Energy Musings Update - January 30, 2025

We are adding the latest information about Russian natural gas possibly being a part of a Ukraine peace plan. It is based on an article in today's Financial Times.

Europe And Russian Natural Gas

Well, that was quick. Today, the Financial Times published an article about Russian natural gas possibly playing a role in the settlement of the war against Ukraine. We just published our Energy Musings article about Europe and Russian LNG. We speculated that Denmark allowing Nord Stream 2 AG to repair one of the damaged pipelines might signal gas would be part of peace negotiations.

The FT cites “people familiar with discussions” as the source of the speculation that Russian gas is part of peace talks. Those people are specifically discussing Russian pipeline gas sales, which are currently banned by the European Union, as the focus of peace negotiations.

The discussions are contentious because countries such as Germany and Hungary see the resumption of gas flows as a way to lower energy prices. Others see it as a betrayal of Ukraine.

As expected, the article quoted people arguing on both sides of the debate. There was also the question of how such a Russian gas trade resumption might impact Europe’s plans to purchase more U.S. LNG, primarily under long-term contracts.

The question seems to be whether the hollowing out of Europe’s heavy industries because of high energy prices that make the companies noncompetitive worldwide outweighs committing to the EU’s target of ridding the community of all Russian fossil fuels by 2027. The EU plan was part of its effort to cripple Russia’s military strength.

Economics versus politics – a familiar debate. This will be interesting to watch.