EU Ministers Hold Talks on Gas Imports as Russia Exerts Pressure

(Bloomberg) -- Europe’s energy ministers are meeting to discuss imports of Russian natural gas that still flow to the region even as the war in Ukraine rages for a third winter. 

At a meeting in Luxembourg on Tuesday, ministers from 27 nations will discuss how prepared the region is for winter as a key gas transit agreement between Moscow and Kyiv expires on Dec. 31. The need to maintain energy security has already forced the bloc to seek new gas supplies, pushed up energy prices and put pressure on the region’s network.

Europe needs to maintain its efforts to shift away from Russian fossil fuels by reducing gas consumption and building renewable capacity more quickly. The Ukraine pipeline is one of just two remaining routes to Europe for Russian flows but exports of liquefied natural gas continue to arrive at Europe’s shores in abundance. 

Negotiations are ongoing to try to replace transit flows but a deal doesn’t seem to be close with less than three months left to run. Both Kyiv and Moscow have said they’re willing to find a solution that could involve Azerbaijan.

The final decision is likely to come at the last minute or even at the beginning of next year, according to people with knowledge of the matter who requested not to be named because discussions are private. 

Slovakia, which together with Austria is the main customer of transit flows, would like to continue to use the route. One option being discussed is replacing Russia with Azerbaijan as a supplier, but details of how it would work remain unclear. With limited spare supply, exports from Azerbaijan to Europe would require swaps with Russia, making such an agreement politically controversial.

Another option could see Azerbaijan’s SOCAR could take on the role of Gazprom PJSC and sell the gas to Europe or, the company could facilitate transit through Ukraine.

The volume will need to be around 10-11 billion cubic meters to reach the levels needed for smooth shipment through Ukraine’s vast pipeline system, according to the people. Lower levels would mean the need to pump in additional gas, rendering the operation unprofitable.

“It is a Ukrainian decision how to deal with the pipeline, so it’s also their responsibility and their right to deal in a proper and responsible way with that,” European Commission President Ursula von der Leyen said last month. 

Relations between Russia and its former Soviet republic Ukraine have been fraught with tensions over gas transit since the fall of communism, with disputes leading to two supply cuts in 2006 and 2009. 

The European Commission, which helped broker agreements between the two countries in the past decades, is not facilitating any talks this time. It has repeatedly said that Europe can withstand the end of Russian gas transit via Ukraine without endangering its security of supply. 

EU gas storage is full and flows through the Ukrainian route now account for less than 5% of the continent’s supplies. Yet for countries including Slovakia and Austria finding new imports could mean higher prices, a factor that politicians don’t like. 

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