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Phasing Out Russian Pipeline Gas in Europe

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Gas at Last: Sanctioning Russian gas is no longer a taboo. The EU decision to ban the transshipments of Russian LNG destined to Asia via European ports is an important, albeit small, step to the fully phaseout of Russian natural gas. Most of the Russian LNG sales to Europe under long-term contracts will remain intact. This means that European consumers will keep sending around €8 billion per year to Russia. However, Russia will find it much harder to export to Asia as it relies on European ports and LNG tankers for much of its business. Unlike the oil sector where building a shadow fleet of vessels can happen fast and relatively cheaply, there are few available LNG tankers Russian companies can borrow. Neither has Russia enough gas transportation or liquefaction capacity to move its LNG sales on the Pacific coast. Hence, it would need to reroute the LNG shipments via the Arctic Sea, a treacherous journey using special icebreakers.

Still in the game:  Despite efforts by major European natural gas consumers like Germany and Italy to reduce dependence on Russian gas, it still accounts for 15% of the EU’s total gas imports, and in May, 2024, it overtook the U.S. LNG supply to Europe, which makes up 14% of the continent’s gas import mix.

Apart from the Russian LNG exports to Europe, natural gas flows through TurkStream, which delivers Russian gas to Greece, the Western Balkans, and Hungary, remain unchanged, thus making it the largest source of Russian gas exports to Europe. To fully cut off the Kremlin from EU-generated gas profits and deprive it of its energy weapon after the transit of Russian natural gas through Ukraine ceases at the end of 2024, the EU must halt Russian gas transit through the European expansion of TurkStream.

The United States can accelerate this decision by sanctioning the Gazprom-led project and all companies that are directly involved in the construction, maintenance, and use of the TurkStream-linked infrastructure. The simultaneous stopping of the gas transit through Ukraine and through TurkStream will provide European clients of Russian gas to suspend or renegotiate their long-term contracts with Gazprom.

Why it matters:TurkStream has crowded out investments in alternative gas supply as Russian gas has undercut the competitiveness of LNG imports. Ending TurkStream will open the way for the completion of the Vertical Gas Corridor linking the Mediterranean regasification terminals with the markets in Central and Eastern Europe. Currently, Russian natural gas supply covers around half of the region’s consumption, yet existing LNG and interconnector infrastructure can facilitate the delivery of three times more non-Russian gas.

Mission possible: The U.S. and the EU should deny Gazprom the opportunity to use the Vertical Gas Corridor as another vehicle to circumvent sanctions through increasing camouflaged deliveries to Europe through TurkStream. The Russian company has successfully obfuscated the origin of its sales using intermediaries. U.S. and EU authorities can help regional gas transmission operators conduct proper due diligence on the terms of the capacity booking contracts. Fully decoupling from Russia’s pipeline gas, will enable the EU to dismantle Russia’s security services-linked state capture networks across Europe that have facilitated Kremlin’s corrosive influence on European economy and politics.

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