Why is the EU nonetheless shopping for Russian fuel? – DW – 04/29/2024 | EUROtoday

More than two years since Russia started its full-scale invasion of Ukraine, its fuel remains to be flowing into Europe.

While the European Union has vastly lowered the quantity of fuel it imports from Russia, the hydrocarbon remains to be powering some European houses and companies and boosting Kremlin revenues consequently.

When the struggle started, European leaders have been pressured to reckon with a long-established dependence on each Russian fuel and oil. Gas was a selected downside, as in 2021, 34% of the EU’s fuel got here from Russia.

Countries in Central and Eastern Europe have been particularly dependent. When the EU mooted a ban, German Chancellor Olaf Scholz was fast to voice his opposition. “Europe has deliberately exempted energy supplies from Russia from sanctions. At the moment, Europe’s supply of energy for heat generation, mobility, power supply and industry cannot be secured in any other way,” he mentioned.

Vladimir Putin seized on this.  Throughout 2022, Russia lower fuel imports to Europe. European leaders fretted a few winter power scarcity. These fears have been by no means realized, however crucially, they meant the EU by no means truly sanctioned Russian fuel.

“It was never a sanction,” says Benjamin Hilgenstock from the Kyiv School of Economics. “It was a voluntary decision by countries, and a smart one, to diversify supply and no longer be blackmailable by Russia,” he informed DW.

How LNG imports from Russia changed pipeline fuel

According to EU knowledge, the share of Russian pipeline fuel member states imported fell from 40% of the overall in 2021 to about 8% in 2023. However, when Liquefied Natural Gas (LNG) is included —  pure fuel cooled all the way down to liquid kind so it may be transported by ship —  the overall share of Russian fuel within the EU’s complete final yr was 15%.

A key approach the EU lowered its reliance on Russian fuel was by rising LNG imports from international locations such because the United States and Qatar. However, this has inadvertently led to a surge of closely discounted Russian LNG getting into the bloc.

According to the info supplier Kpler, Russia is now the EU’s second-biggest LNG provider. LNG imports from Russia accounted for 16% of the EU’s complete LNG provide in 2023, a 40% enhance in contrast with the quantity Russia bought to the EU in 2021.

Import volumes in 2023 have been barely down from 2022, however knowledge from the primary quarter of 2024 reveals that Russian LNG exports to Europe have risen once more by 5% year-on-year. France, Spain and Belgium have been significantly massive importers. Those three international locations accounted for 87% of the LNG that got here into the EU in 2023.

Countries need to cease ‘trans-shipping’ LNG

Yet a lot of this LNG just isn’t wanted by the European market and is being dealt with at European ports earlier than being reexported to 3rd international locations worldwide, with some EU states and corporations profiting consequently.

“A lot of the Russian LNG that goes to Europe is just being ‘trans-shipped,'” mentioned Hilgenstock. “So that has nothing to do with Europe’s natural gas supply. It’s just European companies making money facilitating Russian LNG exports.”

According to a latest report by the Centre for Research on Energy and Clean Air (CREA), slightly below 1 / 4 of Europe’s LNG imports from Russia (22%) have been trans-shipped to world markets in 2023. Petras Katinas, an power analyst with CREA, informed DW that almost all of this LNG was bought to international locations in Asia.

As a consequence, a number of EU members, corresponding to Sweden, Finland and the Baltic States, are placing stress on the bloc to enact a complete ban on Russian LNG, a transfer that might require the settlement of all member states.

EU discussions are presently centered on banning the reexport of Russian LNG from European ports. According to the information company Bloomberg, the sanctioning of key Russian LNG initiatives, corresponding to Arctic LNG 2, the UST Luga LNG terminal and the Murmansk plant, can be being thought of.

“We should really basically ban Russian LNG,” mentioned Hilgenstock. “We don’t think it plays any significant role for European gas supply, or it can be relatively easily replaced through LNG from other sources.” A 2023 examine by the Bruegel assume tank backs up this evaluation.

Yet Acer, the EU’s power regulator, just lately warned that any discount of Russian LNG imports ought to happen “in gradual steps” to keep away from an power shock.

The EU international locations nonetheless piping in Russian fuel

Pipeline fuel from Russia can be nonetheless coming into the EU. Although the Nord Stream pipelines should not operational and the Yamal pipeline not brings Russian fuel to Europe, Russian fuel nonetheless flows into Austria’s Baumgarten fuel hub by way of pipelines that cross Ukraine. The Austrian state-owned OMV power firm has a contract with Russian fuel firm Gazprom till 2040.

In February, Austria confirmed that 98% of its fuel imports in December 2023 have been from Russia. The authorities says it needs to interrupt the contract with Gazprom as early as attainable, however EU sanctions on Russian fuel are obligatory for that to occur legally.

Like Austria, Hungary has continued to import pipeline Russian fuel in giant portions. Hungary additionally just lately struck a fuel take care of Turkey, however specialists say this fuel, by way of Turkstream, can be from Russia.

Hilgenstock says that some international locations have continued to purchase Russian fuel as they’re benefiting from low cost, engaging contracts. “So unless and until there is an embargo on Russian natural gas, then it’s really up to these countries to do this,” he mentioned.

For international locations corresponding to Austria and Hungary, a attainable finish to their pipeline imports from Russia could in the end be common by Ukraine. Kyiv insists it is not going to renew present offers it has with Gazprom to let fuel movement by way of its territory. That settlement expires on the finish of 2024.

Time for an embargo?

Although Russian fuel remains to be imported into Europe, its total share of Europe’s fuel imports has fallen dramatically since 2021.

The EU says it needs the bloc to be fully freed from Russian fuel by 2027, a purpose that Hilgenstock believes seems more and more reasonable.

“I think if this entire, sordid affair has shown us one thing is that we can, in fact, relatively quickly diversify our supply of gas and other energy sources away from Russia,” he mentioned.

However, he believes the political circumstances “aren’t particularly conducive” for a complete fuel embargo at current, significantly a pipeline embargo. He factors to Hungary’s presidency of the EU within the second half of 2024 as a possible barrier. Budapest has nearer ties to Moscow than most EU member states.

On LNG, he’s extra optimistic and says that along with EU motion, it’s as much as high-volume LNG importers corresponding to Spain and Belgium to take measures themselves.

“This backdoor importing of Russian gas is a huge problem, especially from a messaging point of view,” he mentioned. “And we’re helping Russia with its LNG supply chains, which we shouldn’t.”

Edited by: Uwe Hessler