Russia tightens grip on Europe’s gas

Russia’s natural gas export monopoly is set to expand its position as the dominant fuel supplier to Europe after a deal between the two resolved a seven-year-old anti-trust dispute.

The agreement between Gazprom PJSC and the European Commission gives gas buyers more flexibility in handling imports and greater leverage to push for lower prices. That’s likely to make flows from Russia more attractive than alternatives such as expensive new links to fields at Europe’s southeast corner or tanker shipments of liquefied natural gas.

Easing tensions with Russia will make it more difficult for countries from the Middle East and Americas to get a piece of Europe’s lucrative energy market, where gas is trading at roughly double the level prevailing in the US Cheaper supplies on more flexible terms also makes it more difficult for Europe to broaden its sources of energy to reduce the risk of a cutoff from any one of them, an idea that president Donald Trump’s administration has been pressing.

“Gazprom knows that Europe will always represent its key market, it knows that it’s very difficult to diversify away from Europe,” said Simone Tagliapietra, analyst at the Bruegel research group in Brussels. “If the Russian gas becomes cheaper, US LNG will be less competitive if the US is not able to cut down the price.”

Europe relies on Russia for about a third of its gas, and Gazprom’s shipments to the continent reached a record a last year and are only expected to grow. In recent weeks, as the weather warms and demand for heating eases, the pipeline company is shipping in supplies of the fuel to replenish depleted storage sites at rates that are more typical for a hard winter.

Utilities from Germany to Italy to Denmark have over the past decade reached agreements with Gazprom to lower prices or to bring them in line with European hubs, either via negotiations or in courts. Uniper SE, the Russian company’s biggest customer in Europe, voiced relief that the EU dispute was settled, and said the US mingling into European energy security is not helpful or needed.

— Anna Shiryaevskaya and Ewa Krukowska