Putin Wants to Sell More Russian Gas to Europe. Can He?

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ENB Pub Note: This is an excellent article from Bloomberg about the potential for low-cost Russian natural gas to return to the European market. There are several key points to note while reading this article. President Putin has done an excellent job for Russia, replacing Europe as a customer with the Asian markets. As George McMillan has said, “All Putin has to do is nothing, and he has won,” not only the Ukraine war but also the financial battle with the West. The left governments have de-industrialized Germany and much of Europe even without the removal of Russian natural gas. Their horrific energy policies have killed economic growth, and it will be decades of recovery with or without Russian natural gas. Russia has moved on, and it would be nice to sell to the European markets, but make no mistake: they do not need the EU’s markets and only want the land that they occupy in Ukraine to block an invasion. History has shown that was the path for the last three invations into Russia. So, the European markets need Russian gas more than Russia needs a new customer. Not many countries grew their GDP in 2024, and Russia was in the 4% growth range even with heavy sanctions and shipping fewer products to Europe. 

Russian President Vladimir Putin seems confident that pipeline flows of natural gas to Europe could be stepped up if a US-brokered deal to end the war in Ukraine is agreed — raising questions about whether the continent is willing to reverse course and revive that relationship.

“If, say, the US and Russia agree on cooperation in the energy sector, then a gas pipeline for Europe could be ensured,” Putin said at a briefing in Moscow on March 13. “And this will benefit Europe, as it will receive cheap Russian gas.”

But while some traders are speculating that Russian supply will increase, many expect limited volumes to return, if any. The European Union is working on plans, albeit delayed, to end its dependence on Russian energy by 2027.

None of the options to ramp up pipeline flows are particularly straightforward. The simplest would perhaps be a resumption of last year’s levels of gas transiting through Ukraine, which came to a halt at the end of December. These volumes met less than 5% of Europe’s total gas demand.

Why would Europe consider pivoting back to Russian gas?

It’s the “cheap” aspect that Putin mentions that could convince some countries in Europe to overlook their geopolitical concerns. The EU has made considerable headway in curbing its appetite for Russian gas after more than five decades of overwhelming reliance, but continued pricing pressures could test the bloc’s resolve.

Europeans are still paying more for gas three years after the region’s worst energy crisis in decades. And in the EU’s largest economy, Germany, some industries are hoping for a return of Russian supply as high energy costs weigh on their ability to compete with manufacturers abroad. Countries in Eastern Europe that used to rely on the Soviet-era flows of gas, especially Slovakia, have also been pushing for Russian pipeline volumes to come back.

On top of that, gas storage has become a bigger concern this year after a cold winter and drop in wind power generation saw the continent burn through its reserves more quickly. Europe faces a tough and expensive refilling season before the next winter starts, and any meaningful increase in gas supply in a tight market would bring much-needed relief.

Why is Putin optimistic that Europe will buy more Russian gas?

The potential for warmer relations between the US and Russia is key here. Russian and European officials say the US is exploring ways to work with Russian state-run gas giant Gazprom PJSC on global projects. Gazprom is keen for the US to help restart its Nord Stream pipelines between Russia and Germany, people familiar with the matter told Bloomberg News.

Gazprom has a majority stake in Nord Stream and is the sole owner of Nord Stream 2. For the latter pipeline, its Switzerland-based operator — a subsidiary of Gazprom — is in the middle of insolvency proceedings. An American investor with experience doing business in Russia, Stephen Lynch, was reportedly interested in acquiring the operator if it’s declared bankrupt. That would effectively give the US a stake in the project.

Sanctions relief could also unlock more exports of Russian liquefied natural gas, which Europe imported record volumes of last year. Russia has spare capacity as its newest project, Arctic LNG 2, controlled by Novatek PJSC, only managed to start limited shipments in 2024 before stopping due to sanctions imposed by the US and its allies. The curbs restricted access to ice-class tankers needed to navigate frigid northern waters and made foreign buyers reluctant to buy cargoes.

US President Donald Trump has previously said some sanctions on Russia could be lifted as part of a peace deal in Ukraine, but muddying the picture are his own ambitions to sell more US LNG to Europe.

How much Russian gas is Europe buying right now?

Prior to the invasion of Ukraine, Russia was Europe’s biggest provider of gas, serving around 40% of the region’s demand and delivering the fuel through several pipelines to more than 20 countries.

That share had fallen to around 14% in 2024, according to the International Energy Agency. Most European buyers turned to alternative sources after dropping or being cut off by Russian suppliers, or found ways to use less gas. Some countries, such as the UK, Baltic states and Germany decided to stop imports of all Russian gas back in 2022, although Germany still receives some volumes from its neighbors that buy LNG from the east, including Belgium and France.

Europe’s imports of Russian LNG mean Russia is still one of the continent’s top sources of gas. But in terms of pipeline flows, Russia now sends a mere fraction of what it used to, as only one route — a single leg of the TurkStream pipeline that feeds into Hungary, Serbia and Slovakia via Turkey and under the Black Sea — remains operational.

What are the barriers to Russian pipeline gas returning to Europe?

For one, the EU has been working on a plan to phase out its remaining imports of Russian energy by 2027. While publication of the document has been postponed, the European Commission has said that the strategy is still being prepared.

In addition, many of Europe’s ties with Russian gas suppliers have been severed or soured in recent years. Some of the biggest and oldest customers of Gazprom, including German utility Uniper SE and Austrian energy firm OMV AG, have terminated their long-term contracts to buy gas after arbitration rulings.

Others, such as Eni SpA in Italy and Engie SA in France, have pending lawsuits against the Russian company, seeking compensation for the halt of deliveries in 2022. They would likely be reluctant to resume purchases before all claims are resolved.

There are also infrastructure bottlenecks. Both lines of the undersea Nord Stream pipeline were damaged by sabotage in 2022, with the perpetrators still unknown. The explosion took out one of the lines of the Nord Stream 2 pipeline too. While the other string remains intact, the system has never been certified for use by Germany.

Putin has repeatedly said that the undamaged string of the Nord Stream 2 pipeline is ready to supply Europe with Russian gas. Even in the unlikely event the German government reversed its opposition to this, the link would first require some maintenance as the last technical tests were conducted more than three years ago. It’s unclear how long such work would take.

Flows through another network, the Yamal-Europe pipeline that runs across Poland, could be revived after stopping in 2022, but the Polish government would need to approve the reopening and has been firmly opposed to receiving gas from Russia.

And then there’s the possibility of restoring the transit of Russian gas via Ukraine after a five-year agreement expired at the end of last year. While this option could be win-win for both sides — bolstering the revenues of Gazprom and bringing back transit income for Ukraine — talks between the Russian gas giant and its Ukrainian counterpart Naftogaz have historically been painful and lengthy.

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