According to a report by business daily RBK, exports of Russian piped gas are expected to decline this year by up to 34% compared to the previous year. The report cites projections from strategy consultancy Yakov & Partners. Analysts attribute the decline in gas exports to various factors, including the impact of Ukraine-related sanctions and Moscow’s requirement for EU buyers to pay for Russian gas supplies in rubles instead of dollars or euro.
In 2022, the delivery of Russian natural gas via pipelines dropped by nearly 50%, from 206 billion cubic meters (bcm) in 2021 to 122 bcm. This year, experts predict that pipeline gas flows will further decrease to 80 bcm. The loss of the EU market is seen as the key reason for the drop in gas production, with Yakov & Partners estimating that the enforced decline in production could amount to nearly 30 bcm.
The decline in gas exports is expected to have a significant impact on Russia’s economy. In 2022, gas export revenues reached $138 billion, driven by skyrocketing prices for the fuel in the EU and uncertainty surrounding the shift in supplies to new markets. However, this year, gas export revenues are forecasted to fall by 68.8% to $43 billion due to lower prices and decreased sales volumes. Analysts only expect a slight recovery in export earnings to $55 billion by 2030.
The imposition of sanctions has limited the routes for Russian gas flows to the EU. Currently, supplies through Ukraine and one of the two threads of the Turkish Stream pipeline remain the only available routes. The second thread of the pipeline is used for delivering gas to Türkiye, while China is increasing its imports of Russian natural gas via the Power of Siberia pipeline.
The decline in gas exports could have broader implications for Russia’s energy sector and its geopolitical standing. With the EU seeking to diversify its energy sources and reduce reliance on Russian gas, the loss of the EU market could lead to increased competition from other gas exporters. Additionally, Russia’s ability to leverage its gas exports as a means of exerting influence on neighboring countries may be diminished.
It is worth noting that while the decline in gas exports is a cause for concern, Russia has been able to offset some of the losses through increased gas deliveries to China. The Power of Siberia pipeline has allowed Russia to tap into the growing gas demand in China, mitigating some of the impact of the decline in EU exports.
In conclusion, the decline in Russian gas exports to foreign customers is expected to continue for the second consecutive year. The decline is primarily attributed to Ukraine-related sanctions and changes in payment requirements for EU buyers. This decline in gas exports is expected to have significant economic implications for Russia, with a sharp decrease in export revenues. However, Russia has been able to offset some of the losses through increased gas deliveries to China. The decline in gas exports may also have broader geopolitical implications, as Russia’s influence through gas exports could be diminished.