Europe can’t stop buying Russian gas. Here’s why.

• Europe remains dependent on Russian gas and continues to buy it at normal levels.  
• This is despite sweeping Western sanctions being imposed on Russia after it invaded Ukraine.
• Here’s why Europe can’t stop buying Russian gas.

Three days after Russia invaded Ukraine, and after sweeping sanctions were levelled against Vladimir Putin’s regime, Europe’s appetite for Russian gas shows no sign of diminishing.

On Sunday morning, Gazprom, the Kremlin-controlled energy giant, said gas exports from Russia to Europe via Ukraine were proceeding just as expected.

On Friday, figures from Ukraine’s grid operator showed that European imports of Russian gas through Ukraine jumped by nearly 40% on Thursday, the day the invasion began, according to Bloomberg.

Oil and gas have so far been exempted from Western sanctions on Russia.

Here’s why Europe has continued buying Russian gas.

The continent came to depend on it

Europe once enjoyed reliable gas supplies from the North Sea field – which is now all but depleted. Russia, meanwhile, has the world’s largest reserves of natural gas.

The European Union relies on Russia for about 40% of its gas – more than twice as much as Norway, its next-largest import partner.

In 2021, Russia sold about $100 billion worth of oil and gas to Europe, William Jackson, an economist at Capital Economics, estimated. Gazprom supplied about a third of Europe’s gas in 2020, according to Bloomberg. 

Germany came to depend on it

Germany, the largest economy in Europe, relies on Russia for more than half its gas. Germany has been phasing out nuclear power in favour of gas, and has been trying to build a new pipeline to bring in more from Russia. This is the Nord Stream 2 pipeline, which would supplement the existing Nord Stream 1 pipeline and follow a similar route through the Baltic Sea.

Germany suspended the Nord Stream 2 project shortly after Russia invaded – but notably, it did not cancel the project altogether.

The cost is comparatively low

Analysts said increased European imports of Russian gas on the day of the invasion were partly because market forces pushed up the price of non-Russian gas.

Stefan Ulrich, a gas analyst at BloombergNEF, said on Thursday that non-Russian gas prices were “well above the likely sales price for many Gazprom import contracts.”

Georg Erdmann, former chair of the Department of Energy Systems at the Institute for Energy Technology at Berlin University of Technology, told CNBC that the gas industry “assumes Russia to be a rather reliable commercial partner” that fulfils its long-term contracts.

Lawmakers have eyes on consumer energy costs

Europeans have suffered a winter of soaring gas prices, raising home energy bills. European lawmakers are now wary of spooking their voters with the spectre of further price increases.

Ursula von der Leyen, president of the European Commission, has insisted that the EU would be able to cope should there be any disruption to gas imports.

Europe has been slow to shift to renewables

The EU has committed to using renewable energy but the buildout isn’t happening fast enough to ease its reliance on Russian energy. 

Per the Directorate-General for Energy for the EU, 25% of the bloc’s energy comes from natural gas. The rest is from oil and petroleum (32%), solid fossil fuels such as coal (11%), and renewable energy and biofuels (18%).

Tim Schittekatte, a research scientist at the MIT Energy Initiative, told CNBC: “There is simply not enough grid capacity now to take up more renewables in some parts of Europe.”

Russian gas helps grow European crops

Europe uses gas to make key ingredients for fertilizer, like ammonium nitrate and urea. Disruption to gas supplies therefore also has an impact on the continent’s ability to grow crops and feed its population.