In 2022, Russia’s leaders made the decision to stop most of the country’s gas deliveries to the EU, believing it would benefit them financially. Although prices of gas instantly increased, allowing Russia to earn more money despite lower export volumes, the move created challenges for Europe. Europe, which relied on Russia for 40% of its gas in 2021, had to prepare for potential inflation and blackouts as a result of the sudden gas shortage.
However, two years later, Europe’s gas tanks are fuller than ever, thanks to mild winters and significant imports of liquefied natural gas (LNG) from America. Despite the initial impact of Russia’s gas cutoff, Gazprom, Russia’s state-owned gas company, has struggled to make any profits. Russia has faced challenges in redirecting the 180bn cubic metres of gas it once sold to Europe, representing 80% of its total gas exports in 2021.
Russia lacks the infrastructure to easily shift its gas exports to other markets, with no equivalent to Nord Stream, a pipeline to Germany that allowed for easy gas delivery. Additionally, Russia does not have the necessary facilities for LNG production or the specialized tankers needed for transportation. Despite these obstacles, Russia had only experienced minor setbacks until recently. From 2018 to 2023, only 20% of the total revenue from hydrocarbon exports to the Russian budget came from gas, and the country continued to sell oil at a lucrative price despite facing sanctions.