Skip to 0 minutes and 0 secondsLet’s set out to frame Russia-EU energy relations. There is a prevalent opinion in academia, business and international politics that Russia and the EU are mutually dependent in the sphere of energy, especially with regards to the trade in natural gas. Russia, and specifically Gazprom, is the largest supplier of natural gas to European countries. In 2013, Gazprom exported a record level of gas to Europe, significantly exceeding deliveries in the 2008-2012 period. The vast majority of Russian gas exports to Europe are sold on long-term contracts varying from 10 to 35 years in length.
Skip to 0 minutes and 45 secondsThese contracts, which are legally binding and subject to international arbitration, contain take-or-pay clauses which require buyers to pay for a minimum annual quantity of gas, irrespective of whether they take that quantity. European countries have different gas contracts with Russia. Some states pay more for natural gas and other pay less for the same gas from the same supplier. It can be seen in Hungary, where the discount on Russian gas is more important than the common interest of the EU. The situation is similar in Germany, where the business lobby would protect the relation with Russian companies regardless of the Europeanization of energy security.
Framing Russia-EU energy relations
The main additional source of non-Russian gas for Europe up to 2030 will be LNG; pipeline gas imports from domestic and other imported sources are not envisaged to increase substantially and may decline.
Russian gas deliveries to Europe will be highly competitive with all other pipeline gas and LNG (including US LNG) supplies throughout the period to 2030, and Gazprom’s market power to impact European hub prices may be considerable.
© Younkyoo Kim, Hanyang University