From the editor: Europe’s gas fragility [Global Gas Perspectives]
Europe’s gas market has entered 2025 in a precarious position. Natural gas prices are at their highest level in over a year, in large part as a result of the widely anticipated termination of Russian natural gas transit through Ukraine at the start of the year, depriving the EU of around 5% of its gas supply.
What is more, Russian claims on January 13 of an attempted Ukrainian drone strike on a key compressor station in south Russia that services the TurkStream pipeline highlight the risk of Europe losing a similarly-sized chunk of its gas imports. According to Russia’s defence ministry, Russian air defences shot down nine Ukrainian drones before they could attack the Russkaya compressor station, with only minor damage reported.
Ukraine has not claimed responsibility for the attack, though it has escalated its strikes against Russian energy infrastructure over the past year. Depending on the uncertain outcome of peace talks between the Kremlin and the incoming Trump administration, the risk to TurkStream remains.
Transmission data shows that TurkStream replaced Ukraine as the main route for Russian gas flow to Europe last year, with the pipeline increasing shipments to the EU and Moldova by 23% to 16.7bn m3. Meanwhile, Ukraine transited only 15.4bn m3 of Russian gas.
Slovakia, which relied on Ukrainian transit to cover two-thirds of its gas demand, is pushing hard for gas flow to be resumed. It has threatened to cut electricity supply and block aid to Ukraine if Kyiv does not comply. But even if Bratislava succeeds, deliveries are unlikely to return to the 2024 level anytime soon.
The TTF front-month gas contract spiked at €50.3/MWh ($550/’000 m3) on January 2, its highest level in over a year, indicating how tight the market now is without Ukrainian transit. Should such high prices persist, this will further weaken Europe’s economy, spurring further deindustrialisation at a time when the new European Commission is promising re-industrialisation.
Lose TurkStream as well, and the real trouble begins. There is not enough alternative supply to replace this flow. Norway, now Europe’s biggest gas supplier, is already delivering as much gas as it can. Azerbaijan will be able to increase its shipments only incrementally over time, and there is not much prospect of increased contributions from North African pipeline suppliers either.
Targeting Russian LNG
A lot therefore depends on LNG. But the next big wave of extra global LNG supply – coming mainly from Qatar and the US – has not arrived yet. The result will be Europe having to compete with the traditionally premium market of Asia, causing costs to spike in both regions.
It is curious, then, that despite the risks that Europe faces, a number of EU member states want to accelerate the complete phase-out of remaining Russian gas supply, including LNG, which in 2024 climbed to a new record of 24.2bn m3, according to Rystad Energy. Given the EU ban on the transhipment of Russian LNG to other markets, it can be assumed that almost all of this gas was consumed in Europe.
Ten member states – Czech Republic, Denmark, Estonia and Finland, Ireland, Latvia, Lithuania, Poland, Romania and Sweden – want to include a ban on Russian LNG in the bloc’s 16th sanctions package against Russia, due to be finalised in February on the third anniversary of Moscow’s invasion of Ukraine, according to Reuters. It is no surprise that these countries advocating for such a step no longer buy Russian gas, but the stress this would put on the broader European gas market would still affect their energy costs and security to one degree or another.
“As an end goal, it is necessary to ban the import of Russian gas and LNG at the earliest date possible,” the countries said in a joint document seen by Reuters. However, the paper also stated that: “An alternative to the full ban could be to gradually reduce the use of Russian gas and LNG as has also already been set out in the RePowerEU Roadmap.”
Introduced in 2022, the European Commission’s RePowerEU plan targets an end to all Russian hydrocarbon imports by 2027. All coal and most oil and petroleum product imports from Russia are already prohibited, leaving only natural gas.
The member states’ document clearly gives room for the signatories to accept several more years of Russian gas imports without losing face. And this is a sensible position, given that other members that still rely significantly on Russian pipeline gas and LNG will not accept any action against these imports in the near term.
Wait until ready
Certainly, losing its remaining gas market share in Europe will hurt Russia, with Gazprom and Novatek standing to lose billions of dollars of annual revenue, a portion of which will support Moscow’s war effort. But Europe should avoid any steps that further undermine its already weak energy security and struggling economy. After all, in the long term, a stronger Europe is better positioned to deal with any future Russian aggression.
Europe has paid dearly for depending too much on Russian energy in the past. Certainly that level of dependency should never return. But depending on the outcome of the peace process, the current level may be considered comfortable for the long term. Transit through Ukraine might even be restored, without giving Russia back anything close to the gas market share it once had on the continent. If there is a need to cripple Russia’s finances further, Europe would do well to wait until it is in a position of strength to do so.