Europe wants to buy Russian gas again. Now “for the sake of Ukraine” – The Economist
17 February 16:30
Some European officials are already considering a return to purchasing Russian gas under the pretext of facilitating peace talks with Russia. This is stated in an article by The Economist, "Komersant Ukrainian" reports.
According to the publication, gas prices at the European trading hub TTF have reached the highest level in two years – 58 euros per megawatt-hour. The situation was further exacerbated by Donald Trump’s statement of February 12 about the immediate start of negotiations to end Russia’s war against Ukraine, which financial markets took quite seriously.
Therefore, European officials are already considering the resumption of Russian gas supplies as a way to reduce energy costs and revive European industry. According to Goldman Sachs, the end of the war could lead to a 0.5% increase in European GDP, with most of this growth being driven by cheaper natural gas.
All for the sake of Ukraine
Supporters of restoring gas relations with Russia have even put a moral and ethical basis for this intention – it turns out that this step will be openly pro-Ukrainian. After all, they say, it could encourage Russia to negotiate peace and comply with its terms.
Hungary and Slovakia are already actively promoting this idea. Even the potential German Chancellor Friedrich Merz, although he stated that it is impossible to return to Russian gas “for now,” noticeably refrained from completely ruling out such a possibility in the future.
Such a decision would represent a striking turn in European politics. The European Commission is now on record as saying that it “does not see any link” between the resumption of Russian supplies and peace talks on Ukraine. Moreover, the EU’s stated goal is to completely stop importing Russian gas and oil by 2027.
For Russia, this means significant financial losses – the share of gas sales in the federal budget has already dropped from 13% to 8%. In 2023, Gazprom recorded losses for the first time since 1999.
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How will Russian gas be delivered?
The resumption of supplies via the Ukrainian route, which were suspended at the beginning of the year, could reduce TTF prices by a third of their recent peak. MUFG estimates that by 2026, prices could be further halved if flows through Ukraine increased from the low levels of 2023.
Ukraine categorically refuses to extend the agreement with Russia, but workarounds are already being considered. Slovakia’s national gas company is setting up a subsidiary in Ukraine and applying for a transportation license, which could allow supplies from Russia.
There is also the more radical option of resuming sales through the Nord Stream 1 pipeline, which previously transported 55 billion cubic meters a year to Europe, and even the possible commissioning of Nord Stream 2. However, the obstacles are significant: Germany, which has already suffered from its previous openness to Russian energy, must give its consent, and three of the four Nord Stream pipes need to be repaired after being sabotaged.
The Trump factor may also affect the situation. On the one hand, the US president is interested in Europe buying more American liquefied natural gas. On the other hand, Donald Trump is seeking the Nobel Peace Prize, and the return of some Russian gas as part of a peace deal may seem like an acceptable price.
Europe and gas
As of early 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 remained Russian. The EU currently receives only 10% of its gas from Russia
At the same time, some EU countries, such as Hungary and Slovakia, remain dependent on Russian gas. These countries’ contracts with Gazprom provide for gas supplies through the Ukrainian gas transportation system. Austria has signed a contract for gas supplies until 2040, but it has already declared that it has become independent of Russian fuel.
After both Nord Stream and the Ukrainian gas transportation system are shut down, 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 204 billion euros worth of energy from Russia.
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