Ukrainians will stop Russian gas. We can do without him, says the expert

Europe is worried about the further development of gas prices. After a year’s respite, when LNG deliveries, the construction of new terminals, full storage tanks and, last but not least, a mild winter played a positive role, traders are now starting to fear another winter. And you can tell by the price of gas.

Karel Svoboda from the Department of Russian and East European Studies blames the tension in the Middle East for this. “For the time being, it does not seem that the current situation should escalate even more, but the markets are understandably nervous,” said Svoboda. “If traffic in the Red Sea were to stop, it would mean more problems,” he commented.

The supply of Russian gas through Ukraine is causing wrinkles for traders, as the attacked country has announced that it will not extend the contract for the transfer of raw materials to Europe at the end of the year.

“The transit agreement with Ukraine lasts until the end of the year, so we still have a few months until the start of the heating season. There are several possibilities that could happen,” Jiří Gavor, executive director of the Association of Independent Energy Suppliers, answered the question of SZ Byznys. “It is certain that Ukraine will not sign anything with Gazprom, otherwise it would be politically intolerable.”

However, other factors also affect the price. Svoboda emphasized, for example, the economic conjuncture – if it were to occur, for example in China, it would push prices up. And the upcoming heating season is also at stake, which may not be nearly so merciful from the point of view of gas consumption.

“In 2021, Russia wanted, among other things, to force a larger share of long-term contracts when it refused to supply gas to the spot markets, but paradoxically it cut its own branch because European states reacted negatively to it and activated the search for alternative sources,” Svoboda described.

Svoboda thinks that the volumes of Russian gas are not small, but Europe should not collapse from them, he mainly praises the natural gas reserves, which are more than half full. Gavor agrees with him. “I think that the 10 billion cubic meters will not be as big a shock as it was in 2022, when there was a reduction of 150 billion,” he said.

“Slovakia, Austria and Hungary are mainly dependent on Russian gas. Hungary will continue to receive Russian gas, but through other routes, mainly through Turkey,” commented Gavor. “Austria could use a similar option, but there could be capacity shortages. Slovakia could work towards an agreement with Poland,” he described the alternatives for Central Europe.

According to him, the ten billion cubic meters that the Russians will stop supplying to Europe at the end of the year will be spread among other countries, because Russia has planned a gradual increase in capacity. And it will probably be China where most of this gas ends up.

Gavor does not think there will be a deterioration of market stability in Europe, if only because there are no sanctions on Russian gas. However, the offer could be limited. “The Hungarian opposition said that Russian gas is more expensive, but that is not the case. On average, it is cheaper, the contracts are favorable and buying gas from Gazprom is cheaper,” he informed.