Why a gas pipeline in Russia could affect your phone bill

When you see your mobile bill rise this year, you probably won’t blame Russia for deploying 100,000 troops at its border with Ukraine.

But the two events are linked by Germany’s refusal to approve a new Russian gas pipeline.

And we had proof of the impact on Wednesday. The Office for National Statistics revealed that UK inflation hit 5.4% in the 12 months to December, a sign that these huge geopolitical events are starting to affect our personal finances at home.

And their impact emerges in an unexpected location: at the mouth of the River Medway in Kent.

In the 17th century, a chain stretched across the river to defend the region against invading ships from Europe – although the county’s history, as the last place in the UK to have been occupied by a foreign army, perhaps suggests the defence was not all that effective.

Today, it is on the frontline of a very different type of invasion from overseas: high prices.

It is the most visible entry point for a wave of inflation that has now reached a 30-year high. What does that inflation look like? Huge tankers, each carrying enough liquid natural gas to meet a third of the UK’s needs for a day.

This valuable cargo will be unloaded at London Thamesport and delivered to energy companies which have paid record prices for the gas, much of which was fracked in the US. In fact, one of these ships was on its way across the Pacific to China, having passed through the Panama Canal, when it was rediverted to the UK where buyers were willing to pay 25% more for its cargo.

And that premium will be passed on to us, energy customers; if not now, then in April when the energy price cap is increased.

So what has this got to do with the build up of Russian troops on its border with Ukraine – and how will it affect your phone bill?

Well, while the UK actually sources very little of its gas from Russia, that is not the case for the EU, which gets about half of its gas from the country. Most of the rest comes from Norway and Algeria.

But that gives Russia control of the market, which means it can effectively set the price that the rest of us have to pay. A new pipeline, Nord Stream 2, has been built to increase the amount of gas Russia can send to Europe. But even though construction has been completed, gas has not started to flow because that would require regulatory clearance from Germany and the EU.

However, Germany has warned that it could block that approval if Russia re-invaded Ukraine, an invasion many in the international community fear Vladimir Putin may be preparing for – although Moscow denies it.

Meanwhile, energy prices are continuing to rise, pushing inflation well above the Bank of England’s 2% target. And by April, when the energy price cap increases, it is likely to be more than three-times higher than that target.

And that will impact your phone bill.

Buried in the small print of your contract is a clause that allows the network provider to increase prices in line with the old retail price index, which is already at 7.5%.

And the price increases can be felt elsewhere too. Kati Ramsden runs Bare Bazaar independent food store in Ashford, 40 miles away from the mouth of the River Medway, where those cargo vessels are unloading. She has been forced to relabel a lot of the products she sells to account for the price rises from her suppliers.

“This morning I had to put up demerara sugar from 25p to 38p [per 100g] just to suck up the price increase,” she said.

Meanwhile, the cost of a bag of pasta had increased from £1.50 to nearly £2.00, she said.

“It could make a difference to a customer because their wages aren’t going up,” she said.

So while these vast global currents cause sea changes abroad, the ripples are being felt much closer to home.(BBC)

  • PHOTO: Gas pipeline