The disruption of Russian gas supplies to Europe has transformed the global energy landscape, marking the end of an era in which Russia dominated European gas markets.
This new research explores the far-reaching consequences of Russia’s loss of its largest market. The paper, “The global implications of a Russian gas pivot to Asia” highlights the geopolitical, economic, and strategic ramifications of this historic shift.
The paper finds that in all eventualities Russia will be unable to replace the revenue that it has lost from exports to Europe. Furthermore, whether it can pivot to access Asian markets a decision for China, and not the Kremlin. Whatever the outcome, the best policy for Europe is to reduce its reliance on imports of natural gas.
The research highlights actionable insights, including:
The research, conducted with the UK Energy Research Centre, contextualises Russia’s diminishing role in the European gas sector within a timeline of critical events. Following the COVID-19 pandemic, gas prices in Europe began to rise sharply in late 2021 as Gazprom, Russia’s state-owned gas giant, limited supply to the European spot market.
The situation worsened after Russia’s invasion of Ukraine in 2022, with pipeline gas supplies to Europe plummeting to 20% of pre-war levels. Gazprom suspended contracts with buyers who refused payment in roubles, while key pipelines, including Nord Stream 1 and 2, were rendered inoperable due to sanctions and sabotage. Most recently, the failure to renew a transit agreement has resulted in the cessation of Russian gas exports to Europe via Ukraine.
The study identifies three critical areas for consideration:
Geopolitical Realignments: The EU’s decision to phase out Russian gas by 2027 has the potential to fundamentally reshape global energy markets. The research highlights how Europe’s increasing reliance on liquefied natural gas (LNG) and alternative suppliers such as the United States, Qatar, and Norway has redefined trade flows and heightened competition for resources.
Energy Security: While Europe has mitigated immediate supply risks by rapidly diversifying its sources, the dependence on LNG has exposed the region to increased market volatility. The paper emphasises the need for resilient infrastructure to manage fluctuating supply and demand dynamics.
Sustainability Goals: The transition to renewable energy is accelerating, but significant challenges remain. The research identifies a persistent gap between short-term energy security priorities and the long-term ambition of achieving net-zero emissions by 2050.