Russian natural gas halt strikes major blow to EU economy: study
ASİA

Russian natural gas halt strikes major blow to EU economy: study

'Half a winter without Russian imports could be difficult, but running EU for several years without Russian gas would be hugely challenging,' study finds

News Service AA

As tension in the Ukraine intensifies with the threat of a Russian invasion, the EU could face a new energy crisis with the possibility of a halt in Russian natural gas imports, which would force the block to take measures to replace supply and curb demand, according to a Brussels-based think tank Bruegel on Thursday.

In its report titled, Can Europe Survive Painlessly Without Russian gas?, Bruegel said the EU would likely be able to survive large-scale disruption to Russian gas supplies until the summer, based on a combination of increased LNG imports and demand-side measures such as industrial gas curtailments.

However, the report said this would come at a cost for the EU economy and might even result in some countries, especially those more exposed to Russian gas and less interconnected with other EU countries, having to take emergency measures.

If the Russian gas blockade is extended into the coming winters, the EU will find it increasingly difficult to survive as Russia has historically been the EU’s largest supplier of natural gas.

After the 2006 and 2009 Russia-Ukraine-Europe gas disputes, followed by tensions in the wake of the 2013-14 Ukrainian crisis, the EU has sought to reduce its dependency on Russian natural gas imports, however, Russia continues to supply around 40% of the EU’s gas consumption.

Bearing in mind that both the European Commission and the US are looking at contingency plans in case of a further reduction or, in the worst-case scenario, a complete halt in Russian gas supplies to the EU, the report argues that the most efficient solution requires demand-side adjustments to reduce dependency on gas, rather than just replacing Russian gas with imports from another country.

According to Gas Storage Europe's Aggregated Gas Storage Inventory (AGSI ), storage levels were 42% full on Jan. 24, compared to 56% at the same time of the year between 2015 and 2020.

If Russia and all other suppliers continue to supply at current levels, implying historically high levels of LNG imports, and natural gas demand remains in line with the 2015-2020 average, then EU-wide storage would hit a low of approximately 320 terawatt-hours (TWh) in April 2022.

If Russia cuts supplies at the beginning of February, storage would reach a minimum level of 140 TWh in April 2022, the report said.

“If, in addition to Russia cutting supply, the weather is extremely cold, then EU-wide storage will be empty by the end of March 2022,” it warned.

The report predicted that in the short-run and taking the EU as an aggregate, the bloc will likely be able to survive a dramatic disruption to Russian gas imports.

“What is technically feasible might not be feasible politically,” the report said, noting that countries with better supply might be unwilling to share scarce gas resources with countries in worse situations even if it were technically feasible to synchronize the depletion of storages across Europe to delay or prevent gas-supply disruptions anywhere in the EU.

According to the report, the EU's existing infrastructure allows additional import volumes from Norway and North Africa instead of imports from Russia “but this cannot be applied in practice.”

Given that Norway has no additional capacity to deliver more natural gas to the EU and the bloc’s domestic gas production is limited, the report warned that without demand-side measures, “a full disruption of Russian gas imports may result in some EU countries having to take emergency measures before the end of this winter.”


- What if Russian gas supplies are halted for years?

According to Bruegel, getting through half a winter without Russian imports could be difficult, but running the European economy for several years without Russian gas would be hugely challenging.

The report further explained that additional demand in an already tight global LNG market would place immense upside pressure on prices, striking a blow to the European economy, which is already suffering from high energy prices.

“The EU cannot simply rely on increasing supply to replace Russian natural gas volumes, demand will also have to play a role as well,” the report warned, adding that only a combination of the two can deliver a workable outcome.

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