ОПЕК + РОССИЯ + САУДОВСКАЯ АРАВИЯ

The Oxford Institute for Energy Studies - 15.07.2025 - The EU Proposal to Ban Russian Gas Imports: roadblock more than roadmap

Summary and Conclusions

In May 2025, the European Commission (EC) released a Roadmap detailing measures to phase out all Russian pipeline gas and LNG imports to the EU by the end of 2027. On 17 June 2025, the EC introduced a Proposal for a Regulation to enact these measures into EU law. The Proposal includes two key prohibitions: one banning the import of Russian gas into the EU and another prohibiting long-term LNG terminal services for Russian customers. Both prohibitions take effect for new contracts (signed after the Proposal’s publication) from 1 January 2026, with transitional periods for existing contracts extending until 1 January 2028.

Market modelling indicates that the proposed prohibitions would have a limited impact on imports into key Central European countries, albeit prices would be higher. However, if the route via Serbia is lost, Hungary could face a significant shortfall in gas supplies if there are constraints at any other cross-border point. According to analysis, the Regulation will struggle to execute the complete phase out of Russian gas for reasons largely related to the process and the rules that will govern it. These include the high-risk proposed route for buyers to stop imports under existing supply contracts and the absence of mitigation for those risks; stringent transparency and traceability requirements which place a high burden of proof on buyers and potentially restrict legitimate imports; and the likely disagreement between Member States and the EC over the development of National Diversification Plans (NDPs) that will be required to demonstrate national measures for the phase out.

The impact of the import ban on gas supply contracts: uncertain force majeure route

The proposed import ban disincentivises new contracts and poses significant challenges for existing contracts for the supply of Russian gas and LNG. The EC provides no clear guidance on exit strategies for these contracts, beyond assuming the EU ban qualifies as a force majeure (FM) event, leaving buyers exposed to substantial legal and financial risks, including potential arbitration claims filed by the sellers of Russian gas. While the FM route is suggested by the EC, the likelihood of its success is highly case-specific and far from guaranteed.

Contrary to common belief, FM does not trigger immediate contract termination, and the Proposal does not clarify whether termination is required or if suspension of deliveries would suffice for compliance with the import ban. Additionally, the Proposal does not provide risk mitigation strategies to address buyers’ potential losses from FM cases. Even if the ban is recognized as a FM event, its suspension or subsequent lifting could still expose buyers to contractual liability at a later stage. Thus, FM either way proves to be a risky strategy for buyers filing notices to comply with the ban.

Transparency and traceability measures: a greater insight but to an uncertain end

The Proposal introduced stringent transparency and traceability measures. It granted the EC a significantly greater insight specifically into all Russian gas supply contracts – irrespective of their duration, volume, and a share in a Member State’s consumption – enabling access to their full texts (except price information). It also streamlined and expedited access to these contracts by obliging EU natural gas buyers to send them directly to the EC in a disaggregated form and without the need for justification on a case-by-case basis. The providers of LNG terminal services to Russian customers would also be obliged to provide the EC with the information on contracted services, affected quantities and contract duration, although the requirements appear less stringent compared to those for supply contracts.

In addition, the Proposal obliged importers to provide Customs Authorities with “appropriate evidence” to verify whether it is Russian gas that is being imported and to assess whether it meets the conditions for exceptions, while allowing Customs Authorities significant discretion to refuse entry if provided evidence is deemed “not conclusive” thus potentially restricting legitimate gas imports. Furthermore, any gas entering the EU through the Interconnection Points (IPs), listed in the Proposal’s exhaustive list, would be deemed Russian and therefore subject to prohibitions, unless “unambiguous evidence” is provided by the importer that the gas has been in transit through Russia but did not originate in Russia. The list includes all IPs through which Russian gas was previously – or is currently – imported in the EU – except the IPs associated with the Ukrainian corridor, thus leaving the door open to gas entering Ukraine on the Russia-Ukraine border for delivery in the EU post-2027.

National plans to phase out Russian gas: the choice between erasing and reconciling differences

The Proposal obliged the Member States to develop National Diversification Plans (NDPs) by 1 March 2026, describing measures to discontinue all imports of Russian gas. It is far from certain that all Member States’ NDPs will be consistent with the Russian gas phase out deadline and, even if they will, that all of them will be implemented. It is highly likely that there will be disagreements between the EC and the Member States – particularly those reliant on Russian gas supplied through TurkStream or (pre-2025) the Ukrainian corridor – whereas the Proposal did not establish any mechanism for their resolution. The Regulation’s lack of requirement to conduct a quantitative assessment of the phase-out’s impact on security of supply and the internal energy market (IEM) widens the scope for disagreements while also complicating the NDPs alignment with existing national energy plans, in respect of which various indicators (e.g. the N-1 infrastructure standard) are calculated. As an NDP adoption constitutes a solidarity measure – and therefore the application of the energy solidarity principle – the EC is obliged to balance interests of the Member States and of the EU, thus suggesting that differences will have to be reconciled rather than erased.

The impact of the ban on the European gas market

The impact of the ban on LNG and pipeline gas flows into the EU, in theory, looks to be just about manageable in terms of the most affected EU countries being able to source alternative supplies of gas. While a number of EU governments have objected to the proposed ban citing security of supply issues, our modelling suggests that under most likely scenarios, there would not be any shortage of gas in the most affected countries, although spot and hub prices would be higher. In respect of the LNG ban, the modelling suggests that the loss of Russian LNG into Northwest Europe would simply be replaced by LNG from elsewhere, principally the US, with Russian LNG being diverted to Asia. TTF prices would rise on average by some 20 cents per MMBTU (average 2028 to 2035).

Losing Russian pipeline gas, now delivered by TurkStream, is an additional loss, but reduced flows from Russia into Turkey could be more than offset by rising Black Sea production from Turkey and also Romania. Prices would be a little higher with TTF prices some 27 cents per MMBTU. Prices in central European countries of Austria, Slovakia and Hungary rise slightly more than TTF, by some 35 cents on average in 2028 to 2035. This assumes that gas continues to flow via Bulgaria and Serbia into Hungary. If the cross-border flow between Serbia and Hungary were cut off, though, it seems that Hungary would still just be able to source alternative supplies via Austria and Slovakia but principally by importing Neptun Deep gas from Romania. The price impact is the same as if gas continued to flow across the Serbia/ Hungary cross-border point. However, Hungary remains the most exposed to any disruption, to its remaining cross-border import points, which could reduce gas imports significantly, and leave the country facing a significant shortfall in gas supplies.

Conclusions

The Proposal marks the most decisive move by the EC towards phasing out Russian gas to date, yet its outcome is likely to be largely limited due to legal and practical constraints. The import bans and restrictions on LNG terminal services exert regulatory pressure on EU market players, but they do not guarantee that imports under all affected contracts will stop by the required cut-off dates.

While strengthening oversight over Russian gas imports, the Proposal’s transparency and traceability measures place a significant burden on importers and other stakeholders, while risking regulatory overreach – particularly if over-zealously implemented – thus potentially increasing costs and preventing legitimate gas imports from entering the EU. This could have significant consequences for security of supply and potentially increase prices and costs, particularly in central and south-eastern Europe. With the Proposal lacking a mechanism for resolving likely disagreements between the EC and the Member States over the Russian gas phase out requirement in the newly mandated NDPs, the EC will have to balance interests of the Member States and the EU in line with the energy solidarity principle, but such a balancing act is likely to be difficult. In addition, the prospect of some Member States simply ignoring any ban is a distinct possibility. The European Commission, as noted in an article in The Economist1 on 5 July 2025, has shown increasing reluctance to institute infringement proceedings against Member States.

Overall, the Proposal risks becoming a roadblock rather than a roadmap towards the Russian gas-free future. In its political action against the remaining Russian gas molecules, the EC risks undermining the commercial and legal position of European gas importers, places additional financial and administrative burden on European institutions and market players, potentially weakens security of supply of south-eastern and central European countries, and places energy solidarity amongst EU Member States under significant strain. It is not obvious that it is worth taking this risk to discontinue modest volumes of Russian gas in the EU post-2027 under existing contracts. The resulting higher prices, albeit relatively small, from eliminating the import of Russian gas is a European wide problem – and even a global one – although the impact is slightly higher in the most affected central European countries.

Full PDF version

-----