The G7 and the European Union (EU) are set to prohibit Russian gas imports via routes where Moscow has halted supplies, as per insiders involved in the discussions.
This move, a first by Western countries since Russia’s invasion of Ukraine, is to be confirmed during a G7 summit in Hiroshima next week.
This action will halt the potential recommencement of Russian pipeline gas exports to countries like Poland and Germany. These countries faced an energy crisis after Russia discontinued supplies last year. The Western powers aim to prevent an increase in Russia’s energy earnings as they intensify economic pressure 15 months post the full-scale Ukraine invasion.
According to an anonymous official, this step is taken to ensure that allies remain committed to their stance even in a hypothetical future scenario. A preview of the G7’s statement, as viewed by the Financial Times, stated that the leading economies would further reduce their dependence on Russian energy. They plan to do this by stopping the revival of channels previously closed by Russia’s strategic use of energy until the conflict is resolved.
Although these steps are not likely to immediately impact gas flows, they emphasize Brussels’ strong commitment to permanently shift away from its long-standing reliance on Russian energy. The ban carries significant symbolism, given that the EU initially refrained from targeting pipeline flows due to its heavy reliance on Russian gas at the beginning of the war. Despite this, Russia proceeded to cut supplies, leading to a tenfold increase in gas prices.
However, over the past few months, gas prices have considerably reduced as Europe successfully lowered winter demand, hastened the deployment of renewable energy, and procured alternate supplies like seaborne LNG cargoes. Russian gas imports have dropped from over 40% to less than 10% in Europe, and a mild winter has led to an increase in the EU’s gas storage.
Officials are optimistic that gas storage, which is currently 60% full compared to approximately 30% during the same period in 2022, will be fully stocked well before the next winter. According to Tom Marzec-Manser from energy consultancy ICIS, while Europe’s leaders are confident that this plan won’t jeopardize supply security, it’s crucial not to be overly complacent about the European gas market outlook.
Oil pipelines where Russia has discontinued supplies, including the northern branch of the Druzhba line that supplies refineries in Germany and Poland, might also be blocked under EU measures aimed at preventing flow resumption.
As part of the EU’s 11th sanction set, the embargo is currently being deliberated by diplomats. The commission refrained from commenting on sanction discussions or leaks.
An EU diplomat expressed the need for more details from Brussels on how the current “status quo” would be altered, particularly given that some oil from Kazakhstan traverses through Druzhba. “The exact functionality needs to be clarified,” they mentioned.
Berlin and Warsaw, despite having an exemption from sanctions on Russian oil, made a voluntary decision to cease deliveries of crude via Druzhba last year. However, Poland continued to accept supplies until Russia discontinued the flows in February. From the start of this year, German refineries have stopped placing orders for Russian crude.
A few of Russia’s primary gas routes to Europe – the Nord Stream 1 and 2 pipelines – faced sabotage last year, and currently only one of their four strings remains operational. However, other pipelines such as the Yamal line to Poland are still functioning.
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