EU ban on Russian gas imports unlikely - Fitch

April 24, 2014

A lengthy ban on Russian gas imports to the European Union is unlikely, according to the Fitch Ratings' Report 'Living Without Russian Gas’, RIA Novosti reported on April 23.

In the event of a lengthy ban imposed by the EU, gas-intensive sectors such as steel and petrochemicals would be most seriously affected, the report said.

According to the report, Europe has sufficient liquefied natural gas (LNG) regasification capacity to replace some Russian supplies. Yet most of these plants are located in Southern Europe and in the UK, which makes Central and Eastern European countries most reliant on Russian gas supplies.

Moreover, Europe’s gas demand accounts for almost half of the world’s LNG production, which is already mostly tied to long-term supply contracts. That means, according to Fitch, that gas prices would significantly increase if the EU imposes a ban on Russian imports. Surging gas prices might in turn lead to higher prices on electricity, coal and oil.

The ban could be introduced if the ongoing crisis in Ukraine deteriorates. However, the report notes that a far more likely scenario is a temporary disruption of gas supplies transiting Ukraine. Europe is prepared for such developments with substantial fuel reserves and alternate pipelines.

Copyright: RIA Novosti, 2014