New US sanctions hit European fans of Russian gas
27 November 2024 16:56
European countries are urgently looking for ways to continue paying for Russian gas after the unexpected US sanctions against Gazprombank, "Komersant Ukrainian" reports citing Bloomberg.
Until now, Gazprombank was exempt from sanctions because of the potential impact on the security of gas supplies to Europe. However, last week, Washington imposed restrictions on this bank, which is used by some Central European states to make payments to Moscow. This, accordingly, creates a risk that gas supplies to these countries will be cut off after December 20.
Although the US did not explain why it decided to impose these specific sanctions now, it is clear that the system of receiving and paying for Russian gas in Europe will undergo major changes.
Slovakia and Hungary, which are still dependent on Russian gas under long-term contracts with Gazprom, will be most affected. Hungary has already warned that US sanctions threaten the country’s energy security. Slovakia has not yet officially commented on the situation, but its largest gas company is actively seeking a solution to continue transit through Ukraine next year.
Austria could also be affected as it continues to receive supplies through Slovakia, even after its largest utility OMV stopped payments to Gazprom this month. Turkey, which supplies Russian gas to Europe through the Turkish Stream pipeline, is negotiating with the US for an exception that would allow it to continue using Gazprombank. This opens up the possibility for Turkey to become an intermediary for European companies.
There are several possible solutions to the situation. The United States could grant Gazprombank a general license for energy transactions or allow Gazprom’s clients to make payments through other Russian banks that already have the appropriate permits. It is also possible to grant limited authorizations to specific Gazprom clients.
The European Commission is closely monitoring the situation and is in talks with its American partners to minimize possible supply disruptions by December 20.
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Europe and gas
As of the beginning of 2022, the EU was 40% dependent on Russian gas. In 2021, 65% of the gas purchased by Germany was Russian. In the third quarter of 2023, only 12% of the gas imported by the EU remains Russian.
The current contract for gas supplies to Europe through the Ukrainian gas transportation system expires in December 2024. Both sides have made it clear that they are not going to extend it.
At the same time, some EU countries remain dependent on Russian gas, such as Hungary, Slovakia, and Austria. These countries’ contracts with Gazprom provide for gas supplies through the Ukrainian gas transportation system. For example, Austria signed a contract for gas supplies until 2040.
After both Nord Stream and the Ukrainian GTS are out of commission, Russia will be able to supply gas to Europe only through the Turkish Stream.
According to the Center for Research on Energy and Clean Air (CREA), since the beginning of the full-scale Russian invasion, the European Union has bought 207 billion euros worth of energy from Russia.
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