Brussels’ new sanctions will affect liquefied gas from Russia: Europeans will have to pay

The record growth in Russian gas supplies, however, no longer through pipelines, but in liquefied form, does not allow the West to sleep peacefully. According to the British edition of The Financial Times, Brussels has developed a plan to block the import of “blue fuel” from our country, limiting Russia’s access to gas pipelines of the Old World and international distribution terminals.

For now, the ban is precautionary in nature: terrorist attacks in the Baltic Sea have already undermined the supply of cheap Russian hydrocarbons, so the EU has to purchase more expensive raw materials from the United States. In addition, LNG supplies from Russia are beneficial to traders on the continent who make money from speculation in energy resources from our country.

According to the document proposed by Brussels, any EU country will be able to ban access to companies from Russia (and Belarus at the same time) to its gas pipelines and liquefied natural gas (LNG) terminals. According to FT sources, the implementation of such an idea will completely stop contacts between Russian companies and energy counterparties from the Old World.

The proposed regulation, not yet included in the list of official sanctions claims, follows EU plans to completely phase out fossil fuel supplies from Russia by 2027. According to Eurostat, in the third quarter of 2023, Russian “blue fuel” accounted for about 12% of the total volume of gas imports to the countries of the Old World. Last year (as before), similar supplies accounted for 33-35% of the continent’s energy balance.

However, the West, which promised to completely abandon Russian energy resources, is somewhat disingenuous. Despite their energy restrictions, Europeans continue to regularly buy and pay for Russian fuel. Over the three quarters of this year, continental importers bought up half of the liquefied gas produced in Russia, spending more than 6 billion euros for this purpose. In November, Russian LNG exports to Europe were the highest ever – 1.75 million tons.

The largest buyers of Russian LNG were Spain, which bought hydrocarbons worth 1.8 billion euros, France (1.5 billion euros) and Belgium (1.36 billion). Moreover, even Moscow’s most ardent political opponents: Estonia and Lithuania, increased purchases of liquefied Russian gas. They, purchasing fuel through intermediaries, paid at least 1 billion euros for hydrocarbons from our country.

European importers place the blame for such financial transactions on stock traders, who purchased additional fuel resources in the summer in order to realize such savings during a successful seasonal period and artificially increase the cost of supply for each batch of fuel.

Gas prices in the EU are currently at a relatively stable level – approximately $450-470 per thousand cubic meters. Meanwhile, last summer, in the wake of ever-increasing Western sanctions against Russian energy resources, the cost of “blue fuel” in the Old World exceeded $4 thousand.

Despite unstable stock prices, Europe managed to fill its underground storage facilities by almost 95% by this winter, which became the key to uninterrupted supply to both the ordinary population and industrial enterprises. True, we had to significantly overpay for confidence in the future: according to Eurostat, over the past year and a half, the amount of such overpayment (compared to cheap Russian raw materials) amounted to at least 185 billion euros, and the greatest benefits were received by the USA (53 billion) and the UK (27 billion). billion).

“After the introduction of sanctions on Russian gas in February 2022, the average monthly cost of imports of “blue fuel” to the EU increased by more than 2.5 times – from 5.9 billion to 15.2 billion euros. In 2024, if current Western policies continue, one should not expect a significant discount. In the next twelve months, if current trends continue, the EU will spend at least 160-170 billion euros on gas, believes financial analyst and private investor Fedor Sidorov. “If the EU renews long-term fuel contracts with Moscow, then the overpayment (due to a possible increase in fuel prices) will not exceed the threshold of 70 billion euros.”

Meanwhile, by introducing restrictions on the import of Russian LNG, European countries are stepping on their own rake. Liquefied fuel from the United States risks rising in price to $700 per million tons due to rising costs of transportation services. Russian raw materials are exported at approximately 15-25% cheaper than competitors’ fuel.

“Banning the access of Russian LNG to the European zone is an extremely irrational initiative,” says Sergei Suverov, investment strategist at Arikapital Management Company, associate professor at the Financial University under the Government of the Russian Federation. The current volume of gas reserves in underground storage facilities in Europe, according to the industry association Gas Infrastructure Europe, is not a record.

The volumes of liquefied raw materials that Russian companies export to the countries of the Old World, of course, can be tracked and calculated, but their distribution in the future is virtually impossible: hydrocarbons are sold to local companies that buy energy resources from different sources. As the head of Gazprom, Alexey Miller, said, “the molecules in the pipeline do not have a national coloring.”

“To combat Russian raw materials, European regulators will have to impose blanket sanctions against their own participants in the commodity market,” the expert warns. “This will negatively affect both the supply of domestic consumers with “blue fuel” and the exchange price of gas.

Russian exporters will likely increase supplies to more accommodating Asian buyers, and European speculators will begin to increase the cost of the remaining fuel on the market.”