Russia has a small share of the European gas market. And Ukraine should prepare for winter Russian shelling – Kharchenko

Since the start of the full-scale Russian invasion of Ukraine, the European Union has pledged to sharply cut gas imports, but data shows that the bloc’s purchases of Russian liquefied natural gas (LNG) have risen sharply.

Between January and July of this year, Europe increased its exports of liquefied natural gas from Russia by 40% compared to the same period before the full-scale war in 2021. Such estimates were published by the non-governmental international organization Global Whitness.

Despite the increase in purchases of liquefied gas in particular, the overall share of Russian gas in the European market is minimal, convincing Oleksandr Kharchenko, director of the Energy Research Center. According to him, the EU is resolutely moving towards its goal: to remove Russian gas from the market.

As for Ukraine, according to his forecast, this fall and winter, Russia may continue its tactics, the purpose of which is to “freeze” Ukrainians so that they lose the strength to resist. That’s why the analyst in a conversation with a Voice of America correspondent Oksana Bedratenko predicts renewed attacks on Ukrainian critical infrastructure.

The interview has been edited for clarity and flow.

Russia’s share of the gas market in Europe fell 10 times – Kharchenko

Oksana Bedratenko, Voice of America: Global Witness, an international non-governmental organization, shared its estimates of how much Russian liquefied gas is being purchased by Europe: over the past 2 years, European purchases of Russian liquefied gas have increased by 40%. How worrisome is this?

Oleksandr Kharchenko, director of the Energy Research Center: Of course, this is unpleasant – in itself the trend of increasing purchases of Russian gas, liquefied or in any other form.

From the point of view of Russia, the Moscow regime, gas trade has always been a source of money for war and it does not matter whether it is liquefied gas or gas supplied by traditional gas pipelines. The trend is unpleasant.

On the other hand, many experts predicted a much greater intensification of liquefied gas trade by Russia. There were even hypotheses that sounded a year ago that they would simply start supplying a significant part of their natural gas in liquefied form.

This, of course, did not happen and was not even close. Russia’s overall share in the European market is now very, very small. If before the start of the full-scale invasion, we were talking about 40-42-44% of the European market, now we are talking about 4.2-4.3% of the European market as a whole. Therefore, the situation has definitely changed for Muscovites in a negative direction.

OB: I spoke earlier with the British economist Timothy Ash. He believes that Russia, having lost the European gas market, will lose 50-60 billion euros per year. In your view, if Russian LNG sales increase, how much can Russia offset these losses due to this trend?

OH.: When it comes to liquefied gas, the scale is so different, compared to traditional pipelines and natural gas pipelines to Europe, that Timothy Ash’s assessment will not be affected.

That is, Russia has lost and will lose an amount as close as possible to 50 billion dollars a year, I absolutely share this view.

Europe wanted, first of all, to get rid of the gas that Russia supplied by pipelines, in particular, through Ukraine

ABOUT.: How serious do you think Europe is about its declared goal of getting rid of Russian gas altogether? We have seen German Chancellor Olaf Scholz triumphantly proclaim that Germany is building LNG terminals at a record pace. Two terminals have already been erected. There is a statement by European Commissioner Kadri Simson that the European Union should abandon Russian gas as soon as possible. From your point of view, how serious is Europe’s intention to block gas from Russia?

OH.: It seems to me that this is a very serious and huge work that has already been done. In fact, Russia is thrown out of the European market. Those, I would use the word “remnants” from former wealth, which remained, of course, are absolutely not commensurate with what was before Europe began the process of depriving Russian gas of its place in Europe.

Another thing is that I would definitely like the process to be brought to an absolute result. So that Europe really completely abandons the use of Russian gas.

Technically, this, we already understand, is absolutely possible. Another thing is that we know that there are a certain number of pro-Russian cells in Europe, and we can talk here, first of all, about Hungary and about certain Balkan countries that continue to receive Russian gas. And the story with them will be long.

OB: You say Hungary and the Balkan countries. On the other hand, research by Global Witness indicated that Spain and Belgium, countries on the coast, are increasing supplies of liquefied gas. Are there political problems in Spain and Belgium?

OH.: I’ll say it again. Currently, liquefied gas from Russia is not such a large-scale threat in general and was not considered a large-scale threat. To be honest, Europe was once again focused on getting rid of the gas that Russia supplied by gas pipelines: through Ukraine, through “Northern Streams”, through a gas pipeline from Turkey – and it continues to be supplied there. Therefore, no one saw the threat in liquefied gas from Russia. I am not sure that there is a serious focus now on getting rid of liquefied gas.

And as for the channels, how it gets to Europe, many countries have terminals. In fact, if the customer is, for example, from Hungary, or from some Balkan country, then they use a terminal in Greece, for example, or a terminal in some other country, which will be underloaded at the moment, and there will be an opportunity to quickly carry out so-called swap operations when gas is unloaded into one energy system, and the physical volume is obtained from another. Therefore, liquefied gas is the next step. Now the story with gas burners is ending. Now everyone is waiting to see what will happen to the transit through Ukraine and whether Europe will continue to purchase gas through this route.

Because Ukraine, for its part, has already declared that negotiations with Gazprom are impossible regarding the continuation of transit. And if some European countries want to continue receiving gas through the Ukrainian route, then it is necessary to conduct negotiations with Ukraine about this and agree on the use of the Ukrainian gas transportation system in the future, but in such a way that our customers are European companies.

OB: Do you expect EU sanctions on liquefied gas?

OH.: You know, I don’t hear any discussion about this today. On the one hand, I understand that it is absent due to the absolutely small volumes of liquefied gas supplied by ships, if we compare them with traditional channels. Of course, Russia has neither sufficient capacity nor the ability to use vessels.

But, I think that at a certain point there will be a so-called sharpness on this issue, and, provided that Russia continues to wage war against Ukraine, I think that this gas export channel from Russia will also expect to be sanctioned, and, as a consequence , complete oblivion. Moreover, it is much easier to do.

Before winter, Ukraine needs to restore power generation as soon as possible

OB: Obviously, by purchasing gas, Europe is trying to fill its gas storages and prepare for winter. Currently, we see fairly high levels of gas storage filling in Europe. What do you expect this winter for Europe and Ukraine? How hard will the winter be? What are the main challenges?

OH.: Let’s not confuse Europe and Ukraine here. Because everything will be guaranteed to be fine in Europe. There is enough gas, there are no problems with supply, and all the propaganda tricks of Russia, which talked about Europe freezing without Russian gas, are a thing of the past. Everyone already understands this, it is a completely transparent situation for everyone.

But the situation in Ukraine is much more complicated. But it is difficult not because we will not have gas. It is difficult because we expect renewed attacks on our energy infrastructure and, of course, this, unfortunately, will create serious problems.

OB: Even some positive numbers of gas and coal reserves in Ukraine may not yet guarantee that the winter will be smooth. What assistance should Ukraine receive from international organizations? What is the best way to prepare for this winter?

OH.: Not until this winter. The time left before this winter does not allow us to talk about any significant steps. And some huge improvements are already physically impossible. And the problem is that we will have enough coal and gas. The question is where we will burn it.

If the attacks resume, and we have already lost half of the coal generation that was in Ukraine before these attacks on critical energy infrastructure began, then we simply will not have a place to burn both gas and coal. We simply will not have any physical generation capacity left.

The main focus, in my opinion, should now be how Ukraine is going to rebuild its energy generation, how we will restore generating capacity, in what order what should be done. And it should actually start today.

Because today, when I look at the summary of the Ministry of Energy, I see that the amount of restored generation capacity, which is planned to be restored before the (heating) season, looks insufficient to cover consumption.

When Ukraine has been receiving emergency aid from the European energy system almost every day for the past few weeks, unfortunately, these are the bells of an absolutely critical situation, in my opinion.

And today there is already a need to think as soon as possible about ways to restore generation capacities, about the installation of new alternative types of generation capacities, about the establishment of safe generation in key cities of Ukraine, which would feed critical infrastructure, in the event of regional or national blackouts or emergency situations . And here, unfortunately, the work has not actually started yet.