Russia accounts for about 35% of European natural gas supply, of which most comes through pipelines going through Belarus, Ukraine, and the Baltic Sea. Europe’s interconnected gas markets means lower imports from Russia could have a knock-on effect on countries that did not directly receive gas from Russia. For instance, if Germany, the biggest consumer of Russian gas, sees lower volumes from Russia, it must replace it from other suppliers such as Norway.
British gas prices are also prone to volatility caused by Russian supplies, although Russia typically supplies just around 5% of its gas. Lower Russian supply to continental Europe means the UK has to compete with other customers for supplies from Norway or elsewhere. At the same time, European buyers are competing with Asian peers to grab available LNG cargoes, which are typically sent to whichever region is willing to pay the most.
EU-Russia’s political dynamics and Moscow’s political declarations also have a significant impact on daily EU gas prices. European benchmark gas prices hit a record €155 ($179.6) per MWh on October 6 but plummeted 26% to €114 ($132.1) per MWh on the same day after Vladimir Putin said Russia would deliver more gas to Europe after Gazprom is done replenishing domestic storage tanks.
In the first ten months of 2021 Russia exported a total of 31,806 GWh per day of gas to Europe through three main pipelines, down from 33,466 GWh per day in the corresponding period in 2020. Russia has denied accusations that it is withholding gas supplies to pressure European and German regulators to issue permits for the new Nord Stream 2 pipeline. Russian gas exporter Gazprom has said that it is meeting all its long-term contractual obligations.
