European Gas and Oil Costs: Impact of Trump's Policies?
In a bid to reduce reliance on Russian energy sources, the European Commission has proposed an initiative to end all Russian oil and gas imports by 2027. This move comes amidst growing concerns about financing Russia's war against Ukraine.
According to the commission's proposal, Russia still accounted for 13 million tonnes of oil on the European market in 2021, despite a significant decrease. The plan aims to gradually phase out the import of Russian gas and oil, with the goal of ending imports by the end of 2027.
Gas supplies from Russia accounted for around 19 percent of all EU imports in 2024. However, the commission assures that the measures will be implemented gradually and in coordination with the EU countries to minimise possible price impacts.
The switch away from Russian energy sources takes time to avoid a significant impact on energy prices for consumers. The commission has identified alternatives to Russian gas and oil, aiming to end imports of Russian pipeline gas, LNG, and oil by the end of 2027 as part of the REPowerEU strategy.
LNG imports have been increasing, reaching about 40% of gas supply in 2024. The US has been the largest LNG supplier, with gas being routed via new pipelines like the Baltic Pipe from Norway through Denmark to Poland, offering alternatives to previous Russian pipelines.
Some EU countries, like Hungary and Bulgaria, still rely on the TurkStream pipeline for their gas supplies. However, the overall energy diversification is advancing with new infrastructure and sanctions restricting Russian energy imports and investments.
The gas industry believes that the EU's goal of ending imports by the end of 2027 is achievable, but warns of potential price increases and market instability without clear replacement strategies. Ukraine criticises that Europeans still pay billions for Russian energy supplies, thereby filling Russia's war chest.
It is questionable whether von der Leyen's plan will be enough to deter Trump from imposing new US sanctions against Russia. Trump's demand for high tariffs on Chinese imports and NATO countries like Turkey to join measures against Russia could potentially undermine von der Leyen's plan.
Turkey still imports large amounts of cheap energy from Russia and has not shown any signs of wanting to change this quickly. Last year, natural and processed gas worth €15.6 billion was imported from Russia, compared to €19.1 billion from the USA.
The member states and the European Parliament are currently negotiating the commission's proposal presented in June for ending Russian oil and gas imports. If approved, this could mark a significant step towards energy independence for the EU and increased economic pressure on Moscow.
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