Pipelines are visible at the Russian gas compressor station in Suzha, near the Russian-Ukrainian border. (Photo: Sergey Supinsky)
AFP via Getty Images
Russia's full-scale invasion of Ukraine in February 2022 exposed Europe's reliance on Moscow for most of its natural gas supplies. Continental countries that could turn to alternative sources, notably U.S. liquefied natural gas (LNG), have since done so. But many landlocked central European countries are struggling and feeling insecure again.
This comes after Ukraine went on the offensive, launching a surprise invasion of Russian territory. Kiev's surprise attack on Russia's Kursk region on August 6 rekindled fears of a supply cut in Central Europe with knock-on effects on the rest of the continent.
Incidentally, Russian gas continues to pass through Ukraine under a contract expiring in December 2024. The total volume is around 14-15 billion cubic meters (bcm) per year. The main recipients are Slovakia (6.5 bcm), Austria (6 bcm) and Hungary (1 bcm), as part of their respective national supply chains.
The three landlocked countries have even agreed to pay Russia in rubles as an interim measure while they desperately try to find alternative sources of supply as their contracts expire.
However, fighting broke out on August 7 at the Suzyagas measuring station near the Russian-Ukrainian border as a result of the Ukrainian aggression, which could result in gas supplies being cut off before the end of the contract this year. Natural gas flows through the Urengoi-Pomari-Uzhhorod pipeline have fallen by 12 percent, which is worrying as dependence on supplies from Russia remains.
The addiction continues
More than two years after the outbreak of the Moscow-Kiev war, only Slovakia remains actively working to reduce its near-100% reliance on Russian gas, with the government looking to alternatively import natural gas via Poland and from Azerbaijan.
But Austria's reliance on Russian supplies hit 98% last year, and the country's utilities, many of which are partly owned by municipalities and city authorities, continue to import Russian gas because alternatives, especially via Germany, are seen as more expensive.
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According to Politico, a long-term contract between Austrian energy company OMV and Russia's Gazprom also faces legal obstacles that would make it difficult and costly to scrap.
Meanwhile, Hungary has loudly declared that it has no intention of reducing its imports of Russian gas, and is instead seeking to deepen its ties with Russia.
While the positions of the three countries may differ significantly, that would make little difference in the event of a power outage caused by armed conflict. Many are now concerned about the knock-on effects of such a scenario.
Fine margins
The three Central European countries import 15 billion cubic meters of natural gas a year, about 5 percent of Europe's total annual imports of about 300 billion cubic meters. Even small, single-digit outages could have a major impact as winter approaches, even though the continent's storage capacity is more than 90 percent full.
Total Energies CEO Patrick Pouyan told Reuters it was unclear whether Europe would be “fully covered” in the event of such an outage, “even if storage tanks are full.”
He also pointed to delays to new LNG projects such as Golden Pass in the United States, and noted that European gas markets would remain subject to volatility as there isn't much new supply being added.
“So we're still at a stage where there's a surplus in energy supply,” he added.
Worryingly, the head of the global supermajor does not expect the situation to change significantly “until 2027.” No wonder the continent's benchmark natural gas contract, the Dutch TTF, hovers around €40 ($45) per megawatt-hour.
