EU's gas dilemma

The contract for the transit of Russian gas through pipeline transit system to Europe via the Ukraine is due to expire at the end of the year. Kiev has indicated that it does not intend to extend the contract, prompting the EU to explore alternative options. What are the EU'ss plans for obtaining  the much needed Russian gas?.

The Ukrainian gas transit  pipeline is one of two remaining routes from Russia to Europe (the other is Turkish Stream). The two pipelines provides 12 percent of the EU's total gas imports. One of the  other pipelines, Yamal-Europe , were closed due to the decision of the Polish government to stop any transit through the section of the pipeline on their territory. This was despite the fact that the pipeline was built in Soviet times and the Poles did not build it.Plus we all know what happened to the Nord Stream pipelines
It has been announced that the Ukraine transit route is to be closed. Mr. Zelensky stated that this matter has been resolved.
Nevertheless, this is an unlikely outcome.
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This is a significant challenge for Europe. This is particularly the case for Austria and Slovakia. In June, Kyiv was presented with an alternative: to purchase gas in Azerbaijan and transport it through the same pipeline.
"The leasing of the pipeline by other exporters, for instance Azerbaijan's SOCAR, is not feasible in the current foreign policy environment. This would necessitate significant diplomatic concessions from Brussels, which they are unlikely to make," states Pavel Maryshev, a member of the council at the Russian Gas Society.

Azerbaijani gas is transported via the Southern Corridor, namely the Trans-Anatolian (TANAP) and Trans-Adriatic (TAP) gas pipelines, with a capacity of 16 and10 billion cubic metres, respectively. In the previous fiscal year, the EU procured approximately 12 billion cubic metres of gas from Baku. SOCAR has set a goal of doubling exports by 2027.
In a recent statement, European Commissioner for Energy Kadri Simson said: "The Ukrainian infrastructure can be used, there are no sanctions, and this is in Kyiv's interests."
In other words, the purchase of Russian fuel by Western gas operators outside the EU is permitted. This approach has already been trialled in the oil sector.
A proven scheme was successfully implemented at the end of August, when Budapest and Bratislava reached an agreement regarding the Druzhba oil pipeline, which had been blocked by Kyiv due to sanctions against Lukoil.
Hungary's MOL Group has entered into new agreements with fuel suppliers and pipeline operators for transit through Ukraine and Belarus.
Alexander Timofeev, associate professor of the computer science department at the Plekhanov Russian University of Economics, explains that the essence of the scheme is that the "delivery and acceptance" point has been moved from the border of Hungary and Slovakia to the Belarusian border, and that the oil no longer goes through Ukraine as Russian oil.
It is believed that the same is true for gas.
In the first half of the year, transit reached 8.98 billion cubic metres, representing a ten percent increase compared to the same period in 2023. The fuel is primarily destined for Austria, Hungary, Slovakia, and Moldova.These countries have no other way of receiving gas as they lack the facilities or the coast line to import LNG and anyway gas via pipeline from Russia is more realible and cheaper than than the LNG that other countries have embraced.

Western operators will now be purchasing Russian gas in advance. Mr. Maryshev also notes that the pumping will continue, as otherwise there are threats to the EU's energy stability.
"Without this transit, prices could reach $600-650 per 1,000 cubic metres, which would be extremely unprofitable for the EU. They are considering the possibility of concluding a contract with Gazprom Export and a European energy company, which will then sign an agreement with the operator of the Ukrainian gas transportation system," Timofeev clarifies.
It is worth noting at this point that in 2022 when the EU stopped the transit of Russian gas through the Nord Stream pipelines the average cost of gas via pipelines from Russia was around $250 per one thousand cubic metres,afte the transit was stopped and the US blew up the Nord stream piplines gas on the spot market in the EU at the Dutch Tittle Transfer Facility reached $ 3000 per thousand cubic metres for a while and there was a mad scramble for gas to fill the undeground storage facilities.
The EU commissioner for energy and the German Central bank estimate that in 2022 and the first six months of 2023 the EU spent more than One Trillion Euros more on gas supplies than it did in the period before. Even now gas supplies in Europe are howering at around the $400-$450 per thosuand cubic metres and that is double what they used to pay to Russia when they had the reliable long term supplies.
Now the EU countries pay more for less whether its for Russian pipeline gas or its LNG the prices are much higher and they are not going to get lower,if anything they will increase as Russia expands its LNG capacities and sells more to Asia.So makes more money from less gas and the EU pays more money for less gas. Now who is the idiot in this equation?
At the moment it sells to Europe because the distance is shorter and the prices are good compared with Asia ( shorter transit distance is cheaper transport)
It seems unlikely that the West will permit the valve in Sudzha to be closed.
It is unlikely that the southern pipelines, through which Russian gas continues to flow to the EU, will be able to cover the potential deficit. The Norwegian supply is not a reliable option as the volumes it can send are already at their maximun level and their old gas fields are being depeleted and it will take time for any new fields to come on stream,that could be a decade or more..
Furthermore, from next year, the Europeans will be at the mercy of spot deliveries, which are significantly more expensive than under long-term contracts, according to Maryshev.
Hungary, the Czech Republic, Austria and Slovakia depend on Ukrainian transit. In general, Brussels will probably find a way to persuade Kyiv to change its stance.
Plus its already being acknowlegded by the EU that the LNG supply promised by the US is at best unreliable and at worst one of the worst decisions ever made to rely on promises made by US politicians.
At the end of the day they should never have been persuaded or should I say coerced by the USA to abandon the reliable supplies of Russian pipeline gas which has flowed to Europe reliably since the pipelines were built  by cooperation with the Soviet Union and West Germany using german made pipes.For over 40 years Europe had a reliable gas supply at prices that were guaranteed by long term contracts that benefited both first the Soviets and the the Germans and then the whole of Europe and Russia. Lets not forget that after German unification its whole industrial success was based on cheap and reliable energy supplies and not NATO expansion.