On Russian Gas Exports and the Global Political Climate

On the Surface

Russia is looming large in terms of the energy market, announcing several gas export channels to be completed by 2019; if completed, these projects would likely not cause crisis in Europe.

New Channels

In June, Gazprom (the largest extractor of natural gas in the world and a Russian company) has teamed up with a few other companies in order to build a pipeline under the Baltic Sea; Putin announced last December a similar project tunneling under the Black Sea. Both are designed to bypass transit through Ukraine and to the rest of Europe; Gazprom has declared that transit through Ukraine will stop entirely by 2019. EU countries would be in charge of building their own links to Russian pipelines.

Despite this, though, these projects might not even be completed: the financial burden that they would put on Russia (estimated cost is upwards of $150 billion) makes most proposed projects unfeasible amid falling GDP and oil revenue.

Implications for Europe

The impact of the Russian pipelines could be dramatic for Europe: the energy from Russian gas flowing through Ukrainian pipelines is equivalent to Japan’s entire nuclear fleet, and would have the economic consequences of Fukushima. However, Europe would still absorb the shock, as consumers have proven unwilling to contend with rising gas prices– counterbalances exist throughout the continent, including renewable initiatives in Germany and Spain, and other markets (such as Qatar).

So while the Russian gas pipeline initiatives are certainly ambitious, the impact that they would have across Europe is limited by alternative programs. In addition, the financial burden that these projects would impose on Russia means that they might not even come to fruition at all.

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