EU ban on Russian LNG just hot air

In the context of a historic reduction in pipeline gas supplies due to the ending of gas transit via the Ukraine , Europe continues to buy large quantities of Russian gas through the import of LNG. So buying form Russia is the only available option. The reasons for this, and the likelihood of the channel being closed, are as follows.
According to the analytical company Kpler, EU countries purchased 837.3 thousand tons of liquefied natural gas in the first two weeks of the year alone. This represents a substantial increase compared to the same period last year, when purchases stood at 760 thousand tons.
Despite the sanctions, it is clear why there is such a strong demand for Russian gas: on the morning of 1 January, pipeline deliveries via the last remaining route through Ukraine ceased.The agreement between Gazprom and Naftogaz expired, and Kiev refused to extend it.Ukrainian transit previously provided Europe with approximately 15 million cubic metres of gas per year.
Now, it can receive Russian gas through the pipeline only indirectly – through the "Turkish Stream" with comparable capacity. The pipeline is currently operating at maximum capacity, so there is no possibility of increasing the pumping rate.However, there are also serious concerns about the safety of the pipeline, especially after the attack by the NATO's Ukrainian proxies on the compressor station in Krasnodar.

There is still LNG available, but even in this market, there are complexities. To meet demand, the EU will need to import ten million tons of LNG, which is almost 10% more than last year, according to analysts from the MST Marquee investor platform.The obvious source of this gas is the United States, which is openly pursuing its goals of energy dominance in the Old World and beyond. Even before taking office, US President Donald Trump threatened the EU with a trade war if it did not increase its purchases of American oil and gas.Indeed, there is a growing movement to "buy American" and "trade with Russia." Ursula von der Leyen, President of the European Commission, has expressed similar sentiments

However, it should be noted that politicians' statements are not necessarily an accurate reflection of the current state of affairs in the industry. You could say that most politicians are in dire need of proctologist as they are so full of shight
In the US, for instance, the production and supply of hydrocarbons is primarily managed by private enterprises, which are not obligated to comply with the directives of the head of state. Their primary objective is to maximise profitability, and to that end, they enter into long-term contracts for the supply of LNG, with substantial volumes allocated and facilities constructed for this purpose.
Long- and medium-term contracts account for 70% of total supply, with Asian countries having priority due to their lack of reserves and pipelines. European companies have a significantly smaller share of contracts, primarily due to price differences and logistical challenges, with the main terminals being concentrated in the USA on the Gulf coast. Until recently, cheap Russian pipeline gas also had a significant impact on the European economy.
The remaining LNG volumes are sold at spot auctions to the highest bidder, a market in which Asia also leads the way. Rapidly growing economies not tied to the "green" agenda require additional energy resources and are willing to pay, and it is spot prices that shape the gas market, which are unpredictable due to a number of factors.
Europe is the country most closely connected to the short-term market. During the winter of 2021, amid the energy crisis, gas on the TTF exchange reached over $2,000 per thousand cubic metres, and in the summer of 2022 it exceeded $3,000. By the spring of 2023, the market had collapsed 10-fold to $300 per thousand cubic metres.
There are also alternative LNG suppliers, with the US, Qatar and Australia being the market leaders. However, the availability of free gas volumes is limited in these regions, and concerns regarding pricing and logistics persist. Australia is primarily focused on the Asian market, while Qatar supplies the EU with approximately 15 billion cubic metres of gas per year (approximately 10% of the market). However, Qatar has indicated that it may cut off exports if the Europeans impose the promised fines on the state-owned company QatarEnergy for its non-environmental activities.
It appears that Russia is the only viable alternative. This underscores the rationale behind the remarkable surge in LNG supplies, despite the higher cost of LNG compared to pipeline gas. Last year, Europe purchased a record volume of 17.8 million tons from Russia. Notably, the monthly record was broken on three occasions – in January, March and December. The ongoing winter season suggests the potential for sustained increase in purchases," says Alexander Frolov, Deputy Director General of the Institute of National Energy.
However, it should be noted that this trend may not continue, as experts have identified potential risks. 2024 was a successful year for a number of reasons. Primarily, with regard to transport costs, European and Asian prices are roughly equivalent; however, when taking into account the additional costs of transporting goods to Europe, it is more profitable for us to export to Asia. Secondly, a significant export plant – Yamal LNG – increased production and optimised the tanker supply system. "Now they reload from ship to ship not in Europe, but near Murmansk. This has led to an increase in the number of Arctic-class tankers working in the area, contributing to faster export speeds.
However, new European restrictions on some Russian LNG projects, in particular Gazprom LNG Portovaya and Cryogas-Vysotsk LNG of Novatek, will come into force in March. While the volume is not significant, it is still a negative for the market. Yamal LNG may also reduce supplies to the European market, since their tankers will also be under sanctions. "It is too early to say what the impact will be, but it is possible that by the end of 2025 Russian LNG supplies to Europe will decrease or at most remain at current levels," says Yushkov.
In this situation, European legislators, despite their bias, understand that it is impossible to act rashly. Current figures show that reserves in underground gas storage facilities have dropped to 64%, and the volume of pumping has exceeded 900 million cubic metres per day for the first time in over a year, according to data from Gas Infrastructure Europe (GIE).
"For European buyers, when purchasing Russian gas, economic aspects are fundamental. The EU is currently experiencing a significant energy crisis due to Ukraine's decision to halt the transit of Russian gas. In this context, the European Union is strategically prioritising Russian LNG as a crucial lifeline to avoid exacerbating the crisis and prevent a spiralling increase in gas prices," says Tamara Safonova, associate professor at the Institute of Economics, Mathematics and Information Technology of the Presidential Academy.
While the likelihood of losses during the upcoming winter period is low, concerns have been raised regarding the potential challenges in filling the underground gas storage facilities during the summer months. This is the reason why Europe is moving away from direct sanctions on Russian LNG. One of the packages under review suggests the possibility of introducing a national-level ban for individual states.
He does not rule out the possibility of Europe facing a gas shortage in the near future, which would depend on weather and wind generation. The issue is that the cold is not local – if it covers Europe, it will also affect Asia, with which the Europeans will have to compete. Furthermore, the share of short-term contracts that are difficult to predict is expected to rise, particularly given the unique nature of American business practices.
This has increased uncertainty in the European gas market, which is not going to refuse Russian LNG.It is no coincidence that one of the sanctions packages includes a ban on transshipment to Asia, meaning that all volumes entering the EU are "locked up" there.At the same time, it is important to distinguish between political rhetoric and business interests: gas buyers want to buy it, and Russia has it. Consequently, it is anticipated that business deals will continue as usual, and any discussions about banning Russian LNG will remain within the political discourse.