Title: Russia’s gas pipeline strategy and Europe’s alternatives – European Council on Foreign Relations
Headings: Russia’s gas pipeline strategy and Europe’s alternatives
Russia’s gas pipeline strategy and Europe’s alternatives
Author

Content: Thus, markets are self-correcting the imbalances and eliminating the potential surplus. What could really constrain the long-term upward pressure on prices, should such a supply shock materialise and persist, is Europe’s willingness to pay for gas, which is relatively low. This is perhaps thanks to German, Spanish and Italian taxpayers who contributed to financing renewables, making electricity markets in Europe not only ‘greener’ but also to strategically counterbalance the market power of gas suppliers such as Russia or Qatar. Still, a price increase in relative terms could be rather sharp in the short-term, should we witness the removal of Russian gas volumes through Ukraine. Even if the commercial side of the transit question is resolved, a ‘transit–avoidance’ policy is deeply rooted in the minds of Gazprom’s masters in Kremlin
Thus, the desired positive development is some sort of reconciliation between Russia and Ukraine, possibly through the containment of the conflict in the Donbas. In principle, Gazprom might continue using Ukrainian pipelines if ‘commercial’ conditions – such as the transit fee – are attractive. But recent announcements suggest that Ukraine is asking too much and Gazprom is unhappy with the proposed transit price. Furthermore, even if the commercial side of the transit question is resolved, a ‘transit–avoidance’ policy is deeply rooted in the minds of Gazprom’s masters in Kremlin. This policy dates back to the early 1990s and since then Russia’s gas policy has been to bypass Ukraine’s pipelines at any cost. It remains to be seen whether structural changes in the markets and geopolitics force Gazprom’s political masters to ‘rationalise’ its European strategy, and in particular its strategy vis-à-vis Ukraine.