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Source - POLITICO

The Russian gas habit Europe can’t quit: LNG

07.11.2022

Nord Stream may have died but EU liquefied natural gas imports from Russia have increased by 46 percent this year.

European leaders have boasted about cutting their reliance on Russian gas since Vladimir Putin invaded Ukraine. But that’s only part of the truth.

While supplies of natural gas delivered by pipeline fell dramatically this year, liquefied natural gas (LNG) imports from Russia into the EU increased by 46 percent year-on-year in the first nine months of 2022, according to European Commission figures.

For EU countries, the risk is that growing usage of seaborne LNG from Russia could put Europe at the mercy of a fresh round of Putin’s gas blackmail in 2023, just as the bloc seeks to refill its gas stores for winter.

It has been a point of pride for EU officials that countries have reduced their purchases of Russian fossil fuels since the start of the war, as leaders tried to degrade the Kremlin’s finances. “We must cut Russia’s revenues, which Putin uses to finance his atrocious war in Ukraine,” European Commission President Ursula von der Leyen said in September.

And while the supply cuts on pipeline gas have been drastic — a combination of Russia restricting flows on pipelines and EU countries diversifying their imports — Europe’s smaller LNG trade with Russia tells a different story.

Statistics shared with POLITICO by the Commission show that between January and September 2022, EU countries imported 16.5 billion cubic meters (bcm) of Russian LNG, up from 11.3 bcm in the same period last year.

The increase in LNG imports is small in comparison to the huge drop in Russian pipeline gas imports, which halved from 105.7 bcm in the first nine months of last year to 54.2 bcm in the same period this year, according to the Commission’s figures. But the LNG uptick cuts against the grain of EU rhetoric and is not without its own inherent risks, energy market analysts said.

France, the Netherlands, Spain and Belgium have been the main importers of Russian LNG in 2022, according to an analysis by energy market monitoring group Montel, with a third of Russian LNG shipments to Europe headed to France, and nearly a quarter to Spain.

Most of the Russian LNG arriving in Europe comes from energy firm Novatek, which operates the Yamal LNG terminal in northwestern Siberia, of which French energy giant TotalEnergies is a minority shareholder. Some European countries have long-term deals to import LNG which have several years left to run.

Unlike the majority Russian state-owned Gazprom, which has a monopoly on pipeline exports, Novatek is an independent company but has “shareholders [who] are close to the Kremlin, which can strongly influence its operations,” according to an analysis published by Columbia University’s Center on Global Energy Policy.

Only two countries in Europe — the U.K. and Lithuania — have completely halted Russian LNG imports.

Anne-Sophie Corbeau, a global research scholar at Columbia, said it was “very convenient for everybody to turn a blind eye to Russian LNG” flows into Europe.

In economic terms, Corbeau said, it “made sense” for Europe to keep importing LNG from Russia for now. Cutting Russian LNG out of the EU market would mean European countries buying up more LNG from elsewhere in the world, driving up prices for poorer countries in Asia.

“The prices would be stratospheric and that would be extremely bad not only for Europe but also for a lot of countries that wouldn’t be able to afford [LNG],” Corbeau said.

But she added, increased imports of Russian LNG raised the potential for “Russia to use LNG as a geopolitical weapon” — just as it has done with pipeline gas. Putin could potentially block exports to “unfriendly” countries while continuing to provide a gas lifeline to poorer states in Asia suffering severe energy shortages.

Such a move could have consequences for the EU in 2023, amid fresh warnings from the International Energy Agency that Europe could face a gas supply gap of up to 30 bcm during next summer’s storage-filling season.

Svitlana Romanko, director of Ukrainian campaign group Razom We Stand, which is pushing for a full EU embargo on Russian fossil fuels, said there was a clear moral case to drop Russian LNG imports.

“While the EU talks tough on sanctions and embargoes, the reality is that very little is being done to reduce imports of LNG,” Romanko said. “Europe needs to take action now and stop this absurd and counterproductive funding of the Russian war machine.”

Source: Politico

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