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What are Europe’s options in case of Russian gas disruption?

Escalating tensions between Russia and Ukraine have heightened concerns in the European gas market about Russian supplies in the worst-case scenario of an attack that disrupts flows.

U.S. President Joe Biden and other Western leaders have threatened economic sanctions on Russia if it attacks Ukraine.

Europe has already been dealing with lower-than-usual Russian gas flows for several months. European politicians say Russia is using high gas prices as leverage in a dispute over the Gazprom-backed Nord Stream 2 pipeline project.

Gazprom says it is meeting contracted commitments to European customers.

WHERE ELSE CAN EUROPE GET SUPPLY FROM?

Europe relies on Russia for around 35% of its natural gas. The bulk comes through pipelines including Yamal, which crosses Belarus and Poland to Germany, Nord Stream 1, which goes directly to Germany, and routes through Ukraine.

Europe’s gas markets are linked by a network of interconnecting pipelines. Most countries have cut reliance on Russian gas over the years, while there are also more routes for Russian supply that bypass Ukraine.

The Center for Strategic and International Studies (CSIS) said Ukrainian transit of Russian gas has been reduced by 70%, from over 140 billion cubic meters (bcm) in 1998 to less than 42 bcm in 2021.

By last year Ukraine was a transit corridor largely for gas going into Slovakia, from where it continued to Austria and Italy, the CSIS added.

But sanctions on Russia could impact flows through other pipelines such as the Yamal-Europe route via Belarus, Nord Stream 1 and TurkStream. Nord Stream 2, which is now complete, is awaiting regulatory approval before Russian gas can flow through it.

“It would be difficult for Europe to stomach sanctions which effectively cut off Russian gas supply, or at least a large portion of these flows, given the region’s dependency on Russian gas and the ongoing energy crisis,” said analysts at ING.

There are other options for some countries. For example, Germany, the biggest consumer of Russian gas, can also import from Norway, the Netherlands, Britain and Denmark via pipelines.

But Norway, the second largest supplier of gas to Europe, is delivering natural gas to Europe at maximum capacity and that can’t replace any missing supplies from Russia, its prime minister said this week.

For southern Europe, the Trans Adriatic Pipeline can transport Azeri gas into Italy, and the Trans-Anatolian Natural Gas Pipeline (TANAP) can carry Azeri supplies in via Turkey.

European gas storage levels are still very low for the time of year, in one of the coldest months when demand is highest.

Europe’s energy chief has said European countries have enough gas to meet their needs over the peak-demand winter season to the end of March, but the issue is how much they will have to pay.

Liquefied natural gas imports to north-west Europe have climbed significantly this month due to the higher price of Dutch gas – the European benchmark – compared to its Asian LNG counterpart, which has attracted more cargoes to Europe.

Analysts expect this to continue until there is a spike in Asian demand which would lift LNG prices. LNG/

The EU Commission has proposed a system for EU countries to voluntarily buy gas jointly to form strategic reserves in response to soaring energy prices, but that wouldn’t be implemented in the short term.

NON-GAS OPTIONS

Several nations have a range of options to fill the gap, including power imports via interconnectors from neighbouring countries, or increased power generation from nuclear, renewables, hydropower or coal.

In some countries however, such as Germany, Britain, Belgium and France, nuclear availability is dwindling due to ageing plants, decommissioning, phase-outs and frequent outages.

The European Union is under pressure to phase out coal-fired power to meet climate targets, so several countries have shut down old coal plants or are not building new ones.

Some countries retain plants to be fired up as back-up supply.

In past crises, some countries have introduced measures to reduce industrial production at certain times, pay back-up generators to switch on supply, order households to curtail energy use, or enforce temporary power cuts.

HAS SUPPLY TO EUROPE BEEN DISRUPTED BEFORE?

There have been several disputes between Russia and Ukraine in the past 15 years over gas, mostly to do with the price Ukraine paid for the fuel under contracts.

In 2006, Gazprom cut off supplies to Ukraine for one day. In the winter of 2008-9, Russian supply to Ukraine was disrupted due to disagreements over outstanding debts and prices, a situation that rippled across Europe.

In 2014, Russia cut off supplies to Kiev amid the Russian annexation of Crimea. Ukraine subsequently stopped buying Russian gas in November 2015.

Ukraine has reduced reliance on direct gas imports from Russia via a reverse flow mechanism, allowing Ukraine to import from EU countries.
Source: Reuters (Reporting by Nina Chestney, Nerijus Adomaitis, Nora Buli, Vladimir Soldatkin, Stephen Jewkes, Jan Lopatka and Luiza Ilie; Editing by Jan Harvey)

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