On Thursday 17 October, the Bruegel think tank highlighted the need for the EU to adopt a common position on the end of the agreement on the transit of Russian gas via Ukraine, scheduled for 31 December.
Leaving this agreement marks a turning point, as gas transiting through Ukraine currently accounts for half of Russia’s remaining pipeline gas exports to the EU.
The EU countries most affected will be Austria, Hungary and Slovakia, where the Ukrainian transit route met 65% of gas demand in 2023.
Nevertheless, the analysis indicates that the end of the agreement would not pose an immediate risk to the security of supply of these three countries, as the volume lost could potentially be replaced by several LNG terminals, the new floating regasification units in Germany and Italy and the potential expansion of the capacity of the Turkstream gas pipeline.
Another scenario would be to replace Russian gas with gas from Azerbaijan. However, this would not imply any changes in gas flows, as EU traders would “buy gas from Azerbaijan, which would buy it from Russia”.
The third scenario includes possible new types of gas agreements between the EU, Ukraine and Russia.
According to the authors, it is necessary for the EU to seek a common position regarding the end of the current contract in order to avoid divisions.
Among other things, they advise the EU to prepare for a total supply disruption by replenishing stocks in Ukraine (currently 25% full) and, in the event of new agreements, to impose EU controls on gas pipeline imports from Russia (for example, through a sanctions regime).
According to the analysis, these potential sanctions should include an import tax and volume limits to restrict the total quantity of Russian gas entering the EU market.
“To ensure that the countries still dependent on Russian gas agree to sanctions pushed by the EU, these countries would still receive limited volumes of Russian gas under EU control”, explains Bruegel.
Finally, the authors believe that a significant part of the economic rent from this transaction, as well as the revenue from sanctions on Russian gas, should be paid to Ukraine.
Analysis: https://aeur.eu/f/dyy (Original version in French by Pauline Denys)