Gas embargo

Intended effects

Russia was previously one of Europe's largest suppliers of natural gas. The fact that natural gas is typically transported via pipelines, rather than by tankers like oil, makes it a less flexible export good. Pipelines are fixed infrastructure, so gas can only be transported to countries that are connected to the same pipeline network. They are expensive and time-consuming to build and maintain, so it is not easy to switch buyer.

Moreover, by building long-run commitments, pipelines also are a testimony to the geopolitical leverage we discussed before. Russia has long used its natural gas pipelines as a tool to exert geopolitical influence over its neighbors and also in Europe, especially after the construction of the Nord Stream 2.

Effects on Russia

In 2023, Russia's gas exports to the EU were down nearly 40% compared to the previous year, due to reduced demand and the EU's efforts to reduce its dependence on Russian gas (International Energy Agency, 2023 Gas Market Report; Financial Times April 2023).

In 2023, Russia's natural gas production was down approximately 5% compared to the previous year. This was partly due to the embargo and partly due to logistical challenges and lower demand (International Energy Agency, 2023 Gas Market Report; Gazprom financial report 2023; Oxford Institute for Energy Studies, October 2023).

Russian gas giant Gazprom saw its net profit fall by around 50% in 2023 compared to 2022, due to the combined impact of lower exports, lower prices, and increased costs (Reuters, October 2023).

Knowledge gap

Effects on sanctioning countries

Natural gas prices have increased significantly in Europe, leading to higher energy costs for consumers and businesses.

Some European countries have struggled to find alternative sources of gas, leading to energy shortages and rationing. Norway and the US stepped in to fill part of the gap. European countries also increased their imports of LNG from other suppliers, including the US, Qatar, and Australia. These countries ramped up production and deliveries of LNG to help meet Europe's energy needs. In fact, the EU saw a 60% increase in LNG imports from 2021 to 2022, with the US becoming the largest supplier. However, it's important to note that LNG could not fully replace the lost Russian gas imports, as there are some logistical challenges to delivering LNG to Europe, such as the need for specialized infrastructure like LNG terminals and pipelines.