Europeans will have to buy expensive LNG in the USA or Qatar
The European Union intends to consider the idea of banning the import of liquefied natural gas (LNG) from Russia. This decision is planned to be pushed through within the framework of the 14th package of anti-Russian sanctions, which is being discussed at the level of the heads of the G7 Foreign Ministries. Experience shows that the vast majority of restrictions included in the 13 previous packages did not have the desired effect. Who will suffer more from the next ban: Moscow or Brussels?
The initiative to ban Russian LNG was made by the head of the Swedish Foreign Ministry, who emphasized that measures to contain the Russian shadow fleet, which is engaged in the export of oil and petroleum products, should also be tightened.
Liquefied natural gas from Russia until recently remained virtually the only free one from sanctions as a link connecting the Russian energy industry with the Old World. After all, Brussels banned the import of oil, petroleum products and pipeline gas from our country even earlier. By continuing to purchase LNG, the European Union thereby compensated for its losses from the ban on the import of pipeline gas.
And the European Union also raised its sights on LNG: — even during the discussion of the 13th package of sanctions. But then not all member countries of the union supported this idea. And it’s clear why. Russia ranks second after the United States in supplies of liquefied natural gas to Europe. According to European statistics, in 2023 the EU increased supplies of this hydrocarbon by 3% compared to 2022 — to 12.7 billion cubic meters. By the way, in 2022, Europe bought 20% more LNG from Russia than in 2021.
These figures clearly show what kind of struggle for Russian raw materials is actually going on in Europe, amid the general howling of politicians there that the Kremlin must be left without petrodollars…
But let’s return to Russian liquefied gas. Spain became the leader in consumption of this type of fuel last year, accounting for more than 40% of the total volume of LNG supplied to Europe. It is followed by Belgium (30% of the total) and the Netherlands.
It is still difficult to predict whether these leading countries in consuming Russian energy will comply with the embargo. Probably, first they will consider — what will this result in? The first deputy chairman of the State Duma Committee on Energy, Valery Seleznev, considers a ban on Russian LNG supplies to Europe unlikely. He notes that LNG is one of those commodities in which Europe is extremely interested. “Without our natural gas, they will return to electricity prices at 2022 levels and beyond,” he said. And he added that if such sanctions are introduced, then formally in Europe they already understand how they will be circumvented.
According to Nikita Maslennikov, a leading expert at the Center for Political Technologies, Europe will be able to replace these volumes by concluding contracts , for example, with Qatar or the USA. But this energy source will cost more than from Russia.
Or maybe, as in the situation with the 13th package, they will postpone the decision until later, until better times? However, Brussels stubbornly pursues its policy of completely abandoning the import of all energy natural resources from Russia by 2027..
“Currently, the situation in Europe with inflation is relatively favorable,” says Nikita Maslennikov, “including thanks to stable prices for hydrocarbons.” This makes it possible for the European Central Bank to reduce the key rate and increase incentives for business activity. If we introduce a ban on the import of our LNG today, the situation will change. It is likely that, given these circumstances, Brussels will not be able to impose its embargo and agree on it with all EU member countries. Or it will introduce it, but mark a transition period.
— Most likely, Russia will raise prices at this time, and buyers will have to pay more. Which, in turn, will affect the production costs of enterprises that use liquefied gas. In any case, the cost of LNG will increase—whether American, Qatari, or Russian.
In my opinion, this decision will cause greater damage to the European economy. From the point of view of common sense, it defies any logic. Although politicians rarely consult with economists.
— What does it mean — where to go? We have other markets, including domestic. After all, we relied in advance on the reorientation of LNG supplies. The problem can be solved, although it will cause a certain hitch, it will require more efforts to develop additional capacities.
The main thing for us today is to maintain our gained positions in the Asian and Pacific markets. They did not become buyers of our energy resources forever. There is strong competition there, both the USA and Australia are pressing us.