What Next for Russian Gas in Europe: 5 Key Questions

Russian pipeline state has stopped flowing to Europe done Ukraine arsenic of the New Year, marking the extremity of a decades-long arrangement.

Moldova is the main unfortunate of the move, with its breakaway portion of Transnistria suffering an vigor crisis. And though EU is not astatine hazard of an vigor shortage, it mightiness look higher state prices. 

What happened? 

Russia stopped sending pipeline state to European countries done Ukraine, a proviso way utilized for decades, from Jan. 1 aft Kyiv refused to renegotiate the transit woody owed to Moscow's full-scale invasion. 

Russia had utilized the Ukraine transit enactment to nonstop astir 50% of each its pipeline state exports to Europe, chiefly to Moldova, Slovakia, Austria and Hungary. 

Who is the main victim? 

Moldova's breakaway portion of Transnistria, which relied solely connected Russian gas, has been hardest deed by the extremity of Ukraine's transit. 

Russia chopped disconnected each supplies to Moldova, citing some the lack of ability to transport state done Ukraine and the debt allegedly owed to Russian state exporter Gazprom by Moldova's Moldovgaz. Chisinau dismisses these debts. 

As a result, Transnistria is present successful the midst of an energy crisis, with vigor and energy supplies severely affected. 

Although Moldova due imports its ain state from the EU, it is besides impacted by the crisis. 

First, immoderate of Transnistria's neighboring settlements are connected to the Transnistrian vigor strategy and truthful endure from the crisis. Second, Moldova itself inactive gets astir of its energy from the gas-fired Moldavskaya GRES powerfulness works successful Transnistria. 

Several solutions to the situation exist.

Transnistria could bargain state from the EU market, but this volition beryllium costly and volition apt person to beryllium subsidized by either Moldova oregon Russia. 

Another mode retired of the situation would beryllium for Russia to resume supplies to Transnistria through Turkey, though portion of that pipeline inactive passes briefly done Ukrainian territory. 

What astir the EU? 

No state shortages are expected successful EU countries, though alternate sources volition beryllium much costly than nonstop pipeline supplies via Ukraine. 

Markus Krug, lawman caput of state section astatine Austria’s regulator E-Control, said that helium did not expect disruptions due to the fact that of Austria’s reserves and provisions for alternate supplies. 

Prices mightiness emergence temporarily successful January but volition apt driblet again erstwhile the marketplace sees that things are working, Krug added.

Slovakia estimated the losses for its system from the Ukraine transit extremity astatine 177 cardinal euros ($184 million) for receiving state done alternate routes.

Alternative state supplies are apt to come mainly from U.S. liquefied earthy state (LNG). 

North America's determination LNG accumulation is set to double by 2024, with 2 caller U.S. LNG works lines with an yearly capableness of 36 cardinal cubic meters — much than treble what Russia sent via Ukraine successful 2024 (about 15.4 bcm) — soon to beryllium operational. 

EU state prices could emergence to 70 euros per megawatt-hour (MWh) successful 2025 from astir 50 euros/MWh astatine the extremity of 2024 arsenic supplies tighten, Reuters cited Francisco Blanch, caput of commodities and derivatives probe astatine Bank of America, arsenic saying. This compares with mean EU state prices of 17.58 euros/MWh successful 2015-2020, Reuters said. 

Higher energy costs are often cited arsenic a crushed for the EU's weaker concern output, which was astir 1.4% little successful 2024 compared to 2021 and is acceptable to decline by 0.7% successful 2025 compared to 2023.  

How overmuch does Russia lose? 

Gazprom's Ukrainian transit accounted for astir 16% of its export portfolio, which is simply a "noticeable but not cardinal volume," expert Sergei Vakulenko said.

Russia stands to suffer astir $4-5 cardinal successful revenues from the extremity of Ukrainian transit, though these calculations are highly tentative. For example, the state Russia supplied to Moldova via Ukraine (about 2 cardinal cubic meters) had gone to the pro-Russian portion of Transnistria and was apt sold astatine steep discounts oregon adjacent for free.   

From a longer-term perspective, the nonaccomplishment of the Ukrainian transit was not a abrupt event, but different nail successful the coffin of Russia's vigor commercialized with Europe. 

While Russian pipeline state accounted for 31% of gross European proviso and state supplied via Ukraine for 8% successful the pre-invasion twelvemonth of 2021, the respective figures had fallen to 9% and 4% by 2024.

Before the extremity of the Ukrainian transit, Russia had already chopped disconnected state supplies via the Yamal pipeline done Poland and the Nord Stream pipeline done the Baltic Sea, successful summation to halving the volumes of state supplied via Ukraine since 2022. 

Going forward, Russia volition request to absorption connected expanding the logistics to proviso pipeline state to China and Central Asia, arsenic good arsenic shipping LNG to Europe and much globally. 

Which European countries inactive person Russian gas? 

Even aft the Ukraine transit, immoderate European countries proceed to person Russian gas. 

Serbia, Bosnia and Herzegovina, North Macedonia, Hungary and Greece continue to person Russian pipeline state via Turkey, portion EU countries import Russian LNG. 

The measurement of Russian LNG deliveries to the EU hit 17.8 cardinal tons successful 2024, up much than 2 cardinal tons from 2023 and the highest successful years, according to figures from expert steadfast Rystad Energy.  

That measurement translates to astir 24.2 cardinal cubic meters of gas, compared with 49.5 cardinal cubic meters the EU receives via pipelines successful 2024, Rystad Energy said. 

So far, the EU has not imposed immoderate restrictions connected the acquisition of Russian LNG.

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