EPRS Admin By / February 4, 2022

design capacity vs exports to Europe Turkey

Pipeline design capacity vs exports to Europe / Turkey (not including ex-Soviet Union)

Pipeline design capacity vs exports to Europe / Turkey (not including ex-Soviet Union)

While Ukraine’s trade has successfully been redirected to the EU, and Ukraine is integrating with European value chains, its trade with Russia dropped significantly from a 27 % share of Ukraine’s international trade in 2013 to 7 % in 2020. This considerably diminished the level of Russian leverage over Ukraine. However, Ukraine’s role as a transit country for Russian gas exports has also diminished considerably.
Over the years, gas that transited through Ukraine was diverted to newer pipelines such as Yamal (through Belarus), the first Nord Stream pipeline (under the Baltic), and TurkStream (under the Baltic Sea). In 2020, just 40 billion cubic metres (bcm) of Russian gas transited Ukraine, using less than one third of the country’s annual transit capacity of 146 bcm. Even so, this was enough to earn Ukraine US$2.11 billion in transit fees. If it starts operating commercially, Nord Stream 2 would have 55 bcm of capacity, giving Russia the option of bypassing Ukraine altogether. Ending Ukraine’s role as a gas transit country would deprive its faltering economy of an important source of income (equivalent to 1.35 % of the country’s GDP) and also remove one of the main deterrents to a Russian invasion, i.e. disruption to Moscow’s gas exports. Several experts already accuse Russia of weaponising gas supplies, as Russia would like to receive certification of Nord Stream 2, a necessary precondition to start commercial deliveries, without the need to follow EU internal market competition rules.
While the Russian ambassador to the EU linked gas supply shortages with lukewarm EU-Russia relations, at the same time President Putin officially denied weaponising gas. In July 2021, the US and Germany issued a joint statement which reiterated that Germany will ‘press for effective measures’ at EU level, ‘including sanctions, to limit Russian export capabilities to Europe in the energy sector, including gas, and/or in other economically relevant sectors’, should Russia pursue further efforts ‘to use energy as a weapon or commit further aggressive acts against Ukraine’. During the EU-Ukraine summit, Commission President Ursula von der Leyen stated that the 2019 Gas Directive and the third energy package fully apply to Nord Stream 2, while ‘Ukraine remains and must remain a reliable transit country’. The head of the International Energy Agency noted that limitations of Russian gas supplies to Europe ‘coincide with heightened geopolitical tensions over Ukraine’, despite high gas prices which would normally lead to increased deliveries, hinting at a geopolitical rather than commercial approach to the supply of gas by Russia.
For its internal consumption, Ukraine produces gas which covers 70 % of its annual needs, and buys the remaining gas from EU countries. This gas, even if not bought directly from Russia – which has a track record of cutting gas supplies to Ukraine – is frequently Russian. Slovakia’s reverse gas flow to Ukraine hugely improves the situation, but would not be sufficient during the winter peak of gas consumption. The European Commission is working with Ukraine on different scenarios aimed at increasing gas supply capacity from EU Member States. It should also be noted that Ukraine is working continuously to reduce its domestic gas consumption, and succeeded in reducing its consumption by around 50 % between 2010 and 2019.

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