In recent years, the European Union has become a place for sticker sticklers. If anyone deviates from the unified ideological current and dares to point out the failures and weaknesses of the system, they are immediately labeled a Eurosceptic, a pro-Russian mouthpiece, a xenophobe, or an anti-environmentalist who is destroying the planet.
An excellent example from recent months is the storm of criticism that Bratislava and Budapest have faced for rebelling against the ban on Russian energy imports after 2027. The plan has already been approved by energy ministers, with the final verdict resting on the decision of member states. And since neither Slovakia nor Hungary can prevent the embargo (a qualified majority is sufficient to enforce it), they sporadically block sanctions packages, which require the unanimous consent of all.
However, protecting national interests in this way is clearly pro-Russian today. Meanwhile, the decision by Brussels and other European countries that support the embargo that Hungarians and Slovaks will pay extra for gas is fine.
From diversification to total embargo
Although the EU as a whole has managed to diversify its gas supplies relatively successfully, this has been mainly thanks to the large coastal states, which have significantly increased their imports of LNG from the US and Qatar, although some, such as France and Belgium, have also increased their imports of Russian LNG.
Overall, the volume of gas purchases from Russia in the EU has fallen dramatically from around 40 percent before the war to 18 percent in 2024. Brussels estimates that this figure will fall to around 13 percent this year.
However, importing gas from other suppliers is a slightly more complicated and, above all, more expensive process for landlocked countries than for coastal states. Slovakia (until 2034) and Hungary (until 2036) have concluded long-term favorable gas supply contracts with Gazprom. It is not just about a good price for the commodity itself. A huge bonus is that neither country pays transit fees to anyone – according to the contracts, this is taken care of by the Russian supplier.
Even if gas were at a similar price level to Russian gas, both countries would have to pay hundreds of millions of euros in transit fees alone after the embargo was imposed. But that is not the case.
A study by the Center for Research on Energy and Clean Air (CREA) states that, according to estimates based on Eurostat data, in 2024 Russian gas from the TurkStream pipeline will be sold to EU buyers at a price 13 to 15 percent cheaper than other options.
For understandable reasons, these landlocked countries have little motivation to change anything.
Why Europe should cut itself off from Russian gas
Proponents of the embargo put forward two main arguments as to why these countries should nevertheless get rid of Russian gas.
Both are well known. According to the first argument, European countries that buy Russian energy are financing Putin's aggression in Ukraine.
The second argues that the countries of the continent must turn away from Russian gas because it is a means by which Moscow can blackmail them.
An inflated narrative with feet of clay
Both of these arguments are flawed.
Europe's rejection of Russian gas will not hurt Russia too much. The main source of revenue for its treasury is oil, not gas. Secondly, it is a commodity that it can sell elsewhere. This is associated with logistical difficulties for a certain period of time. In the west, Russia is connected by pipelines to several other countries that sell their production to Europe.
In practice, this could easily lead to countries such as Azerbaijan and Turkey selling their gas to Europeans, while producing energy from Russian gas at home.
Moscow would not lose much, while European countries would buy at higher prices, with markups from intermediaries. A sane skeptic would say that this political intervention would cause market inefficiency.
The second argument is also flawed.
Although Slovakia and Hungary consume on average about two-thirds of Russian gas, this does not mean that energy companies do not have diversification contracts with other suppliers. However, a significant portion of the gas they purchase from other suppliers does not physically arrive on their territory but is traded further. In practice, both countries have a largely diversified portfolio and are not afraid of Russia turning off the taps, while at the same time purchasing gas at favorable prices.
On the costs of political and ideological decisions
The EU's verdict does not appear to be a reasonable step towards independence and risk diversification, but rather a purely political decision of a symbolic nature that does not consider the consequences it will leave behind.
The impact on prices is relatively difficult to quantify, but the Slovak Gas Industry calculates that, from Slovakia's perspective, the impact of the measures will be somewhere between €287 and €428 million, which means that we will pay more for gas.
Tamás Pletser, an oil and gas analyst at Erste Bank, calculated that the embargo will increase prices in the region by "5 to 10 percent" in the medium term. He added that if the Commission were to pressure member states to reduce gas transit fees, the increase could range from three to six percent.
Although these figures do not sound so dire, this increase is not caused by natural market developments, but by artificial intervention that no one else outside Europe is doing. Chinese and American companies simply do not buy energy with this political tax. And then everyone on the old continent wonders where Europe's ability to compete with the rest of the world has gone.