There’s nuclear threat yet Russian gas keeps flowing across Ukraine. Why?

As the Russia-Ukraine war escalates and a chilling winter looms over Europe, the continent’s continued reliance on Russian gas reveals the complex interplay of geopolitics, economics, and energy security.

Despite immobilising billions of dollars in Russian assets to support Ukraine, Europe still pays Moscow for natural gas. Meanwhile, Russian gas continues to transit via Ukraine, despite US President Joe Biden’s recent decision to supply Kiev with long-range missiles capable of striking deep into Russian territory.

Pavel Devyatkin, Senior Associate at The Arctic Institute, emphasises that economic imperatives remain the driving force behind Europe’s reliance on Russian gas.

"Europe continues to import Russian gas for economic reasons because it is still essential for heating, power supply, and industrial activities," Devyatkin tells TRT World from Moscow.

"While the European Union (EU) is diversifying its gas imports, refusing Russian gas completely could compromise Europe’s energy security.”

This contradiction becomes even more pronounced amid growing fears of nuclear escalation stemming from Biden’s decision. Geopolitical tensions rose after Kiev fired US-supplied missiles against Russian military targets, followed by British-made Storm Shadow missiles. France also expressed willingness to provide long-range missiles to Ukraine.

In response, Russian President Vladimir Putin updated Moscow’s nuclear doctrine on November 18, allowing nuclear strikes on non-nuclear states supported by nuclear powers.

And on Thursday, Russia reportedly fired an intercontinental ballistic missile (ICBM) at Ukraine, the first time such a long-range missile has been used in any war.

Economic necessity or strategic contradiction?

Amid escalating tensions and despite European leaders calling for a reduction in dependence on Russian energy, the data tells a different story.

According to the latest monthly figures from October 2024, the EU remained the largest buyer of Russian pipeline gas, accounting for 40 percent of Russia's exports, ahead of China (29 percent) and Türkiye (25 percent).

Moreover, the EU ranked as the fourth-largest buyer of Russian fossil fuels in October, with imports totalling €1.8 billion ($1.9 billion), or 13 percent of the top five purchasers. Pipeline gas made up the largest share of these imports (47 percent), followed by liquefied natural gas (LNG) at 32 percent.

“Europe continues to import Russian pipeline gas with an increase of 17 percent in the first nine months of 2024 – the main increases are from Turk Stream, but transit through Ukraine has also increased by seven percent to 11.5 billion cubic meters in 2024,” Devyatkin adds.

This comes even as EU member states impose severe sanctions on Moscow.

"This dependency is forcing European policymakers to reflect on their strategy," Devyatkin notes. "Discussions are ongoing about imposing a total ban on Russian pipeline gas and LNG, but such a move remains fraught with risks," he adds.

Amid fierce fighting on Ukrainian soil, the uninterrupted flow of Russian gas through Ukraine’s pipelines is striking. The ongoing transit arrangement, largely driven by contractual obligations and logistical necessity, persists despite heightened rhetoric of nuclear escalation.

Devyatkin attributes this to Europe’s inability to fully replace Ukrainian transit routes. "Gas supplies can continue through TurkStream or Blue Stream, but these pipelines alone cannot substitute the volumes transported via Ukraine," he explains.

This paradox is even more pronounced, given recent developments. On November 16, Russia halted gas supplies to Austria over a payment dispute, a move that sent European gas prices to their highest levels in a year. Despite this, Europe quickly purchased the unsold volumes.

How is Europe paying for Russian gas?

Europe’s gas dependency underscores the intertwined nature of energy and geopolitics. While the EU has chosen to immobilise Russian assets and use the revenue generated as a key financial tool to support Ukraine, it continues to pay Moscow for gas imports, complicating the overall narrative.

The EU, alongside the US, has imposed strict economic sanctions on Russia, with Russian banks and financial institutions barred from the SWIFT international payment network. Given this context, how are European nations and companies still making payments for Russian gas?

Experts point to EU guidelines issued in 2022 that outlined how European companies can pay for Russian gas in compliance with these sanctions.

While the EU initially deemed payments for Russian gas in rubles a violation of sanctions, the updated guidelines now allow European companies to pay in euros or dollars, under specific conditions.

To comply, companies must open accounts with designated Russian banks, but the payments must be made in the currency originally agreed upon in their contracts.

Additionally, companies must provide a clear statement confirming that payments in euros or dollars fulfill their contractual obligations. Crucially, these transactions will not involve the Russian Central Bank, ensuring alignment with EU sanctions.

This guidance follows Russia's March 2022 demand that "unfriendly countries" pay for gas in rubles in response to the freezing of Russian assets.

Russia introduced a new payment system via Gazprombank, where payments in foreign currencies would be converted into rubles. However, countries like Bulgaria and Poland were cut off for refusing to comply with the ruble payment requirement.

"Sanctions do not prohibit engagement with Gazprom or GazpromBank. European companies are allowed to make payments to fulfill existing contractual obligations," explains Devyatkin.

European leaders have faced criticism for their approach. Some argue that continued payments for Russian gas undermine the EU’s moral and political authority in opposing Moscow’s actions in Ukraine. Others warn that energy disruptions could have severe economic and social consequences for European nations.

The continuation of Russian gas transit through Ukraine, even as the war escalates, serves as a stark reminder of the interdependence between adversaries in a globalised world. For Europe, balancing energy needs with political strategy will remain a central challenge as the conflict unfolds.