So far it has been the red line not to cross: It is good to reduce imports, but avoid pulling the plug completely because of the danger of an unsustainable energy, industrial and social crisis for Europe. But the EU’s period of dependence on Russian gas is numbered: the ending year has seen further declines in imports, not only via pipelines but also of liquefied natural gas (LNG). Steps taken by bloc countries to find an alternative to Moscow are forcing the European Commission to consider imposing a full embargo on Vladimir Putin’s gas for the first time since the beginning of the war in Ukraine.
The hypothesis is being examined in Brussels, but there are at least two important issues that need to be resolved. The first of these relates to contracts. Last month, EU Energy Commissioner Kadri Simson underlined how EU countries could cut supplies from Russia in a “proportionate and targeted way” according to the new rules. Moreover, the British newspaper writes that the same rules provide a legal basis for European companies to terminate contracts with Russian gas suppliers without paying large compensation. financial times.
The other issue that needs to be resolved, which is much more complex and risky, is the impact of the possible embargo on Russian gas on energy prices in Europe. Following the increase in bills between 2022 and the beginning of 2023, prices gradually fell and are today at a tenth of the prices recorded at the peak of the crisis. EU countries may have storage levels well above the average of previous years, and diversification of gas supply (by pipeline and ship) together with planned investments in renewable energy sources is paying off.
In 2023, only 13% of the bloc’s total supply came from Russia; this rate was 40% in 2021. The decline in Russia’s LNG imports by ship was even more encouraging; This had somewhat offset the reductions in 2022. Nordic Stream. Countries such as Germany built LNG import terminals in record time and struck deals with other suppliers, especially in the Middle East. Austria, which is among the EU countries most dependent on pipeline flows, is also moving in this direction.
Will all these efforts be enough for Europe to rid itself of Putin’s hydrocarbons? Experts are divided on the issue. Baringa Partners consultancy director Peter Thompson told the Financial Times that pulling the plug “will mean some upward pressure on gas prices in Europe, but there shouldn’t be a huge price change.” Michael Stoppard, head of global gas strategy at S&P Global Commodity Insights, has a different view: “Governments and politicians are feeling more relaxed about the gas situation, which I continue to suggest is false comfort,” he said in an interview with a British newspaper.
Source: Today IT
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
