Repercussions of the decline in Russian gas deliveries through Ukraine on European countries

In this interview with Al Hurra TV, Dr Carole Nakhle, CEO of Crystol Energy, discusses the possible repercussions of the decline in Russian gas deliveries through Ukraine and the long-term dynamics of securing alternative supplies.

Dr Nakhle says that the extent of the impact of the disruptions in gas deliveries through Ukraine on European countries will depend on the duration and volumes lost during the disruption. For instance, following recent disruptions, the initial market reaction was a 7% increase in gas prices but then cooled down as information came that an alternative route had been secured. This reflects the level of fear in the European markets of a possible cut off of Russian gas supplies.

For decades, Europe and Russia have been locked in a bilateral trading relationship reflected in shared gas infrastructure. Therefore, replacing Russian gas will require new infrastructure to accommodate for example liquified natural gas (LNG) imports. These will require three to four years to be fully deployed. Since the 1990s, Europe has been working on decreasing its dependence on Russian fossil fuels and has been successful in its strategy (for gas from 75% to 40% nowadays). A complete phase out will simply need time.

Gas markets are complex. They require an agreement between the supplier and consumer even before gas is produced. Qatar, for example, is one of the biggest gas exporters in the world and most of the gas that is exported has been already booked by contracts with other consumer countries; therefore, it can only offer small relief to European consumers.