Monday, March 4, 2024

The Brief – Russian gas to Europe changes route – Euractiv

Russia’s aggression against Ukraine produces images of Armageddon-type destruction: Mariupol, Bakhmut, now Avdiivka.

But against this background, there is a place in Ukraine that seems secure: the route of the pipeline still transporting Russian gas across the country to clients in the EU.

Although an onshore pipeline is extremely vulnerable in times of war, some call the Sudzha-Urengoy-Pomary-Uzhhorod pipeline (formerly known as the Brotherhood pipeline) the safest place in Ukraine.

Remarkably, the 4,500 kilometres-long pipeline remains intact as the war approaches its two-year anniversary.

Business is business. Both Russia and Ukraine are making all efforts not to inadvertently damage the pipe, which continues to transit Russian gas to Europe and bring foreign currency to Moscow and Kyiv.

Kyiv stopped buying Russian gas after Moscow annexed Crimea in November 2015. After Russia’s full-scale invasion in 2022, many EU countries stopped buying Russian gas, but some continued, and Gazprom continued to pay Ukraine a transit fee for the commodity.

Ukraine’s Naftogaz and Gazprom signed in December 2019 a five-year gas transit agreement under ship-or-pay terms, meaning Gazprom is obliged to pay for transit whether it uses it or not. Ukraine counts on gas transit revenues worth $7 billion until the deal expires in 2024.

Before the 2022 invasion, some 40 billion cubic meters per year (bcm/y) were contracted to flow annually via the “Brotherhood” pipeline. Today, the figures are much lower. Of the Russian gas transiting Ukraine in 2023, 6 billion bcm went to Austria, 6.5 bcm to Slovakia and 1 bcm to Hungary.

Ukraine indeed stopped buying gas from Russia in November 2015 but instead buys it indirectly from traders in the EU as part of the Russian gas that transits through Ukraine via the so-called “reverse flows”.

The agreement is set to expire at the end of 2024, and Ukrainian Energy Minister German Galushchenko ruled out last August the prospect of Kyiv taking part in any talks with Russia regarding future arrangements for gas transit.

In all likelihood, the contract will end on 31 December 2024 without renewal.

The European Commission has pledged to stop Russian fossil fuel imports, gas included, by 2027.

But until 2027, Russia would certainly use an alternative route such as the offshore TurkStream pipeline, which enters EU territory at the Strandzha entry point in Bulgaria, where, for political correctness, it is called BalkanStream.

Bulgaria stopped importing Russian gas after the invasion of Ukraine, but it fulfills its contractual obligations by transiting the commodity to Serbia, North Macedonia, Hungary, and Austria.

Under a deal signed in 2021, Hungary receives 3.5 bcm of Russian gas via Bulgaria and Serbia and said it wants to import more.

Austria, which still gets half of the gas it needs from Russia, said that as long as Russia sells gas, it is willing to import it (although this may soon change).

There is, of course, a limit to increasing the Russian imports from this southern route: It’s the pipeline technical capacity, which is 15.75 bcm. Currently, TurkStream volumes are close to 10 bcm.

Bulgaria made the mistake of building BalkanStream, thus giving the keys of the Western Balkans to Putin, as an investigation by Euractiv Bulgaria from 2020 shows.

But now Bulgaria holds strong cards vis-à-vis Austria, which is still blocking its Schengen accession with its land borders. Vienna will thus have to negotiate with Sofia if it wants to increase its supplies after the Ukrainian route dries up.

And Russia will be even more interested in destabilising Bulgaria in 2024 – although the Bulgarian ruling coalition is already doing a good enough job at destabilising the country without external help.

In any case, 2024 will be marked by the change of the route of Russian gas to Europe – with some predictable consequences but also some we cannot imagine now.


The Roundup

The European Commission launched a consultation on a draft proposal to phase out the use of the controversial chemical Bisphenol A in food contact materials, including plastic boxes, protective coatings for cans, and food processing equipment.

Austria’s dependence on Russian gas has increased from 80% to 98% in two years, prompting the country’s energy minister to ring the alarm bell ahead of a national election due to take place in the autumn.

Respondents fear climate-change-driven migration more than the security threat posed by Russia, according to a fresh survey for the Munich Security Conference (MSC) published on Monday.

A court-mandated rerun of the 2021 national election in Berlin on Sunday changed little about the composition of the federal parliament, but voters punished the Social Democrats of Chancellor Olaf Scholz (SPD/S&D) while overall, his three-party ruling coalition lost one seat.

EU telecom associations have criticised the course pursued by negotiators on the Gigabit Infrastructure Act, saying the text will allow the speeding up of telecom infrastructure roll-out but will have a minimal impact due to shrinking returns on investments.

Top European officials have rejected former US president Donald Trump’s comments suggesting that the United States might not protect NATO allies who are not spending enough on defence from a potential Russian attack

Look out for…

  • Commissioner Janusz Wojciechowski participates in Global Food Forum, organised by Farm Europe, on Tuesday.
  • EU-Armenia Partnership Council on Tuesday.
  • Commissioner Mairead McGuinness delivers speech at Eurocommerce Annual CEO Summit on Wednesday.

Views are the author’s

[Edited by Zoran Radosavljevic/Alice Taylor]


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