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Could the European Union survive without Russian Gas?
Bruegel published this week a new report assessing how the EU would fare if the flow of Russian gas to Europe were to be disrupted. The main conclusion is that the EU could not only manage its next winter without Russian gas, but it could also do so without having to experience economic catastrophe or electrical disruptions. For this to happen, severe technical and regulatory challenges would have to be overcome and in the worse scenario the EU would have to slash its annual demand for natural gas by 10-15% as no amount of non-Russian imports would be enough to sufficiently refill storages ahead of the next winter.
Key findings from Bruegel’s report:
- The EU has enough gas to make it until the summer on the back of record-high LNG imports: However, in order to survive the next winter, Europe would need to refill its storages to the very brim as the EU would likely face one of the following three scenarios:
1. No Russian imports: The EU would have no choice but to slash its annual demand for gas by 10-15%.
2. Limited Russian imports: The EU would continue to suffer from a highly volatile gas market.
3. Average Russian imports: Storages would be easily replenished and, thus, prices would be much lower.
- The EU can survive the next winter without Russian gas; however, Europe will need to:
- Ensure that as much gas as possible is brought to the EU – Public intervention will be needed to ensure sufficient imports and prevent private companies from outbidding each other.
- Fairly distribute the gas across country storages.
- Pay back to companies the monetary difference in case prices end up below €70/MWh next winter, thus providing an incentive for companies to buy and store gas.
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