While the European Union has been working more than a year to replace Russian pipeline gas and decrease the country’s influence on the European economy, imports of Russian LNG have been ticking upward. The EU may need further sanctions on LNG if it’s serious about kicking Russian fossil fuels, according to a European think tank.
Researchers with Bruegel wrote in a recent policy brief that the EU is facing serious questions on whether it can meet its established goals of ending reliance on Russian natural gas by 2027.
The EU has a number of options, researchers wrote, including waiting to see if the market incentivises bloc members to reduce Russian imports on their own. However, Bruegel concluded delaying policy action risks the EU’s economy and reputation as an ally to Ukraine.
“Given that the EU will be able to manage the shock, and that a scenario of inaction or limited sanctions implies that EU consumers will continue to fund the Russian state, and by extension the Russian war effort, we argue that the EU should bring forward a full embargo on Russian LNG,” researchers wrote.
The EU’s imports of Russian LNG ticked up from 11.28 million tons (Mt) in 2021 to 15.33 Mt last year, according to data from Kpler. Russian imports have remained elevated since the beginning of the year, reaching a two-year high of 1.64 Mt in May.
While Bruegel suggested sanctions on LNG cargoes could help the EU to enforce its reduction policy, researchers also outlined ways the bloc could regulate purchases of Russian natural gas if needed. In the aftermath of falling Russian pipeline volumes to northwest Europe, the EU established an energy platform to coordinate mass purchases of LNG to meet the emergency needs of members.
Bruegel suggested the EU could use this platform, along with a price cap on Russian LNG, to purchase limited market volumes below market prices if Russian LNG producers are willing to sell.
“Ultimately, new buyers will step in for LNG cargoes, as shown by the shift in Russia’s oil trade,” researchers wrote.
Past efforts from the EU to reduce its funding of Russia’s war machine through fossil fuel embargoes have resulted in tit-for-tat sanctions or presidential decrees from President Vladimir Putin to nationalize western European companies.
Bruegel wrote that the progress Europe has made to secure alternative supplies over the last year means an abrupt halt to Russian cargoes would likely have muted impacts to regional gas prices and its overall supply scenario.
Thanks to a combination of LNG, reduced consumption and pipeline supplies from Norway and other partners, ACER concluded the EU has largely displaced Russian pipeline supplies. The EU saw a 55% decrease in Russian pipeline imports during 2022 compared to the year prior, a loss of around 80 billion cubic meters.
Russian flows to Europe in June have stayed at around 80 million cubic meters/day through Ukraine and the TurkStream pipeline, according to Rystad Energy. Analysts from the firm wrote in a recent note that the EU could still make it through next winter without severe gas shortages if it maintained its cuts in consumption.
