Who stands to benefit from Slovakia-Ukraine gas tussle? It’s not Russia

The recent dispute over gas transit between Slovakia and Ukraine, sparked by Kiev’s decision to halt the flow of Russian gas through its territory, has sent ripples through Europe’s already strained energy markets.

Slovak Prime Minister Robert Fico on Sunday paid a surprise visit to the Russian capital, Moscow, where he held talks with President Vladimir Putin. Fico later said Putin has confirmed Russia’s "readiness... to continue to supply gas to the West and to Slovakia, which is practically impossible after January 1, 2025."

Fico, in a Facebook post, stated that European Union leaders were informed on Friday of his planned visit to Moscow. He described the visit as a response to discussions with Ukrainian President Volodymyr Zelenskyy, who has opposed any gas transit through Ukraine after the current contract expires on December 31.

Earlier on Thursday, Zelenskyy—after meeting with leaders of the European Union in Brussels—announced that Ukraine would no longer allow the transit of Russian gas.

The ban, he added, will apply to any gas flow "coming from Russia”, an indication that even gas from Azerbaijan won’t be allowed to transit through Ukraine.

The development is expected to strain relations between Kyiv and Bratislava further. Tensions have been rising between Zelenskyy and Fico since the latter returned to power in October 2023.

Fico has increasingly aligned with Hungary's Viktor Orban, adopting a sceptical stance on military support for Ukraine.

Slovakia, a landlocked country, remains highly dependent on Russian gas, which it gets from Russian energy giant Gazprom through a pipeline crisscrossing Ukraine. Slovakia's main gas buyer, SPP, has warned that losing Eastern gas supplies would incur an additional $156.2 million in costs.

"If anyone is going to prevent the transit of gas to the territory of the Slovak Republic, if anyone is going to cause an increase in gas prices on the territory of Europe, if anyone is going to cause enormous economic damage to the European Union, it is President Zelenskyy," Robert Fico said in a combative press conference at the end of a one-day summit of EU leaders in Brussels.

"Ukraine won’t be invited to NATO. It will lose a third of its territory. There will be foreign military forces there," he said.

The gas dispute between Slovakia and Ukraine has exposed a broader challenge within the European energy market, one that could shift the continent’s energy dependence away from traditional sources, including Russia.

As tensions escalate, the real question arises: Who stands to gain from the ongoing gas tussle between Slovakia and Ukraine? It’s not Russia, but rather the United States and its burgeoning liquefied natural gas (LNG) industry, as a quick review of EU gas import figures shows.

The end of Russian gas transit

Ukraine’s decision to halt the transit of Russian gas through its territory has already set the stage for a major energy realignment in Europe.

This decision was partly driven by Ukraine's refusal to allow the flow of any gas from Russia, even if the original source of supply is Azerbaijan, one of the largest gas producers in the world.

Azerbaijan shares a border with Russia, and one proposal to circumvent the gas transit issue was for Baku to sell its gas to Europe via the pipeline that transits Ukraine.

Ukraine has pushed back against such an arrangement, fearing it will benefit Putin as Russia will continue to make money by selling its own gas to Azerbaijan.

While Slovakia, an EU member state since 2004, seeks to avoid significant economic disruption, Ukraine’s hardline stance on Russian gas flows complicates matters.

The expiration of the gas transit agreement could disrupt Slovakia's energy security, potentially driving up gas prices.

The US to the rescue

And here comes the catch. Amid the diplomatic standoff and Zelensky’s outburst, one thing that’s certain is US LNG suppliers stand to benefit from the end of the Russian gas transit agreement.

Last month, European Commission President Ursula von der Leyen said that the EU is considering replacing Russian LNG imports with US imports.

"We still get a lot of LNG from Russia and why not replace it by American LNG, which is cheaper for us and brings down our energy prices," she told reporters.

The US has rapidly emerged as one of the world's leading LNG exporters since 2022 after the Russia-Ukraine war led to sharp reductions in Europe's gas imports from Russia. Europe has increasingly turned to the US to meet its natural gas needs.

American companies, including Cheniere Energy and Freeport LNG, are capitalising on this demand, securing long-term contracts with European buyers.

In 2023, the US emerged as the EU's largest LNG supplier, accounting for nearly 50 percent of total imports, according to data from European Council. This marked a nearly threefold increase in US LNG imports compared to 2021.

Meanwhile, the share of Russia’s pipeline gas in EU imports dropped from over 40 percent in 2021 to about 8 percent in 2023. For pipeline gas and LNG combined, Russia accounted for less than 15 percent of total EU gas imports.

LNG import from Russia declined from over 150 billion cubic meters (bcm) in 2021 to less than 43 bcm in 2023. During the same period, import from US grew from 18.9 bcm in 2021 to 56.2 bcm in 2023. Import from Norway grew from 79.5 bcm in 2021 to 87.7 in 2023.