MOSCOW, May 6. /TASS/. The EU's rejection of Russian pipeline gas and liquefied natural gas (LNG) will result in higher prices for the region, Finam analyst Sergey Kaufman told TASS.

"The impact on prices will primarily be determined by specific parameters, but if the EU rejects Russian LNG, a speculative increase in prices closer to $500 per thousand cubic meters is possible," the expert said.

However, in the long term, the market price may stabilize in the range of $250-300 per thousand cubic meters, since in the coming years the global LNG market may become surplus, he added.

Earlier on Tuesday, the European Commission (EC) announced initiatives to phase out Russian gas. The roadmap states the intention to ban new deals on import of Russian gas and spot contracts by the end of 2025. The EC also wants to ban import of pipeline gas and LNG from Russia under existing contracts by the end of 2027.

"Legal sanctions of the EU can become sufficient justification for buyers to declare force majeure under contracts. Russian gas companies do not disclose the structure of their supplies to the EU, but according to our estimates, spot market accounts for no more than a third of supplies," Kaufman said.

Nevertheless, a complete refusal of the EU from Russian pipeline gas is unlikely at the moment, the expert believes. Its main importers are currently Hungary and Slovakia, whose governments consistently advocate for the continued import of Russian hydrocarbons. That is why, if the ban on pipeline exports is approved, there will probably be exceptions for Hungary and Slovakia, Kaufman believes.

As for Russian LNG, it is primarily imported by France, Belgium, Spain and the Netherlands, the countries that generally support the sanctions regime against Russia.

"In the coming years, a noticeable increase in supply from the United States and Qatar is expected, which, together with the rather modest dynamics of demand in China, may, according to our estimates, allow the EU, if it needs to, to abandon Russian LNG in a year if the geopolitical situation does not improve. In fact, the transition to alternative sources may take longer so as not to increase volatility in the European gas market too much," said an analyst at FG Finam. According to him, in such a scenario, the EU's dependence on American LNG will increase.

 

On EU's purchase of Russian gas

 

In May 2022, the European Union launched the REPowerEU program, aimed at ending its dependence on Russian gas by 2027. After that the cost of purchasing Russian LNG for the European Union has increased almost fourfold in three years due to an increase in prices and volumes of its supplies from Russia. Until 2022, the European Union purchased 40% of its gas from Russia, by 2023 this figure had dropped to about 15%, but in 2024 it began to grow again and reached almost 19%, which caused sharp criticism from Brussels.

Earlier TASS reported citing Eurostat data and its own calculations, that in 2024 the European Union paid 7.6 billion euros for pipeline gas from Russia, compared to 7.9 billion euros in 2023. Purchases of LNG from Russia last year amounted to 7.2 billion euros, compared to 8.1 billion euros in 2023.