Two years after the outbreak of the war, the European Union is importing gas from Russia. Why? “Disgusting affair”

More than two years after Russia began its invasion of Ukraine, Russian gas is still flowing to Europe. While the European Union has significantly reduced gas imports from Russia, it still powers some European homes and businesses, adding to the Kremlin’s revenues.

The EU has actually never imposed sanctions on Russian gas

When the war in Ukraine broke out, European leaders expected long-term dependence on both Russian gas and Russian oil. Gas was a particular problem, as 34 percent of gas in the European Union came from Russia in 2021.

The countries of Central and Eastern Europe were particularly dependent. When the European Union was considering introducing a ban, the German Chancellor quickly became the voice of opposition to such a step. – Europe has deliberately excluded energy supplies from Russia from sanctions. At the moment, there is no other way to ensure Europe’s energy supplies to generate heat, ensure mobility, or supply electricity to its inhabitants and industry – said Olaf Scholz then.

Vladimir Putin picked up on this. During 2022, Russia itself limited gas imports to Europe. Its leaders were afraid that there would be a lack of energy in winter. These fears did not materialize, but the key point here is that the EU has never actually imposed sanctions on Russian gas. – These were never sanctions – notes Benjamin Hilgenstock from the Kiev School of Economics. – It was a voluntary and smart decision of the countries to diversify supplies and no longer be blackmailed by Russia – he explains in an interview with DW.

LNG instead of pipelines

According to EU data, the share of Russian gas reaching member states through pipelines in total natural gas imports fell from 40 percent in 2021 to about 8 percent in 2023. However, after taking into account LNG, i.e. liquefied gas, i.e. gas cooled to a liquefied temperature or lower so that it can be transported by ship, the total share of Russian gas in EU imports last year reached 15 percent.

A key way for the European Union to reduce its dependence on Russian gas was to increase LNG imports from countries such as the USA and Qatar. However, this unknowingly led to an inflow of much cheaper Russian LNG into the EU. Kpler, a company specializing in collecting and analyzing global trade data, claims that Russia is today the second largest supplier of liquefied natural gas to the European Union. The 15.5 million tonnes it sold to Europe in 2023 represented 16 percent of total LNG supplies to the EU market. This is an increase of 40 percent compared to the amount of LNG sold by Russia to the EU in 2021.

Import volumes in 2023 were slightly lower than a year earlier, but data from the first quarter of 2024 show that Russian LNG exports to Europe increased again, namely by 5 percent year-on-year. France, Spain and Belgium were particularly large importers. These three countries accounted for 87 percent of LNG imports to the EU in 2023.

Re-export of gas from Europe

However, much of this LNG is not needed on the European market and is transhipped in European ports before being re-exported to third countries around the world, and some EU countries and companies benefit from this. – A large part of the Russian LNG that goes to Europe is simply transhipped, says Hilgenstock. – So it has nothing to do with natural gas supplies to Europe. This is all about making money by facilitating the export of Russian LNG by European companies.

According to the latest report by the Center for Research on Energy and Clean Air (CREA), in 2023 almost a quarter of European LNG imports from Russia (22 percent) were transhipped to further reach global markets. Petras Katinas, an energy analyst at CREA, told DW that most of this LNG was sold to countries in Asia. As a result, several EU members, such as Sweden, Finland and the Baltic countries, are putting pressure on a total ban on Russian LNG. However, this would require the consent of all member states.

EU discussions are currently focused on banning the re-export of Russian LNG from European ports. Imposing sanctions on key Russian LNG projects such as Arctic LNG 2, the UST Luga LNG terminal and the Murmansk plant is also being considered, according to the Bloomberg news agency. – We should actually ban Russian LNG, says Hilgenstock. – We do not think it plays any significant role in gas supplies to Europe. It can also be relatively easily replaced with liquefied gas from other sources, he emphasizes. A 2023 study by the Brussels thinktank Bruegel confirms this analysis. However, EU energy regulator Acer recently warned that any reduction in imports of Russian LNG should be “gradual” to avoid an energy shock.

Austria and Hungary still connected

Pipeline gas from Russia continues to reach the European Union. Although the Nord Stream gas pipelines are no longer operational and Yamal no longer supplies gas from Russia to Europe, Russian gas still flows to the Austrian gas hub Baumgarten via gas pipelines crossing Ukraine. The Austrian state energy company OMV has a contract with the Russian gas company Gazprom until 2040.

In February, Austria confirmed that 98 percent of its gas imports in December 2023 came from Russia. The government in Vienna claims that it wants to terminate the contract with Gazprom as early as possible, but for this to happen legally, EU sanctions on Russian gas are necessary. Like Austria, Hungary also continues to import Russian gas in large quantities. They also recently concluded a gas agreement with Turkey, but experts say that this gas, which is supplied via the Turkstream gas pipeline, also comes from Russia.

Hilgenstock says some countries continue to buy Russian gas because they benefit from cheap, attractive contracts. – So until there is an embargo on Russian natural gas, it will really depend on these countries what they will do – says the expert. For countries such as Austria and Hungary, ending the import of pipelined gas from Russia may ultimately be forced by Ukraine. Kiev insists that it will not renew existing agreements with Gazprom, which allow gas to flow through its territory. This agreement expires at the end of 2024.

Time for an embargo? “Disgusting affair”

Although Russian gas continues to reach Europe, its total share of European gas imports has fallen dramatically since 2021. The European Union says it wants to be completely free from Russian gas by 2027, and this goal seems increasingly realistic, says Hilgenstock. – I think if this whole disgusting affair has shown us anything, it is that we can actually diversify our supplies of gas and other energy sources relatively quickly without Russia’s involvement, he says.

However, the expert from Kiev believes that the political conditions are currently “not particularly favorable” for a complete gas embargo, especially gas sent via gas pipelines. He points out that the Hungarian presidency of the European Union in the second half of 2024 may be a potential barrier. Budapest has closer ties with Moscow than most EU member states. When it comes to LNG, Hilgenstock is more optimistic and believes that, in addition to the EU itself, action can also be taken by large importers of liquefied natural gas, such as Spain and Belgium.

– This secret import of Russian gas is a huge problem, especially from the point of view of communication – he says. – Moreover, we help Russia maintain its LNG supply chains, which we should not do – emphasizes Benjamin Hilgenstock from the Kiev School of Economics.