Where will the EU get its gas and LNG when it stops relying on Russian supplies? | DW News

Key Concepts

• EU Gas Import Ban: European Union's agreement to cease purchasing Russian gas, including pipeline and liquefied natural gas (LNG), by January 2028.
• Sanctions Package: Additional measures being compiled by the EU against Russia, aiming to counter circumvention of oil export sanctions.
• LNG (Liquefied Natural Gas): Natural gas that has been cooled down to liquid form for easier transportation and storage.
• Pipeline Gas: Natural gas transported through underground or underwater pipelines.
• FSRU (Floating Storage and Regasification Unit): A vessel used to receive, store, and regasify LNG.
• Interconnectors: Pipelines that connect different gas networks, allowing for the transfer of gas between countries.
• Vertical Corridor: An energy infrastructure project connecting Southern and Northern Europe, providing alternative gas supply routes.
• Market Integration: Harmonizing regulations and tariffs across EU member states to facilitate the efficient movement of gas.
• Shadow Fleet: A fleet of oil tankers operating outside of traditional shipping insurance and regulatory frameworks, often used to circumvent sanctions.
• Fungible: Interchangeable; in the context of LNG, it means that Russian LNG can be easily traded and redirected to other markets.

EU Agreement to Halt Russian Gas Imports

The European Union's energy ministers have reached an agreement to end their reliance on Russian gas, with a definitive ban on both pipeline and liquefied natural gas (LNG) imports set for January 2028 at the latest. This decision is part of a broader package of sanctions against Russia, which also includes measures to combat attempts to circumvent existing sanctions on Russian oil exports.

Opposition and Rationale

While the decision signals a strong intent to reduce dependence on Russian energy, Hungary and Slovakia have expressed opposition. European Commissioner for Energy and Housing, Dan Jorgensson, emphasized the importance of sending a clear signal that the EU will not be "blackmailed by Russia" and cannot continue to purchase expensive energy that indirectly funds Russia's war efforts. He acknowledged the preference for unanimous support but highlighted the broad consensus despite the reservations of two member states.

Current Import Landscape and Historical Context

Despite efforts to reduce dependence since Russia's full-scale invasion of Ukraine over three and a half years ago, the EU remains a significant importer of Russian energy. In the previous year, Russia accounted for one-fifth of all EU gas imports. Notably, the EU was the largest importer of Russian LNG in August, receiving almost half of Russia's exports, ahead of China and Japan. Similarly, while imports of Russian pipeline gas have decreased, the EU still leads as the largest importer, with Hungary and Slovakia being the primary recipients.

Reasons for Continued Russian Gas Imports

Tomas Waski, an expert on EU energy and climate policy, identified two primary reasons for the EU's continued import of Russian gas:

1. LNG Trader Contracts: Many LNG traders have secured long-term contracts for Russian gas, seeking the best prices. These firms are now "stuck with those contracts."
2. Pipeline Gas Dependence in Certain Countries: A few countries, particularly in Central and Eastern/Southern Europe, continue to accept Russian pipeline gas due to its low cost and existing long-term contracts. Waski pointed out that these countries have not prioritized diversifying their supply over the past decade, leaving them in a difficult situation. Hungary and Slovakia are identified as the main countries in this category.

Diversification Efforts and Challenges

Examples of Successful Diversification

Waski highlighted the efforts of countries like Germany and Poland to reduce their reliance on Russian gas. Germany has invested in four to five FSRU terminals, significantly increasing its capacity to import LNG (40 BCM). Poland has built a pipeline and an LNG terminal, with another under construction. These examples demonstrate that abandoning Russian gas is feasible with sufficient political will.

Challenges for Landlocked Countries

While landlocked countries like Slovakia and Hungary cannot build LNG terminals, they have alternative options, such as investing in interconnectors. Croatia, for instance, has offered to supply gas to Hungary via its pipeline and LNG terminal. However, Waski suggested that Hungary's current stance indicates a lack of political will to pursue such alternatives.

Broader Import Picture

Despite the focus on Hungary and Slovakia, Spain and the Netherlands are also significant importers of Russian gas. The question remains whether the EU can manage without these supplies if the ban is implemented.

The EU's Path to Phasing Out Russian Gas

Timeline and Negotiations

The decision by the Council of Ministers sets a deadline of January 1, 2028. However, the European Parliament is advocating for an earlier deadline of January 1, 2027, leading to ongoing "trialogue" negotiations to determine the final timeline.

Reduced Exposure to Russian LNG

Olga Kakova, Deputy Director for European Energy Security at the Atlantic Council's Global Energy Center, noted that Russian LNG currently constitutes about 10-13% of total EU imports, a significant decrease from 45% in 2021. She stated that there is an abundance of LNG available globally, with increasing production from the US, Middle East (Qatar, Oman, UAE), Mozambique, and Nigeria. Industry experts generally agree that the EU can manage without Russian LNG.

Energy Transition and Decreasing Gas Use

Kakova also emphasized that the EU is in the midst of an energy transition, focusing on renewables, nuclear power, and energy efficiency. This ongoing transition further supports the reduction in overall gas consumption and dependence on Russian supplies.

Geopolitical and Logistical Factors

Kakova explained that the continued reliance on Russian gas is a combination of geopolitical decisions and logistical challenges. While being landlocked presents limitations, some countries, like Hungary, made geopolitical choices to sign long-term contracts while neighbors diversified.

Market Integration as a Solution

Beyond physical interconnections, Kakova stressed the importance of market integration, including regulatory alignment and harmonized tariffs across member states. This integration would facilitate the efficient movement of gas throughout the region.

Impact of the Ban on Russia's War Financing

Limited Impact on Piped Gas

Kakova believes that the remaining piped gas flowing into Europe is minimal, with only a few BCM passing through Turkey. Therefore, the direct impact of banning this specific flow on Russia's war financing would be limited.

Addressing LNG and Oil Revenues

The greater concern lies with increasing LNG exports and oil revenues that Russia continues to generate. Kakova argued that a ban on Russian LNG access to Europe is a good first step, but due to LNG's fungible nature, Russian LNG could be redirected to other markets.

Targeting LNG Production and Components

To effectively impact Russia's revenue, Kakova proposed targeting Russian LNG projects directly, including the components Russia relies on from Western suppliers for its production growth plans. She stated that if these sources are not addressed, it will be challenging to prevent Russia from profiting from LNG sales to other markets.

Coordinated Sanctions on Oil

Similarly, Kakova called for cohesive and coordinated sanctions on the entire "shadow fleet" of oil tankers, not just a portion of them, to effectively curb Russia's oil revenues.

Conclusion

The EU's decision to ban Russian gas imports by 2028 marks a significant step towards energy independence and a response to Russia's aggression. While logistical and political hurdles remain, particularly for landlocked countries, the EU has demonstrated its capacity to diversify its energy sources. The effectiveness of the ban in impacting Russia's war financing will depend on comprehensive strategies that address not only direct imports but also the global trade of Russian energy commodities and the supply chains supporting their production.