by C. Alessandro Mauceri –
For months, indeed for years, well before the invasion of Ukraine by Russia, the restrictive measures on imports from this country into European countries were considerable. Limitations that have increased after the start of the Ukrainian conflict and the stance of the EU countries.
These restrictions on the import of products from Russia have so far not had any real effect. Many countries continue to import from Russia precisely one of the most controversial products: LNG, liquefied natural gas.
The case of Finland is exemplary. This country, which only a few days ago was given the green light to join NATO and which openly supports European energy sanctions against Russia, continues to do business with Russia. This is confirmed by a note from the Finnish state energy company Gasum, which confirms that “Gasum has a long-term natural gas supply contract with the Russian Gazprom Export”. In April 2022, Gasum was required to make the payments agreed in the procurement contract in rubles instead of euros. Gasum had not accepted and in May Gazprom Export had suspended the supply of natural gas. In November 2022 the arbitral tribunal confirmed that Gasum was not obliged to pay in rubles or with the payment method requested by Gazprom Export. However, the same court suggested continuing the bilateral contractual negotiations to resolve the issue.
In recent days, the Yle news agency confirmed that the dispute has been resolved: Gasum will continue to receive LNG from Russia. Indeed, the Finnish company underlined that the contract with Gazprom “will be valid for many more years”. The point is that the contract with Gasprom Energy is a so-called take or pay contract, common in gas supply contracts. This means that, year after year, Gasum is obliged to pay for a certain amount of liquefied natural gas (LNG), whether it receives it from Russia or not, as confirmed by the Finnish company in an email sent to Yle .
Meanwhile, all this time, Helsinki has continued to import liquefied natural gas (LNG) from the Russian company Novatek’s Cryogas-Vysotsk LNG plant. According to the Finnish Customs Service, since February 2022, after the invasion of Ukraine, Gasum has bought about $188 million worth of natural gas from Russia.
The role of LNG as an alternative to natural gas, both of which are imported from Russia, is significant in many other European countries.
In the new supply diversification strategy, Europe has focused on liquefied natural gas. In 2022, imports to Europe from Russian pipelines fell by more than 80 percent. At the same time, however, the presence of Russian LNG has increased by 50 percent. Italy and other European Union countries have increased their imports of LNG from the United States, from Qatar, but, and herein lies the surprise, also from Russia, which remains the world’s fourth largest exporter of LNG.
A situation that has significant geopolitical consequences: in fact, Russia continues to receive money from the countries that have imposed economic sanctions on it. Starting with European countries. On closer inspection, the whole affair could turn out to be a real deal for Russia. The gas that Russia exported via pipelines was sold at extremely low and competitive prices. The increase in demand for LNG and the conditions of other international suppliers have caused LNG prices to rise with considerable economic advantages precisely for Russia. Last year, in defiance of the embargo, this country recorded a record in exports of LNG to Europe: in September alone, EU countries bought LNG from Russia for a value of almost one billion dollars (Spain, but also Belgium and France which, in 2022, increased LNG purchases by 6 per cent, Italy and Portugal also imported LNG from Russia). Only the UK and Lithuania have stopped importing Russian LNG.
Many European countries have agreements to import LNG from Russia for many more years. A strategic move: the availability of LNG from Russia could suffer a decrease due to the greater demand for this energy source from China. According to the IAE, if the Chinese ally’s demand for LNG were to return to 2021 levels, Europe could find itself with about 30 billion cubic meters of LNG less. This would cause a further increase in the price of LNG. Two consequences. The dependence on fossil fuels would turn back into dependence on Russia. But above all it would demonstrate the futility of some restrictive measures against this country.
