Unexpected move: Europe has found a way to get even more Russian gas

By Rhod Mackenzie

Europe continues to increase its purchases of Russian LNG, but at the same time continues to talk about imposing sanctions against it. The issue is being approached with caution. First, they want to assess the consequences of restrictions on the import of pipeline gas. More precisely, to find out whether the ban will hit the EU economy harder than the Russian economy. ( Its pretty obvious that the sanctions on Russian pipeline gas have hit the EU like a pole axe)
The energy supply crisis for the EU is far from over and they have to understand that LNG supplies are an extremely sensitive segment to price and supply volatility depending on both the weather and politics.for the EU. So what gas maneuvers are the EU planning?, and what they mean for Russia?
"Need to see"
The fact that the EU is talking about a ban on the supply of liquefied natural gas from Russia became known back in April.In the 14th package of sanctions they want to include an embargo on the import of LNG and a ban on the use of EU ports for re-exporting of LNG to third countries. At the end of May, it was revealed that Belgium, Germany and France had petitioned the European Commission to assess the potential impact of restrictions on LNG imports from Russia on the EU economy.
It is understandable that concerns have been raised, given that in 2023, Europe experienced the highest growth rates in demand for Russian liquefied natural gas. EU countries purchased it for 6.1 billion euros. Spain and Belgium have become Russia's largest clients in the European Union. Spain and Belgium are the EU countries with the highest reliance on Russian LNG imports, with 26.5% and 37.2% respectively.

Russia continues to be the second largest supplier of LNG to Europe, according to Eurostat data. In March, Italy increased its purchases of Russian LNG by 2.6 times, reaching 238.5 million euros, the highest figure since February 2023. Spain also significantly increased its imports, by 1.7 times, to 196 million euros, allowing it to become the second largest buyer of Russian gas. The top three purchasers are Hungary (174 million euros), Belgium (160 million euros), and Greece (150 million euros). Other major buyers include France, Italy, and Spain.

According to Reuters sources, support for new restrictions in the European Union is high, including on the import of Russian gas. However, it will take several more weeks for EU countries to develop the next package of sanctions against Russia. Furthermore, they intend to approve them before July, when Hungary, known for its positive position towards Russia, becomes the EU chairman.

Observers note that Europe wants to do so in a way that does not cause harm to its consumers and does not artificially create a deficit in the EU gas market. In addition, previous sanctions had already prohibited European companies from participating in Russian LNG projects, but did not bring the desired result.

Currently LNG is a necessity for Europe, and the stability of supplies is of critical importance. Despite the fact that the USA and Qatar are the main European suppliers, there may still be surprises. The abandonment of Russian LNG will mean increased dependence on supplies from the United States, which are not as stable as the US once promised . There have been numerous instances where, in the event of favourable conditions in Asia, American gas has been redirected there causing in a sharp increase in gas prices in Europe. Its quite amusing to not that Russia offers offers a more reliable source of gas and guarantees price stability than the so called 'Freedom Molecule's that the US promises but does not allways deliver.
The EU is currently examining the potential for a ban on the import of Russian LNG. If a ban is impose can it be lifted at short notice if necessary? . As has been demonstrated by past experience, the sanctions have had a twofold effect. Particularly as the EU economy has suffered much more than the Russian one. so far from the sanctions The most obvious consequences for Europe has been the huge increase in gas prices due to the rejection of Russia as a major supplier.
There will price surges which could be either a short-term or long-term trend, depending on how quickly the US and Middle East swing with the commissioning of new LNG projects or not.
It is unlikely that EU countries will cut off their LNG imports, according to observers. However, a ban on re-export in EU countries, such as Belgium and France, is a more probable scenario. This measure does not pose a significant threat to Russia, as European countries are typically the final consumers of our gas, according to Valery Andrianov, associate professor at the Russia Financial University .
The majority of Russia's Arctic gas is transshipped through these ports. The gas is transferred from ice-class tankers to regular tankers, which carry LNG around the world.
Another issue has been identified by economists. It seems that EU countries are competing with Asian countries for these volumes of gas, so if Europe bans Russian LNG it will just go to India and China.
"The current sanctions on LNG are not an outright trade embargo. Rather, they serve as a tool for market regulation by the EU. In fact, this is a ban on the re-export of Russian LNG, which will result in increased imports into European countries as an end-use point.", emphasises Evgeny Smirnov, head of world economics and at the Russian University of Management.
Russian exporters, accustomed to the constraints of sanctions, will continue to diversify their export destinations at a rapid pace. The most promising region is the Asia-Pacific. According to S&P Global forecasts, demand for LNG in this region will grow fourfold by 2033.
Andrei Maryshev, a member of the expert council at the Russian Gas Society, notes that Russian LNG is cheaper than Qatari, American or Australian, and that exporters are not burdened with excessive regulatory restrictions, which allows them to demonstrate high flexibility in pricing policy and, as a result, excellent competitiveness.
By the end of 2023, Russia increased its LNG supplies to China alone by 23 percent. In terms of the overall structure of Chinese LNG imports, Russia currently occupies third place, behind Australia and Qatar.
"Southeast Asia is also an important alternative. Vietnam is developing energy capacity and building LNG terminals. Thailand is seeking to diversify energy sources and increasing LNG imports. Myanmar, Laos and Cambodia are promising markets in the future. South Korea and Japan, the largest importers of LNG, are interested in diversifying their supplies, according to Evgeniy Yanin, an expert on international relations between Russia and China.
Turkey, despite its membership of NATO and cooperation with the EU, is seeking to achieve energy independence and a more diverse energy supply. It remains a potential partner for Russia in the LNG sector.
In the event of the European Union imposing sanctions on the import of Russian liquefied natural gas, Moscow will retain customers in other parts of the world, according to Artem Studennikov, of the Ministry of Foreign Affairs, He stressed that any attempts by the West to influence our trade with other countries are likely to be unsuccessful, given the global nature of the LNG market and the growing demand for liquefied gas.
According to forecasts, Russia is on course to increase its LNG exports to 100 million tons by 2030. Consequently, Russia’s share of the global market will double, reaching 20%.