BRUSSELS: The European Union (EU) has reached a deal to phase out Russian gas faster than originally planned, a move that aims to finally sever ties between the bloc and its once-primary energy supplier.
In the aftermath of the invasion of Ukraine, traders and energy companies have closely monitored the EU’s shift away from Russia towards alternative suppliers, such as the United States and the Middle East.
But while Europe halved purchases after the war began in 2022, Russian gas has continued to account for roughly a fifth of imports.
Negotiators representing member states, the European Parliament and the European Commission cut that remaining link in the early hours of yesterday, agreeing to gradually prohibit liquefied natural gas (LNG) imports from Moscow by the end of 2026.
That’s a year earlier than originally proposed by the commission and in line with a ban on seaborne deliveries already approved by the EU under its latest sanctions package on Russia.
Pipeline gas imports under long-term deals will have to halt by Sept 30, 2027, with a possibility of an extension to Nov 1, 2027, depending on fulfillment of gas storage targets set by the EU.
That compares with an end-2027 ban on those contracts originally put forward by the commission.
“Finally, and for good, we are turning off the tap on Russian gas,” EU Energy Commissioner Dan Jorgensen said on X.
“Europe has chosen energy security and independence. We will never go back to volatile supplies and market manipulation.”
The EU had proposed the measure in June to address risks to its energy security after the crisis triggered by Russia’s invasion of Ukraine and Moscow’s subsequent curbs on gas flows to the bloc.
The United States has sought to broker a peace deal between Russia and Ukraine, and speculation that a potential agreement could eventually ease sanctions on Russian energy has contributed to benchmark European gas futures recording their longest downward streak in almost four years.
But the EU has continued to push its plan, known as RePowerEU, to cut reliance on Moscow for good.
“This is a big win for us and for all of Europe,” said Lars Aagaard, Energy Minister of Denmark, which is holding the EU’s rotating presidency and was representing member states in the talks.
“We have to put an end to the EU’s dependence on Russian gas, and banning it in the EU permanently is a major step in the right direction.”
The EU receives about 15% of its LNG supplies from Moscow, making Russia the second-largest provider of the fuel to Europe after the United States. The monthly bill for those imports ranges between €500mil and €700mil.
The shift away from that trade comes at a time of plentiful supply. The global gas market is expected to start shifting into a surplus in the second half of next year, reducing the risk that an EU phaseout of Russian shipments would put pressure on supplies and drive up prices.
That’s helped secure broad political support in the region for a comprehensive and lasting break with Russia.
Europe has also been under pressure from the United States to speed up moves to sever its energy ties with Moscow, and buy more American LNG.
A trade deal between Europe and the United States agreed earlier this year included a commitment to purchase US$750bil in US energy by 2028. — Bloomberg