Russian gas to Europe is on the slow road to zero
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By Pierre Briancon
BERLIN, Nov 22 (Reuters Breakingviews) -The year-end closure of a key Ukrainian pipeline transporting Russian gas to Europe marks the symbolic end of the continent’s dependence on Moscow’s energy. And the vague possibility of a ceasefire raised by the election of Donald Trump to the U.S. presidency will not change the European Union’s energy equation much. From an economic viewpoint, it won’t need to switch Russian gas back on. Politically, it is unlikely to want to.
Gas pumped into Europe via Ukraine for nearly a century will stop flowing at the end of the year when Kyiv’s transit contract with Moscow expires. For 2023, that accounted for 4% of the 3,250 terawatt-hours of EU gas imports, according to Bruegel, with total Russian inflows including from other pipelines and liquefied natural gas (LNG) amounting to 463 TWh, or 14%. In 2021, Russia constituted 42% of EU gas imports.
Structural changes since then have reshuffled the gas market, and Moscow has lost the twin competitive advantages of price and certainty it had for decades. Initiatives like 2022’s REPowerEU to build out European green power came about because President Vladimir Putin’s shock Ukraine invasion belatedly proved to Europe he was no longer a reliable partner. Meanwhile the Russian LNG industry, hit by sanctions, faces hard-to-explore Siberian fields and transport barriers that may decrease its competitiveness.
European storage capacities are already 95% full and will help the continent deal with the Ukraine switch-off in the coming months. Beyond 2025, additional deliveries of LNG will come from the U.S., Asia or North Africa. That’s in the overall context of declining EU gas imports, because Europe has cut its usage and increased consumption of renewable energy.
The EU therefore has the means to deal with the disproportionate impact of the Ukraine shutdown on Austria, Hungary and Slovakia, who derive 65% of their gas demand from the Ukrainian pipeline.
The upshot is that Europeans look on track to reach their non-binding target of weaning themselves off their dependence on Russian gas by 2027, including LNG. Having gone to all that trouble, they would have no incentives to go back to such an unreliable partner – even if it peddles its gas at a big discount.
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CONTEXT NEWS
The United States imposed new sanctions on Russia’s Gazprombank on Thursday, the Treasury Department said on Nov. 21.
The move effectively kicks Gazprombank out of the U.S. banking system, bans its trade with Americans and freezes its U.S. assets.
Gazprombank is partially owned by Kremlin-owned gas company Gazprom.
Supplies of Russian gas to Europe via Ukraine may completely stop from Jan. 1, 2025 after the current five-year deal expires, as Kyiv has refused to negotiate the new terms of the transit with Moscow during the war.
Graphic: EU gas imports from Russia have fallen sharply since 2021 https://reut.rs/4fQj6mC
Editing by George Hay and Oliver Taslic
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