Russia's Gas Weapon and Europe's Best Response

Authors:
  • PKPéter Kotek
    Péter Kotek
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Abstract
In response to Russia’s war in Ukraine, the European Commission has proposed the REPowerEU startegy to wean the EU off Russian fossil fuels. It aims to reduce the Russian gas volume 2/3rds by the end of 2022 with a full phaseout by 2027. Using market modelling, we assess the possibilities of Russia to maximize its profits by withholding supplies and the options of Europe to mitigate the loss of its main pipeline supplier. Strategic behaviour is modelled in a pre-war, a REPowerEU and a full sancions scenario. We find that Russia has no market power on Europe in the REPowerEU scenario if Europe mitigates the adverse price effects of the curtailment by demand reduction and alternative pipeline and LNG sources.

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