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The spectre of the Russian gas war is back on the international stage. At this juncture of the conflict between Russia and Ukraine, the attention of many European chancelleries in recent weeks was focused on the 31st of December 2024, the day when the five-year methane agreement between Kiev and Moscow expired. The agreement was first signed in 2009 between Russia’s Gazprom and Ukraine’s Naftogaz, then renewed in 2019 when it was already at risk of being cancelled. At that juncture it was the European Union that pushed for the renewal, but with Russia’s invasion of Ukraine the situation has changed. Suffice it to recall Mario Draghi’s warning at the time: ‘Which option do we prefer? Peace, or being quiet with the radiator on?’. The contract, in any case, has withstood even the conflict, but now Ukrainian President Zelensky has reportedly said he is unwilling to open new negotiations with Putin to reach a renewal. This is mainly because he does not want Gazprom’s revenues to continue feeding the Russian war machine. All of this also in anticipation of the 20th of January, when Trump will take office in the White House. The tycoon has, in fact, promised to turn the conflict around in a short time, bringing about a ceasefire and probably stabilising the situation. Certainly, on the negotiating table now the gas issue will assume greater importance.
REPERCUSSIONS IN EUROPE
The European Union, and in particular the member states most closely connected to the import of Russian gas, will probably suffer repercussions from this halt to transit through Ukraine. Of course, the agreement has held up until today because on the Russian side it is a considerable amount of money, while for Ukraine this has not exacerbated the conflict with the European chancelleries, stabilising part of the flow of money and aid that has allowed Kiev to hold out until today. Furthermore, it cannot be denied that the Ukrainian network that allows gas to pass through has so far been spared the bombardment. This is an important strip of territory that could come into Moscow’s sights when the gas transit is stopped. The transit stop will have repercussions on the supplies of several countries – not least Italy -, despite the fact that since 202, with the Russian aggression against Ukraine, gas imports from Russia have dropped considerably. With the conflict, in fact, Russian supplies to the EU fell from 40% to less than 10%. Now, with this new stop, a further 5% of European imports will be reduced. Nevertheless, some countries such as Hungary, Slovakia and Austria, whose supplies depend to a very large extent on the Kremlin, may find the situation particularly complex. In these cases, the increase in costs will certainly be felt on bills and thus on citizens’ pockets. A problem that will also affect those who no longer, or only minimally, source their gas from Moscow. This is because of the possible speculation that may occur on the energy market in the coming months.
RUSSIAN GAS NUMBERS
Starting with the scenario in which this new development in the gas war takes place, it should be remembered that before February 2022, the month in which Russia attacked Ukraine, gas imports from Moscow accounted for around 40% of the European Union’s needs. Measures to curb imports from Russia, linked to the member states’ decision to limit their dependence on Moscow, also in support of Ukraine, meant that in 2023 the gas purchased accounted for only 8% of requirements. To date, however, European gas reserves have fallen faster than last year. Bloomberg reports the figure of 75% of available reserves compared to 87% available at the same time last year. This convergence is mainly due to the colder temperatures that are affecting Europe. It is, in fact, the data provided by Eurostat that paint the current picture, within which natural gas imported from Russia into Europe was 54% lower than in Q1 of 2021. Despite this, in Q3 of 2024 imports to Europe were still at 20%, with the average cost rising mainly due to market uncertainty. In order to cope with the closure of transit through Ukraine, the EU will have to meet the needs of some countries and thus increase the share of gas from the Norwegian pipeline, or from US LNG. Meanwhile, a new strategy is expected in February with the aim of reducing the EU’s dependence on Moscow. A work that started in 2022 and that for Italy, for example, has begun to bear some fruit. Before the conflict in Ukraine, Italy was importing about 40% of its gas needs from Russia, while in 2023 it reached 5% of consumption. A result achieved only thanks to the supply diversification policies started with the Draghi government and continued under Prime Minister Meloni. The stop to gas transit in Ukraine could, however, also have consequences in Italy, given that in 2024 imports stood at around 7%, but with the full operation of the Ravenna regasifier this figure is expected to decrease significantly, with LNG currently accounting for around 25 per cent of gas consumption in Italy.
RUSSIA AND THE STRATEGY OF TENSION
The Russian strategy of tension is all about the export of gas, especially for those countries most dependent on this import. For example, a clash between Zelensky and Slovak Prime Minister Robert Fico took place in recent days. Fico declared that if Ukraine interrupted the flow of gas, then Slovakia was ready to block the supply of electricity to Kiev – a game that, as Zelensky also mentioned, earns Bratislava around 200 million dollars a year. The Ukrainian president heavily attacked his Slovak counterpart, also accusing him of being a tool of Moscow in such a delicate game as the gas clash. Moreover, Ukraine is giving up about a billion dollars a year in transit excise duties with this stop, yet for Zelensky this blockade is a positive factor. Indeed, he stated that if, when Putin took power, the annual pumping through Ukraine was over 130 billion cubic metres, it is currently zero. Of course, in Kiev’s strategy there is also a cut in Moscow’s revenues that, in this way, will not end up in the war machine. In fact, Russia loses between 5 and 6.5 million dollars every year with this stop.
On the other hand, Putin declared that Ukraine was ‘punishing Europe’ with its decision but, at the same time, the Russian leader is said to be willing to reorganise transit through Belarus and Poland in order to overcome the impasse with Ukraine. Furthermore, Moscow is also looking at alternative markets in addition to a further expansion of TurkStream. A possibility – in any case all to be verified – that would, however, put the European chancelleries in turmoil, especially after the (largely still ongoing) efforts launched since 2022 to free Europe from Russian gas imports. Tension is also being fuelled in recent weeks by the Kremlin in Moldova, where an openly pro-European president has been elected. Here, Gazprom has already made known its willingness to turn off the taps and stop exporting so much gas due to missing remittances. The country has therefore decided to go for gas rationing and a state of emergency (already since 16 December), through a 30 per cent cut in distribution. Only during the coming weeks will the global picture become clearer, and the impacts and incidence of changes be defined.