East or West: Where Will Russia Send Its Natural Gas?

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Russia’s natural gas policy is at a watershed moment. It still sells most of its gas to Europe, but a slump in demand and accelerated European Union diversification efforts in the wake of Russia’s annexation of Crimea have pushed Moscow to accelerate its quest for market access in the East. Demand there is strong, but Russia does not have the infrastructure to expand rapidly.

In this report, Wikistrat explores Russia’s energy policy, its trajectory and the factors shaping it.

One of our key findings is that Russia isn’t going to make a clear-cut choice between East and West, because it can’t. Moscow must hold onto its European market share and is ultimately willing to comply with legislation — but it won’t do so without putting up a fight.

The Asian market and LNG projects give Gazprom breathing space in the event that Europe’s demand is not strong enough or it sets too many obstacles; however, competition in terms of LNG is fierce, and prices may fall substantially if supply increases or demand softens.

The future size of Russia’s European market share — as well as the likely destination of Russian gas — will become apparent once a definitive deal is reached on one (or several) pipeline routes:

  • Nord Stream II (bypassing Ukraine to deliver gas directly to Germany)
  • A resurrected Turkish Stream (which was cancelled in December)
  • Maintaining the Ukrainian route (the cheaper but politically troublesome option)

Click here or on the cover image to download the report.

About the author

Anca Mihalache

Anca Elena Mihalache
Wikistrat Researcher
Senior Analyst at the Energy Policy Group

For more information about Wikistrat and for access to the full simulation archive, contact [email protected]

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