Europe’s Gas Conundrum
If Europe is willing to pay the price of expensive LNG imports, it could severely undermine Russia’s ability to earn hard currency via gas exports to finance the war in Ukraine. But this would carry high costs for Europe, too.
BRUSSELS – In a matter of months, the European Union has reduced its dependence on Russian oil so much that it is now ready to impose an embargo. European Commission President Ursula von der Leyen has announced a plan to ban Russian crude oil imports to most of the EU in the next six months, and refined oil products by the end of the year. But to have a meaningful impact on Russia’s budget, Europe must also end its dependency on Russian gas. This will prove much more difficult to achieve.
Europe has managed to reduce its need for Russian oil quickly for a couple of reasons. Oil can easily be delivered by tanker, not just pipelines, and it is relatively easy to find new supplies on the world market. The problem is that it is also relatively easy to find enough new buyers – and Russia has plenty – to offset a large part of the losses from an EU embargo.
Gas is different. Europe needs natural gas to provide heat in winter and to serve as feedstock for the world’s largest chemical industry, which accounts for a significant share of EU exports. And certain features of the natural-gas market will make it far more difficult and costlier to find alternatives to Russian supplies than it has been for oil.