may still be above 50%, twice that of 2021.

The accumulated inventory in European warehouses and new raw material supply sources have allowed Europe to get through most of the winter without energy or heating supply shortages and forced interruptions, and Europe has achieved diversification of energy supply.Additionally, the relatively warm temperatures in Europe this winter have not been as cold as imagined, creating favorable conditions for the decline in European natural gas prices. However, Europe has also paid a huge price for this. According to data from Reuters: The European Union has allocated a total of 681 billion euros for this, which is a huge cost.

Now that the European energy crisis has been resolved, it will further suppress Russian energy.

Since last year, the G7, the European Union, and Australia have agreed to set a price cap of $60 per barrel for Russian crude oil, prohibiting maritime insurance, financial, and brokerage services for Russian seaborne oil exceeding this level.

Now, this pricing measure has been extended to all Russian oil exports since February this year. For more expensive products such as gasoline, diesel, and kerosene, the price cap is $100 per barrel; for cheaper oil products such as fuel oil and naphtha, the price cap is $45 per barrel. At the same time, the European Union's sanctions banning the import of Russian oil products have also officially taken effect.

In response to Western sanctions, Russia has also restricted and then stopped most natural gas exports to Europe, threatening to use oil and other commodities for counterattacks. Russia plans to cut oil production by 500,000 barrels per day in March to retaliate against Western energy sanctions and push up oil prices.

However, after the West imposed a series of new sanctions, Russia faces more challenges in selling energy. Since energy is the main source of revenue for the Russian government's budget, this has led to a $25 billion deficit for the Russian government in January, and Russia's current account surplus plummeted by 58.2% to $8 billion that month.

In this way, it can be said that Russia did not gain the upper hand in this round, and it can be said that Russia misjudged the rapid adaptability of Europe as a gas customer, and the opposition was invalid. So why is it said that Russia made the right move?

That is because Russia, in order to completely resist Europe, now Russian Deputy Finance Minister Korolev has stated: This year, the Ministry of Finance will clear the euro share in the National Wealth Fund, and will only retain gold, rubles, and yuan.

This means that Russia will completely abandon the European market and shift its trade focus back to the Asian market. It can be said that this decision by Russia is the right move and the right bet, that is, "China-Russia cooperation." This move by Russia not only represents their understanding of the overall situation but also reveals their own helplessness.

1. Understanding the overall situation.Firstly, the economic development of Asia, led by China, has been nothing short of remarkable over the past few decades, especially during the pandemic, where China has emerged as a standout among global economies.

Last year, Russia's natural gas sales to India and China surged, which defied numerous predictions of decline and instead increased Russia's crude oil production by 2% to 10.7 million barrels per day.

Economist Daly stated: It is predicted that over the next 30 years, the global GDP weight will shift more towards Asia, and by 2050, the world's top five economies will be China, the United States, India, Indonesia, and Germany.

With such enormous economic potential led by China and recognized by global institutions, Russia, known as a fighting nation, certainly understands this point!

Moreover, China and Russia complement each other's resources and are interdependent. According to customs statistics, the trade volume between China and Russia in 2022 reached a record $190.2 billion, accounting for 3% of China's total foreign trade, an increase of 29.3% compared to the previous year. This means that Russia can only effectively counter Western developed countries like the United States and Europe by getting closer to China. Isn't this a wise move for Russia?

2. Out of necessity.

According to relevant data, in 2021, Germany was the largest export destination for Russian natural gas, accounting for 19.19%, Italy accounted for 10.38%, France accounted for 7%, and Poland accounted for 4.18%. Excluding Belarus and Turkey, the proportion of exports to developed European countries reached as high as 63.21%. In addition, 50% of Russia's oil exports went to Europe. Under this background, it is natural for Russia to hold a high reserve of euros.

However, Western countries have now excluded Russia from the international fund clearing system and have banned Russia from using dollars and euros for settlement. To put it bluntly, even if Russia holds euros now, they cannot be used.

The key is that the proportion of Russia's natural gas exports to Europe has also dropped to a single digit. In this situation, rather than waiting passively for death, it is better to take decisive action, clarify its position, clear out dollars and euros, and completely draw a line with the United States and Europe.

Finally, I want to say that Russia has cleared out euros and increased its holdings of the renminbi. At this point, no matter whether Europe sets a price limit on Russian natural gas or reduces the price, it is no longer important, because Russia has made the worst plans. "China-Russia cooperation" has a promising future, and this is the correct move made by Russia.