As the multibillion-dollar contract for Russian gas flowing through Ukraine nears expiration at the end of the year, many European officials are eager to move away from Moscow’s energy supplies. Data shows that most EU countries have diversified their sources, making Russian gas largely replaceable. However, for Austria, Slovakia, and Hungary, the potential cutoff of Russian gas poses significant economic challenges. These countries have continued to rely heavily on Russian gas for cost reasons, using the Ukraine pipeline as a crucial link to Moscow’s energy.
Following Russia’s invasion of Ukraine in early 2022, Europe was forced to reduce its dependence on Russian gas. Moscow had cut off supply through major pipelines such as Nord Stream and Yamal-Europe, prompting EU countries, especially those with coastal access, to turn to liquefied natural gas (LNG) from the U.S. and other regions. By 2023, Russian gas accounted for only 8% of the EU’s total energy imports, down from over 40% in 2021.
Despite this progress, the Ukraine pipeline has remained an essential source of gas for Central and Eastern European countries that cannot as easily pivot to LNG. Austria, for example, was still 98% dependent on Russian gas in 2023, much of which arrived through this route. Slovakia and Hungary are similarly reliant on the Ukraine pipeline, with Slovakia importing several billion cubic meters of gas through it. Although Hungarian reliance on the pipeline has diminished somewhat, the country remains deeply connected to Moscow’s energy supplies.
The looming expiration of the Ukraine pipeline contract raises concerns for these countries, which may face disruptions in gas supply. While alternative sources are available, including deals with Turkey and Serbia, switching to LNG or other suppliers will likely result in higher costs. Historically, Russian gas has been cheaper than LNG due to the simplicity of pipeline transport. As a result, any shift away from Russian gas could lead to economic difficulties, particularly for Austria, Slovakia, and Hungary.
Moreover, the potential closure of the Ukraine pipeline could cause ripple effects throughout the EU. Even though the pipeline currently supplies only about 5% of the EU’s total gas imports, the reduction in available supply could tighten the energy market, making it more vulnerable to shortages and price fluctuations. This is particularly concerning as Europe heads into winter, a time when gas demand typically spikes.
Some proposed solutions involve importing gas from Azerbaijan to replace Russian supplies. However, there are doubts about whether Azerbaijan has the capacity to meet this demand. Experts also suggest that Azerbaijan might act as a middleman, funneling rebranded Russian gas through its pipelines. Even if such an arrangement materializes, gas prices are expected to rise, with Russia still profiting indirectly.
As the EU continues its transition away from Russian energy, Austria, Slovakia, and Hungary may face tough choices in securing affordable and reliable gas supplies. These countries must weigh the costs of alternative energy sources against the geopolitical need to reduce reliance on Russian gas.
https://www.politico.eu/article/russian-gas-deal-europe-ukraine-pipeline-energy-market-lng