Gazprom can still deliver competitively priced molecules, but the political economy in Europe may have already moved against Russian gas.
Is Russian gas gone for good, or will it eventually return to Europe? This question has been looming since the Kremlin cut off gas supplies to its EU customers in the wake of its full-scale invasion of Ukraine in February 2022. For decades since the Ostpolitik of the 1970s, Europe had been the prime market for Russian gas, and the ensuing pipeline infrastructure linked West Siberian gas fields to Western Europe’s industrial heartland. And for decades, Russia was Europe’s key source of gas, supplying up to forty percent of EU consumption, some 155 billion cubic meters, in 2021.
Both sides invested a great deal of political and financial capital in this long-standing and, for the most part, mutually beneficial gas relation. Affordable, albeit clearly not “cheap,” Russian gas supplies allowed European industries to thrive against the backdrop of limited domestic energy sources. Gazprom, Russia’s state-owned energy giant, made the bulk of its profits in Europe, which enabled the cross-subsidization of domestic industry and households, as well as advancing an economic development agenda.
All of this went out with a bang. Within a few months, Russia, a once dominant player in the European import balance, was reduced to a marginal supplier, delivering a mere 51.6 bcm in 2024, of which 31.6 bcm was pipeline gas. The EU’s stated policy goal is to phase out Russian gas by the end of 2027 and to put an end to Moscow’s ability to weaponize gas exports.
Still, some EU policymakers have been keen to keep the door open for Russian gas to return. Albeit not their ultimate decision, the motivation was to make energy supplies part of a package deal should peace talks on Ukraine eventually come to fruition. As a side benefit, the hopes are that Europe would return to the status quo ante bellum, thus alleviating some of the excessive cost burden and reconstituting European industry’s competitiveness on a global scale.
What is more, a US investor recently seemed interested in operating what’s left of the Nord Stream system after underwater explosions destroyed three of the four pipeline legs. With a major piece of import infrastructure coming back online, Russian gas flows to Europe could resume, now under US control, provided still-existing sanctions on Nord Stream 2 are lifted. Once politically palatable, Russian gas may be back in the game.
And yet, things are not as straightforward. Making Russian molecules available and operating the infrastructure through which they flow is one thing. Whether those molecules will find a market welcoming them is another.
Prices will, clearly, not stand in the way. Gazprom has in the past proven it can and is willing to provide gas at competitive price points, and Moscow may also welcome the cash. Instead, it is the political economy of the EU gas market that may prove increasingly difficult for Russian gas going forward. Three things have changed considerably since Russia’s invasion of Ukraine: sunk costs, incumbency, and policy paradigms.
New Sunk Cost Dynamics Break Russian Gas Inertia
For decades, pipelines linking Europe to external suppliers had generated significant sunk costs in the gas industry. In the case of Russian gas, this included the Brotherhood pipe, Yamal Europe, and eventually Nord Stream 1 and Nord Stream 2, all spanning thousands of kilometers from borehole to end consumer, and all amounting to surplus capacity towards the European market.
What is more, upstream assets needed to be developed, and transmission systems needed to be put in place to bring gas to customers, along with the operational capacity for sales and distribution in the end consumer market. A dense web of corporate networks in the gas sector emerged between Europe and Russia, tied together through mutual financial commitments made in transmission systems or storage, in cross-border transit infrastructure, and, in the Russian case, even in European end-user industries such as chemicals. Past financial and political commitments perpetuated gas relations and emerged as an important force of inertia in favor of Russian gas imports. In return, revenues accrued from the gas trade, transit, and sales benefited corporations, operators, and governments on both sides. By 2020, gas stood at some twenty-five percent of the European energy balance, up from 16.9 percent in 1990 and 21.6 percent in 2000.
The 2022 gas crisis dramatically changed these sunk cost dynamics. In the wake of a historic price spike, the share of gas in the EU member states’ energy balance declined across the board, thanks to cuts in gas demand, a fuel switch, and a shift towards more renewables in the energy system. Germany’s nominal gas consumption decreased by 17.2 percent between 2019 and 2023, Italy’s by 15.3 percent, and Poland’s by 6.2 percent, to highlight but a few larger European economies.
At the same time, new infrastructure started creating novel sunk costs. In 2023, Norway had taken the spot of being Europe’s top supplier, whereas liquefied natural gas (LNG) ended up replacing Gazprom’s molecules, mostly in the shape of gas shipped from the United States. Within record time, and to the surprise of many observers, the geography of the gas trade shifted from east to west. Berlin rushed to build three LNG terminals at a pace barely seen in the country, hardwiring this shift into the German import balance. Italy, Poland, and Greece all expanded their LNG liquefaction capacity, while utilization rates of existing LNG capacity in Belgium, France, and Spain rose to record levels in 2022. By 2024, Europe’s LNG intake capacity had increased by more than thirty percent compared to pre-crisis levels.
Russian Gas Returning May Hurt Significant Corporate Interests
By extension, the politics of incumbency saw significant alterations. Prior to the 2022 energy crisis, gas importers, particularly those tied to Russian partners, were a political force to be reckoned with. To be sure, gas market concentration differed across Europe, as did, by extension, the gas companies’ ability to exert policy influence. Gas markets in Slovakia or Poland were marked by few players dominating key parts of the value chain, including transmission, storage, and trading. Germany and Italy, by contrast, were characterized by more competitive market structures.
Yet, high levels of industrial consumption put German gas companies at the center of the government’s policy efforts to maintain an export-led economic growth model, handing the incumbents a somewhat oversized clout.
In the context of the 2022 crisis, two elements came together. The first is gas consumption trajectories in most European countries, which showed a peak in demand between 2020 and 2022. Thanks to determined renewable energy policies, gas has started to gradually lose ground to cleaner energy sources. In other words, incumbents were getting weaker already before the crisis, and the latter only accelerated this trend.
Second, the crisis brought in new gas players challenging incumbent ones, particularly if their business was built on Russian gas. To highlight but a few: companies operating newly built LNG terminals will be out of money should Russian gas come back. So will importing companies that diversified and struck long-term contracts with alternative suppliers, including Qatar and Algeria.
What is more, corporations in energy-intensive sectors (EITE), such as chemicals and steel, have committed billions in investment into industrial decarbonization to secure business in a high (energy) cost environment marked by geopolitical uncertainty. They, too, will feel the heat. So will European governments, which started handing out financial support to facilitate the clean transition of EITE industries.
All of this suggests that it is reasonable to expect significant opposition against Russian gas returning, as significant corporate interests stand to be hurt in the event of lower-priced molecules reentering the European gas game.
Policy Paradigms Turned From Blue to Green
Regulatory paradigms have shifted, too. In essence, they went from “blue” to “green.” Since Europe’s clean transition efforts started in the early 2000s, gas has been considered a transition fuel — comparably low in carbon emissions, palatable for industrial processes, and available to replace coal in thermal power plants. Regulations followed.
A series of EU-level “energy packages” were geared to facilitating an integrated EU gas market, ensuring cross-border infrastructure was in place, and fostering competitive pricing to ensure consumers benefit. The regulatory paradigm, clearly, was gas-friendly — it was “blue.” To be sure, this is not to suggest that green agendas had no place in the EU’s policy mix. To the contrary, determined decarbonization efforts were underway, the latest such move since the 2008 landmark Climate and Energy Package — a reaction to the failure of the Kyoto Protocol. Yet, it was arguably the 2022 events that tilted the balance towards climate ambition and, by extension, against natural gas.
This was not by choice; it was by necessity. Clean alternatives to natural gas were seen as key to hedge against Russian attempts to weaponize gas, to regain resilience in energy supply chains, and to ensure economic security. Renewables became politically charged, culminating in then-German finance minister Christian Lindner’s statement that renewables amounted to ‘freedom energy.”
This process of securitization, as political scientists would call it, took clean solutions out of the climate policy box and put them into the security policy box. Regulations, again, followed. The EU’s REPowerEU plan prioritizes clean energy by increasing its share in the energy mix, streamlining regulations to speed up renewable project permits, and committing to the development of a green hydrogen economy. The revised 2023 Renewable Energy Directive sets a binding renewables target of 42.5 percent for overall EU energy consumption by 2030. Most recently, the European Commission eyed a target of a ninety percent reduction in net emissions by 2040.
The EU member states acted in line with this ambitious green agenda. Judged by the national energy and climate plans (NCEPs) at the EU level and the nationally determined contributions (NDCs) submitted to the UNFCC, Germany and Italy set some of the most ambitious targets, whereas Poland, another significant consumer of gas, exhibited some of the fastest growth in renewable energy in the energy balance. Clearly, EU regulatory frameworks put a premium on green solutions, assigning natural gas the place of a backup fuel in a system that is rapidly leaving the fossil age.
Europe’s decarbonization targets have become ever more ambitious in the past two decades, and the energy crisis triggered by Russia’s invasion of Ukraine has accelerated this trajectory. “Gas as a bridge fuel” for the energy transition has lost most of its appeal.
A New European Political Economy of Gas
Europe’s energy landscape has fundamentally shifted since the 2022 crisis. The prior reliance on Russian gas is now insignificant, gas companies that had heavily invested in Russian contracts have been weakened, and new supply infrastructure has created different sunk cost trajectories. The regulatory focus has decisively moved from fossil fuels to green energy.
To be sure, not all countries share an appetite for leaving Russian gas behind. Slovakia and Hungary are notorious for their ties to the Kremlin and are eager to maintain Gazprom’s supplies.
There also are differences in national policy responses to the crisis. Italy, for example, shifted to alternative suppliers of gas but took a rather slow approach in deploying renewable energy as a means to replace gas, while other European countries put in place ambitious measures to pivot to renewable sources.
Overall, however, the dynamics unfolding in the new political economy of European gas are hard to do away with. The longer they last, the more path dependencies will become sticky, and for Russia, the more returning to the status quo ante will get difficult. Politics may become palatable again for Russian gas to return to the European market, but chances are it will not have a significant place in it.
About the Authors: Andreas C. Goldthau and Adnan Vatansever
Andreas C. Goldthau is the Franz Haniel Professor of Public Policy at the faculty of economics, law and social sciences and Director of the Willy Brandt School of Public Policy at the University of Erfurt. Before joining the Brandt School he served as Research Group Lead on the Energy Transition in the Global South at the Research Institute for Sustainability – Helmholtz Center Potsdam (RIFS), as Professor in International Relations at Royal Holloway College, University of London and as Professor at Central European University’s School of Public Policy in Budapest. He was Marie Curie Senior Fellow with the Geopolitics of Energy Project at Harvard Kennedy School and Adjunct Professor with John Hopkins’ MSc program in energy policy and climate. He also held postdoctoral appointments at the Paul Nitze School of Advanced International Studies at Johns Hopkins University, the RAND Corporation and the German Institute for International and Security Affairs.
Adnan Vatansever is Reader in Russian Political Economy in the King’s Russia Institute and author of ‘Oil in Putin’s Russia: The Contests Over Rents and Economic Policy‘. Previously, Adnan worked as a senior associate in the energy and climate program at the Carnegie Endowment for International Peace, a senior associate in Russian and Caspian energy at IHS Cambridge Energy Research Associates, and a consultant for the World Bank and the U.S. Department of Energy. He holds a PhD from the School of Advanced International Studies at Johns Hopkins University, and M.A. from the School of Foreign Service at Georgetown University. He speaks Russian, Bulgarian, Turkish and English.
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