Is The EU Plan To Cut Off 100% Of Russian Gas Supplies By 2027 Economically Feasible?

The European Union has unveiled plans to reduce all oil, gas and nuclear supplies from Russia to zero by 2017 and has been requesting details of all EU government and corporate gas supply contracts with Russia to evaluate the size of the task. Victor Orban, the Hungarian Prime Minister has described the moves as ‘economic suicide’.

Full details about how the European Union will achieve this have been outlined in the European Commission’s RoadMap To Ending Russian Energy Imports

It includes compliance details on how all 27 member states, from landlocked to coastal, must phase out all remaining purchases of Russian energy, most notably the carriers of liquefied natural gas (LNG) that continue arriving in the bloc. The plans are to have this take place gradually, firstly by imposing a ban on new and short-term contracts by the end of 2025. In the second stage, long-term contracts, which account for two-thirds of Russian gas supplies to the EU, will be terminated by the end of 2027. Further restrictions will also be introduced to crack down on the shadow fleet that covertly transports Russian oil and stop imports of Russian uranium and other nuclear materials.

Each member state will be asked to draft a national plan detailing how they intend to remove Russian gas, nuclear and oil from their energy mix.

We perceive problems ahead. Firstly, the European Commission is overriding the elected wishes of all 27 EU members states – not all are comfortable with cutting themselves off from less expensive Russian supplies. This will particularly impact the eastern members of the EU and negate their current price competitiveness with the wealthier western member states. In effect, the eastern EU will become subservient to the likes of Germany and France. How far the likes of Orban are prepared to go in order to resist EU directives will be interesting to note.

The EU’s treatment of Serbia, which is not currently an EU member, is also noteworthy: the EU has stated that if Serbian Prime Minister Aleksandar Vučić visits Moscow to take part in Victory Day celebrations, such an act would have implications for Belgrade and the country’s EU accession negotiations. This attitude suggests that even visiting Russia carries political and trade risks. Vucic ignored the warnings of the EU leadership, saying he did not care about the reaction of other countries to his visit to Moscow, and on 7 May his special plane landed in Vnukovo.

Orban’s economic reasoning also bears out. Last year the EU purchased 31.62 billion cubic metres (bcm) of Russian pipeline gas and 20.05 bcm of Russian LNG, representing 19% of total EU gas consumption. The EU bought more LNG from Russia in 2024 than they did in 2023.

In 2020, the average gas price in the EU was €7.0 per 100 MWh. Today, it is €45 per megawatt-hour (MWh). When the EU finally weans itself off Russian gas, and cuts off the remaining 19% imports, the result will have been an increase in energy supply costs to about €53 per megawatt-hour – a total rise of over 657% in EU energy costs.

Readers can make up their own minds concerning the reasons for this increase, the beneficiaries, and the subsequent impact on the European Union economies.