Cheap Russian Pipelined Gas: Don’t Fall for It, Says Ukrainian Energy CEO

     It should be obvious, but apparently, it needs to be reiterated. Putin seeks to re-establish Russian gas and oil flows to Europe, particularly to “friendly” countries in Eastern Europe like Hungary and Slovakia. As I used to say, before he invaded Ukraine, he had it made with cash flowing in from gas and oil sales to Europe even after manipulating the prices and asserting his control. Apparently, Putin is using this as a talking point in negotiations, saying:

"If, say, the U.S. and Russia agree on cooperation in the energy sector, then a gas pipeline for Europe could be ensured," Russian President Vladimir Putin said March 13, per Bloomberg and other reports.

"And this will benefit Europe, as it will receive cheap Russian gas," he said.

Who the hell would fall for such bullshit?

     Ukrainian energy CEO Maxim Timchenko spoke at the recent CERAWeek in Houston and also met with Energy Secretary Chris Wright. He told Axios what should be obvious to anyone:

"People shouldn't be naive that Russian gas can be cheap. Absolutely not. The price can be paid in different forms."

Timchenko is involved in talks to bring more U.S. LNG to Ukraine.

"Our idea is to build this bridge between the United States and Ukraine, Europe and Ukraine.”

"Ukraine has the largest gas storage facility [in Europe], and definitely it should play [an] important role in energy security of Ukraine and Europe today.”

Russia used to supply half of Europe’s natural gas but now it is down to about 13%, including LNG.

He also noted:

"We have access to infrastructure. We have very good wind and solar potential. We have a lot of gas. Ukraine will become an exporter of clean energy, mixing nuclear and renewables.”

Ukraine also has oil and gas, and drilling has continued during the war, although oil & gas and other energy infrastructure have been targeted, especially by the Russians who have repeatedly destroyed civilian infrastructure while the Ukrainians have focused on military targets and infrastructure. I read that one city has no functional hotels since they have all been targeted, some repeatedly, by the Russians. I don’t recall the Ukrainians bombing any Russian hotels. In these negotiations, they need to acknowledge the war crimes perpetrated by the Russians including inhumane treatment of prisoners, bombing of civilian infrastructure, even inhumane treatment of their own fighters, and much more as the list is very long. As for mineral and energy deals, Timchenko noted:

"We welcome any deals that bring in more U.S. and European companies to the Ukrainian market," Timchenko said. "We need fresh capital. We need technology, we need expertise ... we need more competition in the market."

Axios also noted that he's hoping to announce deals with U.S. companies at a major Ukraine recovery conference in Rome scheduled for July.

     Unfortunately, Trump is saying things like the Russians are easier to work with than the Ukrainians. According to BNN Bloomberg:

“We will continue to increase our share on world LNG markets” even as sanctions aim to halt this growth, Putin said during his annual press conference on Dec 19. He also expressed confidence that Russian gas-giant Gazprom PJSC would survive the end of pipeline transport through Ukraine.

Unfortunately, he is right in that Europe has upped its purchasing of Russian LNG since pipeline flows have stopped from Russia through Ukraine to EU countries. Russia’s overall LNG exports reached record levels in 2024. Before the war, Russia had pipelined about 155 billion cubic meters of gas into Europe per year. In 2024 that volume was 30 billion cubic meters, less than 20% of pre-war levels, and with half of that 30 BCM was flowing through Ukraine and since January 1 has been cut off by the Ukrainians. Russia has become a master of sanctions evasion and market switching. The cheap hydrocarbons are too hard to pass up, especially by China and India. As it is difficult for many of the EU countries to find alternative gas supplies, they will likely buy more Russian LNG to account for the lost Russian pipelined gas. It is also unfortunate that Ukraine’s economy will likely be hurt a little more than Russia’s economy due to cutting off the pipelined gas supply. Bloomberg also noted the words of Sergei Markov, a political consultant:

 “For Moscow, it is extremely important that the diplomatic blockade is being broken for the second time,” Markov said, referring to Slovak Prime Minister Robert Fico’s surprise visit to Moscow on Dec. 23 to discuss gas among other things. He was the second European leader to visit Moscow since Russia invaded Ukraine after Hungarian Prime Minister Viktor Orban’s trip in July.

But things will not be as they were before the war.

“The natural gas and LNG landscape has changed dramatically for Russia in the last three years,” said Claudio Steuer, an energy consultant and faculty member of IHRDC, Boston. It requires “far greater investment and effort for a less profitable business” now that Russia needs to search for business further afield with buyers that are more price sensitive.

     While the Trump people seem to want to force Ukraine to capitulate to Russia on a number of fronts, Ukraine will certainly pushback as they know well the Kremlin’s tricks and lies. We can only hope that the Trump people won’t fall for them.  

     The EU still has a goal of ending its dependence on Russian energy by 2027, but can it? In a different world with a friendly and non-aggressive Russian government, Russian oil and gas could be revived but I don’t believe any country, but Hungary, Slovakia, and Türkiye are really interested in reviving Russian pipelined gas. Türkiye is not in the EU and has not slowed its buying of Russian gas, some of which is diverted via one pipe of the Turk Stream pipeline system to Hungary, Serbia and Slovakia.    

     There is still an effort in the EU to sanction Russian LNG but in the first month of 2025, the EU has imported more Russian LNG, not less, as the following graph of 1^st half-month of the year flows by year shows. Replacing pipeline flows no longer flowing through Ukraine is one reason for the increase. Another is reduced winter wind flows in the EU. Total LNG imports increased in 2024 over previous years. However, the EU wants to increase purchases of U.S. LNG instead and certainly, the U.S. is willing to supply it.

     Another important consideration for the 2025-2026 winter is that European gas storage is down from the previous year. According to IntelliNews:

“The EU’s storage tanks are expected to end this heating season only 35% full, one of the lowest levels in years and half the 60% full they ended the 2023/4 season with. That will increase the demand for gas over this summer as members rush to reach the 90% full benchmark by November 1 demanded by EU regulations.”

As a result, the EU is considering dropping the requirement to have storage 90% full by November in order to avoid price spikes. They may extend the deadline to December, or they make the requirement voluntary rather than compulsory. Obviously, they don’t want to shoot themselves in the foot by seeing their policy objectives leading to price spikes, like the devastating price spikes endured in 2022-2023.  

     While Putin is trying to steer the conversation to reestablishing Russian gas and oil sales, the U.S. delegation may be interested but surely the Europeans and especially the Ukrainians consider that a non-starter, at least until peace talks lead to agreements. I question why we are even talking about it since Russia has done absolutely nothing to warrant it as a negotiating point. We all know that Russia’s energy sales are a huge part of their war economy and allow them to continue their invasion. The question is not “Who holds the cards?” but “Who is willing to stand up to the Kremlin’s war and propaganda machine?”

 

 

 

References:

 

Why a Ukrainian energy CEO is warning against a Russian gas revival. Ben Geman. Axios. March 17, 2025. Why a Ukrainian energy CEO is warning against a Russian gas revival

Putin Has Options for Russian Gas After Ukraine Route Closed. Bloomberg News. January 6, 2025. Putin Has Options for Russian Gas After Ukraine Route Closed

Putin Wants to Sell More Russian Gas to Europe. Can He? Elena Mazneva and Anna Shiryaevskaya. QuickTake via Bloomberg. March 15, 2025. Putin Wants to Sell More Russian Gas to Europe. Can He?

EU devours Russian gas at record speed despite cutoff. Gabriel Gavin and Giovanna Coi. January 16, 2025. Politico. EU devours Russian gas at record speed despite cutoff – POLITICO

EU to soften gas storage rules to avoid price spikes. IntelliNews. March 17, 2025. EU to soften gas storage rules to avoid price spikes