PARIS, December 20. /TASS/. The termination of Russian gas transit through Ukraine will result in higher costs for European countries, as they will have to purchase it through go-betweens, Jacques Sapir, a specialist in global economics and research director of the Paris-based Higher School of Social Sciences (Ecole des Hautes Etudes en Sciences Sociales) said in a conversation with TASS.
According to him, the decision not to extend transit contracts was no surprise given the political landscape. The economist believes that the termination of the deal will hurt Ukraine more, as it will lose a source of income, while Gazprom will not be hurt financially, owing to, among other things, its introduction of additional capacities for processing liquefied natural gas (LNG).
"It is obvious that European countries cannot do without Russian gas. Imports from Russia again exceed imports from the United States, and some countries, such as Italy, are planning to increase imports of Russian gas," Sapir stated. He added that after the closure of the Ukrainian route, Russian exports still have alternatives such as the TurkStream gas pipeline, through which gas is supplied to the countries of Southern and Southeastern Europe.
According to Sapir, about 25-30% of gas consumption in the EU will be covered by supplies from Russia, but the transition to LNG is irreversible, even if pipeline supplies resume after the end of the Ukrainian conflict.
"In fact, additional costs of switching to LNG are from 20 to 25%. This is one of the main reasons for the recession in Germany and the economic problems of Italy, since some industries, such as chemical and metallurgical, desperately need gas, not to mention consumption for heating and electricity," the economist says.
Restoring business ties with Russia
In the context of production cuts and layoffs in Germany, as well as plans to relocate enterprises, especially in the chemical industry, the country’s authorities, as Sapir says, "will seek to restore contacts with Russia to receive cheap energy." This will happen regardless of who comes to power after the next elections in that country.
Economic difficulties across Europe could further push countries toward rebuilding relations with Russia, often at Ukraine's expense.
"Society and political elites in some countries are beginning to understand what the situation with aid to Ukraine really is. This concerns not only Germany, but also Italy, not to mention some Central European countries such as Hungary, Slovakia and even Austria. We see how the European Union is splitting into two parts: on the one hand, the Baltic countries, Scandinavia (especially Sweden and Finland) and Poland, which are still ready to support Ukraine, and on the other, the countries of Central and Southern Europe, which understand that this support will lead to nothing and that military actions have been going on for too long. Other countries are undecided. These are France (because of the current political crisis) Spain and Portugal (because these countries are much less concerned about what is happening in Ukraine)," the expert explained.
Refusal of gas transit
On December 19, at a Q&A session along with his annual press conference with journalists, Russian President Vladimir Putin said that there will definitely be no contract for the transit of Russian gas through Ukraine. He noted that by refusing to extend the agreement, Kiev has created additional problems for European countries, without whose support Ukraine cannot actually exist.
The contract for the transit of Russian gas through Ukraine expires on December 31, 2024. Kiev has repeatedly stated that it does not intend to extend it. However, a number of Ukrainian and Western media outlets wrote that transit schemes are possible, under which European countries will buy gas from Russia even before it is sent to the consumer, so that formally it will no longer be Russian gas that will flow through Ukrainian territory. There have also been suggestions that a third country, such as Azerbaijan, could purchase gas from Russia in order to then supply it to Europe through Ukraine.