Russia’s gas transit contract with Ukraine expired on December 31, 2024, and Kyiv has refused to negotiate a new deal. This decision is supported by the European Commission, even though it results in a loss of 5% of Europe’s gas supply.
While the ongoing war between Russia and Ukraine may have led many to expect a halt in gas flow, Russia continued supplying gas. In fact, despite the suspension of most Russian pipeline gas to Europe, 2024 saw a record import of 21.5 billion cubic meters (bcm) of liquefied natural gas (LNG) from Russia, accounting for 19% of Europe’s LNG imports.
Recent data from Spain reveals that Russia remained Europe’s second-largest LNG supplier, contributing 21.3% of Spain’s LNG imports. The United States remains Europe’s top LNG provider, with 48% of total imports in 2024.
It’s also important to note that around 20% of Russian LNG sent to Europe is re-exported to third countries. This practice will be banned by EU sanctions starting in March.
Europe’s Strategy and Impact of Ukraine’s Gas Shutdown
In May 2022, three months after Russia’s invasion of Ukraine, the EU launched its REPowerEU plan. The goal was to reduce Europe’s reliance on Russian fossil fuels by diversifying energy sources. In 2021, 45% of the EU’s gas imports came from Russia. By 2023, that share dropped to 15%, although it slightly increased to 18% in 2024 due to higher LNG imports from Russia.
Despite these changes, the EU has not imposed sanctions on Russian gas imports. However, it has sanctioned the Arctic-2 LNG project and banned the reloading of Russian LNG in EU ports. The reduction in pipeline gas exports to Europe has been largely due to Russia’s actions, including demanding payments in rubles and the sabotage of the Nord Stream pipelines, an event still shrouded in mystery.
The European Commission is aware of the delicate balance in the global gas market. If Russian gas exports were sanctioned, it could cause prices to soar, similar to the energy crisis of summer 2022, which cost European governments an estimated €650 billion (£547 billion) in relief measures.
In 2024, Russian gas reached Europe through three routes: 30% via Ukraine, 31% via Turkey and the Turkstream pipeline, and 39% as LNG. By 2025, assuming Ukrainian transit is not restored, flows will be limited to Turkstream and LNG.
Price Volatility and Long-Term Strategy for Europe
The global LNG market remains tight, and a decline in Russian gas imports may expose Europe to continued price volatility. However, new LNG production projects are expected to come online by 2027, which could help Europe fully cease Russian gas imports by that time.
In November 2024, EU energy commissioner Dan Jørgensen suggested that Europe might end Russian gas imports by 2027. However, this will likely depend on continued efforts to improve energy efficiency, accelerate the transition to renewable energy, and reduce gas demand. A total ban on Russian gas is unlikely until the global LNG market is more stable.
Meanwhile, the U.S. has imposed additional sanctions on Russia’s oil and gas industry, complicating Europe’s energy choices. Former U.S. President Donald Trump has long criticized Europe’s reliance on Russian gas, so the EU may face tough decisions regarding its energy strategy.
Future of Russian Gas Exports: Two Scenarios
A study by the UK Energy Research Centre (UKERC) published in Nature Communications forecasts two possible scenarios for Russian gas exports.
The first, called “limited markets,” assumes that the EU will stop all Russian gas imports by 2027, and alternative export routes will be hindered by sanctions on LNG technology and lack of new pipeline capacity. This would occur if Russia and China fail to reach an agreement on the Power of Siberia 2 pipeline, limiting Russian exports to China to the 38 bcm Power of Siberia 1 route and a new 10 bcm pipeline from Russia’s far east.
The second scenario, “pivot to Asia,” assumes an agreement on Power of Siberia 2 and a rapid increase in LNG exports. Under this scenario, Russia continues exporting gas to Europe via Turkstream, and LNG imports face no restrictions.
The research also examines these scenarios under different global gas demand levels, which will be shaped by climate policies.
Overall, the study suggests that Russia will struggle to regain pre-crisis export levels. By 2040, Russian gas exports may have fallen by 31%–47% under the “limited markets” scenario, and by 13%–38% under the “pivot to Asia” scenario. Increased Chinese demand will not significantly improve Russia’s situation, as any shift to Asia will depend on China’s energy security and climate policies.
In late 2024, shares in Russia’s state-owned Gazprom fell to a 16-year low due to a $7 billion (£5.73 billion) loss in 2023 and canceled dividend payments. Geopolitical uncertainty over Gazprom’s ability to secure new export routes has also contributed to the decline.
Two Key Questions for the Future
The research raises two crucial questions about the future of Russian gas on global markets: Will the EU maintain its resolve and stop importing Russian gas by 2027, or will a cessation of Russia’s war on Ukraine lead to a reversal? Can Russia find new export routes and markets for its vast gas reserves?
These questions are closely related. If Russia increases pipeline exports to China, it could reduce China’s need for LNG imports, leading to a more liquid global LNG market for Europe to access, primarily from the U.S. Ironically, this could also reduce trade tensions between the EU and the incoming U.S. administration.
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