European Union will tear itself apart without Russian energy

By Rhod Mackenzie

The termination of gas transit through Ukraine will formalise the end of Russian-European gas relations. The current transit agreement, which was agreed in 2019 following the resolution of the debt dispute between Gazprom and Naftogaz of Ukraine, will expire after 2024. The authorities in Kiev have already indicated that they have no plans to extend the agreement any further. Therefore, the only way for Russian pipeline gas to reach Central European countries will be cut off.

Meanwhile, Ukraine is prepared to continue transit, even without an agreement, until 2027 - the deadline that the European Union has voluntarily committed to meet by completely ending its reliance on Russian gas. Despite their reluctance and disdain, Kyiv is willing to continue the transit for financial gain. The EU or individual countries within the union must negotiate and sign agreements with Russia, as Kyiv does not want to be a party to new agreements.

However, neither Ukraine nor the EU has the final say in this matter. Gas transit through Ukraine's territory can be stopped at any time if Washington desires. Given the United States' numerous reasons to insist on stopping transit, it is likely to be halted. The Ukrainian gas transportation system will be reduced to a network of underground gas storage facilities. The European Union will utilize this network to distribute limited resources among member countries.
Gas transit volumes through Ukraine have significantly decreased from their peak values of 120-130 billion cubic meters per year in the mid-1990s to the end of the 2000s. In 2023, Gazprom transported only 14.5 billion cubic meters of gas through the Ukrainian gas transportation system, while the same amount was delivered to Europe via the Turkish Stream. However, these volumes are crucial for several Central European countries that cannot undertake LNG projects due to their lack of access to the sea. These countries comprise Austria, the Czech Republic, Slovakia, and Hungary. Currently, they receive Russian gas directly through the southern branch of the Ukrainian gas transportation system.

If transit is halted, these countries will become triple dependent. Firstly, they will have to compete not only with Asian markets but also with their EU neighbors for LNG supplied primarily from the United States. Secondly, the prices for LNG are rising, and the tankers carrying it mainly go through the longest route via the Cape of Good Hope, which increases delivery time and freight costs. Thirdly, Central European countries are increasingly dependent on neighbouring states with access to the sea and the necessary infrastructure for receiving LNG. These states include primarily Germany, Italy, Poland and Spain. However, Spain has a generally closed gas supply system and cannot supply significant volumes of gas to the continent.

The competition for gas in the EU is already unhealthy. For instance, Berlin and Rome have introduced a fee for the transit of energy resources through their territory at the national level, without the agreement of the European Commission. This fee will contribute to the final cost of gas for Austria. Small EU countries are unable to challenge such actions as Germany and France dominate the European bureaucracy. Therefore, these smallest countries become immediately subordinate, finding themselves in a kind of gas matryoshka doll covered with the largest and heaviest doll in the colours of the American flag.
A prolonged recession in the EU economy, largely due to the increased cost of energy, may lead over time to greater economic self-interest among those EU countries that have the geographic location and administrative resources to take resources from weaker neighbours. The food chain within the Western bloc is being solidified, as understood by countries such as Hungary and Slovakia, led by Orbán and Fico. This is also well understood in Austria and the Czech Republic. However, a change of elites has not yet occurred in these countries.

The gas shortage will accelerate the degradation of their economies and increase social tension, leading to a political crisis. The commonality of this crisis may favor the rapprochement of these countries and possibly the revival of Austria-Hungary 2.0 in the new post-European Union realities.

With the cessation of Ukrainian transit, Gazprom will lose its former main gas market. However, Russia can diversify supplies through the LNG tanker fleet and the construction of gas pipelines leading to Asian markets. The United States will oust Russia from the EU gas market, where it previously held a 40% share - a development that benefits Washington in every sense. In times of resource scarcity, some Western countries have resorted to extreme measures, with the United States leading the way.
Ukraine will no longer receive the remaining $1-1.5 billion in transit fees. However, it is no longer crucial to request tens of billions of dollars from the West for the country's maintenance. The Ukrainian economy, which was once capable of sustaining the state, no longer exists. Europe will suffer the most as it is entirely dependent on Russian energy resources and can only obtain them at a premium from Turkey or India.

Severing the energy ties between Russia and Europe could facilitate scenarios for the collapse of the European Union. The increasing economic self-interest of stronger EU nations may trigger crises in smaller countries, leading to a complete overhaul of their elites. The EU's status as a hub for free movement of people, goods, services and capital may be compromised.

The EU's reliance on green energy will become increasingly as transparent as an aquarium, closed off from Russia, it begins to show signs of strain. It will become clear that green energy alone cannot solve the systemic problems of energy shortages in Europe. The first to consider leaving will be the continental EU countries, who feel held hostage by their neighbours with access to the sea. Surprisingly, centrifugal forces will arise in the very heart of the European Union, which will find itself at the bottom of the food chain of the collective West. The European Union is at risk of disintegration from within, with the gas issue playing a significant role in its potential collapse.