Russia is said to be pulling out of the European market much faster because it can find alternative markets in Asian countries. Liquefied natural gas (LNG) from the United States (US) is expected to reach the European Union (EU) within weeks to replace Russia. Oleg Tyapkin, head of Russia’s State Department for European Affairs, stated that “Washington aims to take Russia out of the European gas market, and its statements that Germany is ready to give up Russian gas confirm this.” Noting recent developments, Tyapkin said there are signs that the US is aiming to take Russia out of the European gas market: failure to approve the launch of the North Stream 2 pipeline, Gazprom pressure on European subsidiaries, the nationalization of the Rosneft assets in Germany and the sanctions that made it impossible to repair North Stream 1.[1]
Gas prices in Europe have dropped sharply in recent weeks. For the first time since June 24, 2022 (November 17, 2022), the cost of November gas supplies has fallen below $1,400 per thousand cubic meters. Fuel prices in Europe have been declining steadily over the past month and a half, driven by concerns over the transition to the winter period. In this case, one major factor is the fact that underground gas storage facilities (UGS) in Europe have been filled earlier than planned and that the US is continuing to increase LNG supply.
European countries have been able to provide almost 90% of their underground gas storage facilities through the spring and summer and the fuels they have provided from third countries. However, it is only mentioned that spending the winter with reserves in the underground facilities is insufficient. However, the significant flooding of underground storage facilities makes European energy consumers feel safer and makes prices drop. It also reduces the need for Russian gas.
In 2021, according to the International Energy Agency (IEA), Europe imported about 140 billion cubic meters of natural gas from Russia through pipelines. Another 15 billion cubic meters were supplied as LNG from Russia. Until recently, Russia’s share of Europe’s “blue fuel” imports was 45%. About 40% were exported via gas pipelines and 5% by liquefied through LNG tankers.[2]
Many EU countries have significantly reduced their dependence on Gazprom. Italy, for example, opted to buy gas from Algeria, Azerbaijan, and Qatar. Italy reduced the share of Russian gas imports to about half of the state’s total needs or 21%. Spain and Portugal, which were not previously highly dependent on Russian gas, have begun to act as natural gas exporters to other EU countries in the current economy. This is because all the main terminals for acceptance and processing of LNG are located on the Iberian Peninsula.
In addition to the other European countries mentioned, France has recently launched three LNG terminals to allow for the regassing of liquefied fuels. Paris gets most of its gas from Norway via a pipeline to the port of Dunkirk via the English Channel (English Channel). Denmark and Sweden are also largely self-sufficient in their energy needs. Türkiye reduced gas imports from Russia by 37% in July 2022, and also increased hydrocarbon supplies from Iran and Azerbaijan. Thus, according to Gazprom, raw materials supplies to countries other than the Commonwealth of Independent States (CIS), which fell to most European consumers, fell by about 60 billion cubic meters or 40% in 9 months.[3]
Mainly, LNG of American origin has become the main substitute for Russian gas in the EU. Geoffrey Pyatt, Deputy Assistant Secretary of the US Bureau of Energy Resources, explained that Washington provides Europe with 70% of all LNG exports. Washington, he says, is mobilizing its resources for LNG exports to meet the needs of Europe. The US will thus become the world’s largest LNG supplier in 2022. Pyatt also assured that Europe, “which significantly strengthens energy security”, would successfully survive the winter period “with US guarantees and robust support.”[4]
For this reason, the authorities in Russia, gas industry experts, and economists are looking for alternative directions to energy supplies that will help put a brake on the overall decline in natural gas production. Prospects for the construction of new gas contracts with China and Russia in conditions acceptable to Russia so far have been unrealistic. It will take many years to redirect Russian gas to China and other Asian countries. Moscow is believed to have maintained a weak position in the gas talks with Beijing so far. Russia would hardly be able to charge a fair price to the Chinese.
As a result, the European energy market seems to be dominated by Russian substitutions, Europeans avoiding fear of a Russian gas crisis, and Russia found it difficult to find alternative consumer markets for the European market, which it lost.
[1] “МИД РФ: Вашингтон поставил задачу вытеснить Россию с газового рынка Европы”, Rossiyskaya Gazeta, https://rg.ru/2022/10/06/mid-rf-vashington-postavil-zadachu-vytesnit-rossiiu-s-gazovogo-rynka-evropy.html, (Date of Accession: 17.10.2022).
[2] “Европа импортозамещает «Газпром»”, Kommersant, https://www.kommersant.ru/doc/5240309, (Date of Accession: 17.10.2022).
[3] “Газпром за 9 месяцев 2022 г. снизил добычу газа на 17,1%, поставки в дальнее зарубежье – более чем на 40%”, Neftegaz, https://neftegaz.ru/news/companies/753067-gazprom-za-9-mesyatsev-2022-g-snizil-dobychu-gaza-na-17-1-postavki-v-dalnee-zarubezhe-bolee-chem-na-/, (Date of Accession: 17.10.2022).
[4] “В США раскрыли долю поставляемого в Европу СПГ”, Lenta.Ru, https://lenta.ru/news/2022/10/16/spg/, (Date of Accession: 17.10.2022).
