Europe's rejection of Russian gas: consequences and forecasts

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, gave an interview to the Oil and Gas Industry magazine (Krasnoyarsk) about the prospects for exporting Russian pipeline and liquefied natural gas to the EU and the possibilities of its replacement.

– If the European Union completely stops buying Russian gas, what financial losses will this lead to for Russia? How big can they be?

– The amount of losses depends on gas export prices, which change all the time. Relatively speaking, if supplies remain at the level of 2023 (about 41 billion cubic meters, including LNG, part of which is re-exported from EU countries), sales revenue could amount to about $ 14-18 billion per year in 2024-2025 at the most likely price parameters.

– How can this affect the European economy? What can the growth in demand for natural gas in Europe lead to due to the likely shortage of this type of fuel?

– Since the autumn of 2022, the EU's dependence on Russian gas has greatly weakened and is of a "focal" nature. Austria, Hungary and Slovakia are still mainly dependent on pipeline imports from Russia. If supplies are completely cut off, they will experience a moderate gas shortage within one to two years and will face a noticeable increase in import prices. This is not a catastrophic scenario for them (it is possible to arrange supplies of regasified LNG from Italy and Germany), but it is unpleasant, and they will strive to avoid it. At the same time, Austria itself plans to completely abandon Russian gas from 2027. The most critical years are 2024-2025.

The same can be said about Russian LNG supplies, on which France, Belgium, the Netherlands, Spain, Finland and Greece depend. Starting from the end of 2025, an excess supply of gas is expected to form on the global LNG market, and already in 2026 the demand for Russian LNG will drop sharply. If we assume that the EU countries will refuse to supply LNG from Russia already in 2024-2025, then this will definitely lead to an increase in prices, but they are unlikely to face a physical shortage.