The EU has to make a tough choice. As a matter of principle it wants to cut off all imports of Russian oil and gas, slashing the volumes to zero by 2027 so that Europe is not participating in funding Russia’s war machine.

But at the same time, despite pledges to wean itself off Russian hydrocarbons, it has the pragmatic problem of the need to power its economy. Europe hasn't been able to replace those imports. The piped gas imports have largely ended, but Russian LNG imports have grown and now make up 19% of the EU energy mix, up from 17.5% in 2024, making Russia the second biggest supplier after the US which accounted for 45%.

There is simply not enough LNG on the market from big suppliers like the US and Qatar to replace the Russian LNG. The deadline of 2027 was set as hopefully some new big projects in the US and Qatar will come online to make up the shortfall, but those projects are also waiting for customers like the EU to sign off on long-term supply contracts to finish the investments and that has not happened yet.

The EU’s headache is made worse by the reluctance of some EU member states, such as Czechia, Hungary and Slovakia, that don't want to end Russian gas imports and are actually making money from them by exporting the gas to the rest of Europe. Indeed, these “backdoor” routes are significant revenue earners for Moscow and the rest of the EU is quietly turning a blind eye to the dodge. Germany has also officially ended all its Russia gas imports, but as bne IntelliNews reported, in reality its imports of LNG from Belgium, a country that has no gas production of its own, have soared – Belgium, along with Spain, is a major LNG port and Russian gas it handles is simply rebranded as Belgique in a face-saving ruse to avoid admitting the attempt to end Russian gas reliance has failed. Ironically, the EU remains one of Russia’s biggest LNG customers.

Global net LNG imports by destination (bcm/ quarter)
	Europe	China	Developed Asia	Emerging Asia	Other Atlantic Basin	Other Pacific Basin	Total
Q1 2023	38.8	21.8	51.9	13	9.4	0.8	135.7
Q2 2023	41.4	23.2	39.4	17	7	2.4	130.4
Q3 2023	31.8	23.6	43.8	16.7	6.4	3.9	126.2
Q4 2023	38.9	27.2	48.8	15.7	7.1	1.6	139.3
Q1 2024	34.7	27	49.9	17.3	9.6	1.9	140.4
Q2 2024	30.4	24.9	43.9	19.6	6.5	2.9	128.2
Q3 2024	24.2	26.1	47.4	17.6	8.1	4.5	127.9
Q4 2024	32.2	26.8	49.5	17.2	10.5	1.5	137.7
Q1 2025	40.7	20.2	50.1	16.5	13.3	2.6	143.4
Source: Eurostat

The moral argument for supporting Ukraine and cutting all commercial ties with Moscow is clear and just under 30,000 sanctions have been applied to virtually every product that Russia produces starting in the very first days of the war – even to products that make Russia insignificant amounts of money.

However, the miscalculation the West made was to underestimate how deeply Russia is embedded into the supply chains of the global economy, and Europe in particular, so most of the 16 rounds of sanctions have been compromised by a raft of exemptions, carve outs, quotas or delayed deadlines, simply because Western business cannot do without the Russian inputs.

Europe has already de facto chosen the pragmatic option of continuing trade with Russia over the principled option and even reducing the imports by a modest amount has seen the pain of sanctions bounce back in a boomerang effect that is hurting the EU’s economy more than it hurts Russia’s. With growth of over 4% for the last two years, Russia has been one of the fastest growing major economies in the world, while European growth has sunk to around 1% and Germany is suffering from de-industrialisation and currently in its third year of recession.

Nevertheless, the EU leadership is still committed to cutting all ties with Russia irrespective of the damage it will do to the European economy. European Commission President Ursula von der Leyen is one of Europe’s biggest Russia hawks, and did an impressive job of marshalling Europe’s extreme sanctions reaction to the Russian invasion of Ukraine in February 2022, enthusiastically backed by former Estonian Prime Minister Kaja Kallas, the Commission’s top foreign policy official.

The European Commission on May 6 unveiled a brief roadmap outlining how it plans to achieve the EU objective of eliminating all remaining Russian energy imports by 2027 – a policy that will bring it into direct conflict with pro-Russian leaders like Hungarian president Viktor Orban and Slovakia’s Prime Minister Robert Fico. As bne IntelliNews reported, the Ukraine conflict has introduced enormous tensions into the EU, and they are threatening to tear it apart.

If the European Commission sticks to the vaunted EU values enshrined in Article 2 of the EU treaty, it should cut off Russian gas completely. If it continues to follow the pragmatic path it has in effect been following until now, then it should cut Russian gas imports to 15% of the energy mix. Pre-war the problem was Russian gas imports made up 40% of the mix and created a dependence that gave the Kremlin political leverage. If the amount is reduced to around 15% then that gas can be replaced with LNG and the political dependence is nullified.

Beijing followed this policy of holding imports of oil to a maximum of 15% from any one supplier to avoid the political risk of becoming too dependent on any one country for years until the war in Ukraine started and it dramatically increased imports from Russia to 20% of the total in 2024.

The economic advantage of continuing to import limited amounts of gas is manifold. Germany’s economic problems would be greatly alleviated at a stroke and going back to cheap, secure piped supplies of Russian gas would improve its energy security, rather than relying on the fickle LNG supplies, which have now been commoditised. Indeed, Europe is facing a fresh energy crisis this coming winter after the storage tanks were depleted more than normal after an unusually cold winter and it is not clear they can be refilled to 90% again by the November 1 deadline.

A counterpoint to the talk of ending EU imports of Russian gas entirely has been the growing discussion of returning Russian gas deliveries via the Nord Stream 1 & 2 pipelines again. One of the four strands survived the explosions in September 2022 and could be turned on tomorrow, supplying some 25bn cubic metres of gas, or around 15% to Europe’s needs. However, until the debate between principle and pragmatism is resolved a decision on this will not be made. And presumably there would need to be a ceasefire in hostilities in Ukraine in place as well.

The EU has a plan

In the meantime work on the roadmap continues and precedes a legal proposal that will be presented next month and debated by the European Parliament and member states. Analysts estimate the cost of ending Russian gas imports will be at least €300bn, money Brussels can ill afford to spend at a time when it intends to spend hundreds of billions on rearming.

While the plan lacks much detail, it clearly calls for a gradual phasing out of Russian oil, gas, and nuclear energy – specifically uranium supplies – from the EU energy mix over the next two years.

It calls on member states to prepare national plans to meet this target by the end of the year. Regarding gas, the aim is to end all Russian imports – including pipeline and LNG supplies – by the end of 2027, including cutting off supplies to Hungary and Slovakia. That will provoke attempts to veto the proposal by both Budapest and Bratislava, but Kallas has said the EC has a “Plan A” to avoid a veto in May, but gave no details on how it will work.

This will involve enhancing the transparency, monitoring and traceability of Russian gas, while banning new contracts with Russian suppliers, and terminating spot contracts, by the end of this year.

It is not clear what will happen to Hungary and Slovakia. Both remain heavily reliant on Russian gas. Both countries previously secured unlimited exemptions from the 2022 embargo on Russian oil with no end date on them, and similar concessions could undermine the roadmap’s effectiveness.

And the plan is likely to drive energy prices up even higher, which remain twice what they were before the war started.

A distorted narrative

In its statement, the Commission credited the significant reduction in Russian gas imports – from 45% of total imports before the Ukraine war to 19% currently – to the success of its REPowerEU plan. This strategy, launched in May 2022, aimed to reduce reliance on Russian energy following Moscow’s invasion of Ukraine. However, this interpretation distorts the facts.

In reality, it was Russia that curtailed gas supplies to Europe in a failed bid to weaken EU support for Kyiv. Russia’s actions included demanding gas payments in rubles instead of euros, imposing sanctions on the Polish operator of the Yamal-Europe pipeline and deliberately reducing flow via the Nord Stream 1 pipeline before its destruction in September 2022.

REPowerEU did envisage replacing Russian gas with increased LNG imports, but it was primarily market dynamics that made this happen. LNG suppliers diverted flow away from Asia to Europe, and Germany and others had a clear incentive to rapidly construct LNG import terminals to take this gas. While the plan projected a decrease in gas demand thanks to a shift towards renewables, the actual decline resulted mostly from energy demand destruction caused by high costs, economic stagnation and deindustrialisation across Europe.

The strategy also set ambitious goals for hydrogen production, aiming for 10mn tonnes per year (tpy) of clean hydrogen by 2030, along with an equivalent volume of imports. However, as bne IntelliNews reported, hydrogen is not a workable solution to Europe’s energy problems. There is unlikely to be any meaningful level of so-called green and blue hydrogen production either in the EU or globally by the end of the decade.

One realistic target was the production of 35 bcm of biomethane by the end of the decade. Output rose from 3.5 bcm in 2021 to nearly 7 bcm last year, with an additional 17 bcm of biogas produced that can at some point be upgraded into biomethane and fed into the gas grid.

Waiting for the next LNG wave

The EU’s plan to eliminate Russian gas hinges significantly on the anticipated expansion of global LNG capacity, expected to increase by around 200 bcm by 2028 – five times the current volume of Russian gas imported by the EU.

However, over half of this new capacity is already locked into long-term contracts, primarily with Asian buyers more willing than their European counterparts to commit to such deals. And the EU may have to compete fiercely for the remaining uncontracted capacity.

Moreover, the plan could lead to increased reliance on the US, already Europe’s largest LNG supplier through its delivering 51 bcm to the EU last year, covering about 45% of LNG imports and roughly a sixth of total gas demand.

European policymakers are already expressing concern about simply replacing the Russian dependency on gas with a new American dependency at time when the North Atlantic “special relation” is in meltdown. Indeed, accounting for 45% of the EU’s LNG imports last year, the EU is already more dependent on the US for gas than it was on Russia pre-war. US President Donald Trump has abandoned the previous liberal free trade model for an aggressive new transactional paradigm that suggests he will have no qualms over using his energy leverage over the EU if he needs to.

Europe will also lean more on Qatar, which supplied 12 bcm last year – about 10-12% of LNG imports and 4% of total demand. Qatar notably warned it would stop delivering LNG to the EU last December if member states were to strictly enforce a new law on forced labour and environmental impact.

EU authorities also anticipate a significant decline in gas demand, with REPowerEU projecting a decline of more than half by 2030 versus the 2021 level – another disincentive for Europe to sign the long-term contracts that the US and Qatar are demanding before they making the investments into new capacity and an incentive to temporarily restart Nord Stream supplies.

There is broad consensus that European gas demand will fall over the coming years – the Gas Exporting Countries Forum (GECF) noted in its recent 2050 forecasts that Europe would be the only region to see a decline in gas demand over the coming decades. But if gas demand does prove more resilient than Brussels projects, this would also increase the economic toll of giving up Russian supply.

Opposition in Bratislava and Budapest

In the short term, the proposed roadmap would have minimal impact on Russian pipeline gas flows to Europe, as the majority of Russian gas still sold in the EU under existing long-term contracts, which the European Commission’s announcement indicates would not be affected until after 2027. Many European companies are tied in by these contracts on a take-or-pay basis and say they can’t get out their obligations unless imports of gas are sanctioned triggering a force majeure that allows them to break the contracts.

Hungary and Slovakia account for almost all the remaining Russian gas piped to the EU. Last year, Hungary imported 7.5 bcm – two-thirds of its gas needs – while Slovakia took in 3 bcm, also about two-thirds of its demand. In Hungary’s case, more than 70% of gas is sold under long-term contracts, while in Slovakia, the percentage can reach as high as 100%.

Both countries have already vowed to block the plan. Slovak Prime Minister Robert Fico warned on May 7 that the proposal would raise gas prices and damage EU competitiveness, describing it as "economic suicide" driven by geopolitical motives. Hungarian Foreign Minister Peter Szijjarto similarly condemned the plan as "unacceptable," pledging to resist its adoption.

The European Commission’s June proposal will only require approval from the European Parliament and a qualified majority of member states, meaning it could still pass despite opposition from Hungary and Slovakia. However, these countries might threaten to block other legislation in retaliation, including further financial and military support for Ukraine, as well as its EU accession. The EU could offer the two countries exemptions, as it did for the 2022 oil embargo, but this would contradict the strategy’s core goal.

Other states could also be reluctant to give up Russian LNG, flows of which to the EU reached a new record of 16.5mn tonnes last year, equivalent to about 22.5 bcm of natural gas. France was the biggest importer of Russian LNG in Europe last year, taking 7.7 bcm, while Spain received a further 5.7 bcm and Belgium 5.1 bcm. Again, though, the majority – about two-thirds – of this gas is sold under long-term contracts and so would be unaffected by the plan until after 2027.

Balancing pragmatism and principle

The big question is whether a full embargo on Russian energy is really in the EU’s best interests. Advocates of a complete ban mainly come from countries that stopped importing Russian gas years ago, such as Estonia, whose president, Alar Karis, has called for an embargo on all trade with Russia.

The energy crisis of 2022-23 has already wreaked havoc on the European economy and deeply hurt its global competitiveness. In April last year, European Commission Vice President Maros Sefcovic estimated the economic cost of Europe’s energy crisis at €1 trillion ($1.1 trillion). And that cost continues to mount up. European gas prices have subsided significantly since the highs seen in the summer of 2022, but they remain more than twice as high than the average for the decade up to the start of the COVID-19 pandemic. European energy costs are also two to three times higher than those in the US and China.

Pragmatically, an economically stronger Europe is better positioned to stave off an increasingly aggressive Russia. Any effort to further eliminate Russian energy would be illogical if it causes more economic harm to the EU than it does to Russia.

Depending on the outcome of Russia-US-Ukraine peace talks – which is far from certain – there is also the prospect that the EU might reverse course and start accepting more Russian gas. Numerous media have reported that a resumption in Russian gas flow via Ukraine and the remaining Nord Stream 2 string is a central part of the discussions between Washington and Moscow. US investor and a veteran of the Russian market Stephen Lynch has already applied for permission to take the pipeline over.

There is also the prospect of sanctions relief to allow the first train of Russia’s Arctic LNG-2 terminal to finally start up. The project has effectively been frozen since construction was completed at the end of 2023.

As energy feeds into most other economic costs, more Russian gas would be a boon for the EU economy, which is facing a major and deep lack of competitiveness crisis, but it remains to be seen whether this is politically acceptable.

Certainly Europe has paid a steep price for relying too much on Russian gas in the past, with Moscow demonstrating over the past three years that it is willing and able to weaponise this supply. Europe’s pre-war dependency on Russia for 45% of gas imports was clearly too high, but pragmatically, it may be wise for the EU not to give up the remaining supply, if it is serious about achieving economic revival and reindustrialisation.