Russia Tightens Its Grip On Europe’s Natural Gas Markets

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A much-used proverb says: a good neighbor is better than a distant friend. Nowhere is it more suitable than the EU’s position vis-a-vis its largest and most important neighbor: the Russian Federation. Current relations are the worst since the end of the Cold War. Despite the often rocky interaction, the European and Russian economies are highly complementary. This has led to a level of dependence that has become a problem for certain countries.

The complementarity of the economies has been mutually advantageous for decades: Russia exports vast volumes of raw materials and imports finished, often high-tech, machines. These exports primarily include energy products such as oil and natural gas. Also, after the annexation of Crimea sanctions were introduced that reduced Russia’s access to Europe’s financial sector. Energy imports, however, have remained stable, except for the pandemic period, which is worrying to many European countries.

The level of dependence differs for each country. Due to historic reasons, Gazprom’s market share is the highest in Eastern Europe. The west and north, in contrast, have a far lower level of dependency where domestic production is higher (North Sea region) or nuclear is used in more abundance (France). Eastern Europe is, therefore, usually more vocal in its opposition to Russian energy deals.

Therefore, the EU has set out to strengthen the resilience of the market and reduce dependence on a single producer. First, new rules and legislation have been introduced to lessen the influence of energy companies and protect customers. Second, physical measures have been taken such as reverse flow capabilities and additional cross-border infrastructure between member states. Third, diversification has been another important tool to strengthen Europe’s position concerning producers. Despite these intentions, Russia will remain the most important exporter to Europe for decades.