"The termination of Russian gas supplies arriving via Ukraine at the end of this year has been known to the market for a long time, so the overall effect is already reflected in gas prices," said Baltic Energy Partners board member Marko Allikson. He added that if transit were to resume, it would lead to a fall in prices.

According to Allikson, the cutting of gas supplies from Russia will have a regional impact on the price of gas bought by Hungary, Slovakia and Austria. There will also be new transit fees for purchases made through other countries. "This is why the representatives of these countries are the most vocal on the issue," he said.

Europe's gas storage levels are currently at 73 percent of their total capacity, down 13 percentage points from the same time last year but similar to the long-term average, Allikson said.

He also noted that once the fate of Ukrainian transit is finally clear, the weather will be the main factor influencing future gas prices in winter. "A cold and windless forecast will raise both consumption and prices, while mild and windy weather will tend to lower them. Weather forecasts along with news related to Ukrainian gas transit have caused gas prices to fluctuate for the past two months, which is why the TTF (Title Transfer Facility Natural Gas Futures Pricing – ed.) monthly index, which underpins prices for major gas purchase contracts is essentially at the same level (€44-45 per megawatt-hour) for both December and January, but February transaction prices are currently at €48 (per MWh)."

Allikson added that in future natural gas futures prices will be down on month as LNG (liquified natural gas) supplies are expected to increase in the coming years. "This is putting downward pressure on prices, with Baltic gas prices tracking the same TTF index movements, meaning our gas prices are subject to the same developments."

Elering CEO: European Union has no gas supply problems

Elering CEO Margus Kaasik noted that the market has already reacted to Ukraine's intention to stop the transit of Russian gas and so the impact is no longer significant.

"If we look at this gas market, the price of gas has been quietly going up, although it seems to me that the gas market here has reacted several times to the same news that supplies might stop. In that sense, I don't think the impact in itself is big," Kaasik said.

Kaasik added that the impact of the suspension of supplies will be very big for the countries that have up to now received gas from Russia. "These are Austria, Hungary and Slovakia. For them it is definitely a problem, they will have to find new supplies. It is possible that these supplies now are cheaper for them than they could get on the market at the moment. For these countries, of course, this is a tragedy of a minor nature."

Kaasik pointed out that Russian gas transited through Ukraine accounted for around five percent of total gas imports into the European Union. "It is not a large number, but it is not a negligible number either. Today, there is enough spare capacity at many LNG terminals to import more LNG if needed, should there be a shortage. I don't see Ukraine cutting transit as causing any kind of major security of supply concern or a need to increase the price significantly."

"The fact is that in any case, the market price has reacted negatively to this news, but it has been doing so for a long time because actually the threat that transit through Ukraine might stop has been touted for a number of months. This really hasn't just come about in the last few days," Kaasik added.

Should Ukraine suddenly decide to extend the transit agreement, Kaasik believes that could drive down the price. "There is an assumption with this gas price that transit will not continue, or if it does continue, it could lead to some kind of price drop. But again, whether it would, remains to be seen. My own sense is that the price of gas has risen rather more than is reasonable."

Kaasik stressed that the European Union does not have a problem with gas supply. "There is plenty of gas in storage, and there is no sign of a cold winter in Europe at the moment. There is no sign of a major emergency. But it is true that the price of gas has been slowly creeping upwards since spring."

The damage to EstLink 2 will have a minor impact on the market, Kaasik said. "Various analysts and evaluators have suggested that there could potentially be a ten percent impact. We've got more renewable capacity coming on to the market which, in those hours when the sun is shining and the wind is blowing, will bring that price down. Maybe even further than last year. But at those times when the wind is not blowing and the sun is not shining, it will once again be more expensive to get that energy produced. There will definitely be a small negative impact on the market from this damage to EstLink 2."

Kaasik expects gas prices to fall next year. "If the backbone of winter can be broken in the coming weeks, then gas prices could still start to come down, if we see that there are no supply concerns for Europe. How it all plays out in reality remains to be seen, the market can throw up surprises from time to time. The fact that the price of gas fell so low last spring was something of a surprise. Now, the price is back up to where it is at the moment," he said.

Vare: Russia earned nearly $6 billion a year from gas supplies to Europe

Speaking on Vikeraadio show ""Lõpp hea, kõik hea," economic expert Raivo Vare discussed the impact of the suspension of Russian gas supplies on Hungary, Slovakia and Moldova.

According to Vare, Russia has so far been earning around $6 billion USD a year from gas supplies to Europe, while and Ukraine has been earning up to €200 million from transit. Hungary stands to lose more than €1 billion euros and Slovakia more than €0.5 billion as a result of the transit contract ending, he added.

Vare was asked why Ukraine had not terminated Russia's gas transit permit earlier.

"Contractual terms are certainly a factor here, but there was also a lot of money at stake, of course, the position of the European Union and some of its member states, which were so interested in this gas that Ukraine felt it necessary to continue with this transit," Vare said.

Vare noted that the Sudzha natural gas exchange hub in Russia's Kursk Oblast is currently under Ukrainian control. Gas from Sudzha passes through Ukraine to Hungary, then on to Slovakia and from there to Austria and Germany.

"Nevertheless, 42 million cubic meters of gas has flowed more or less uninterrupted until now. It has now been decided this will not continue, because Russia has made somewhere in the region of $6 billion USD dollars in total from it, and that of course is financing the war, which is not good for Ukraine," Vare said.

Vare was asked what the suspension of gas transit would mean for Slovakia and Hungary, for whom 70 to 80 percent of gas consumed comes from Russia.

"Hungary previously had a contract with Russia to supply 4.2 billion cubic meters, and has increased its purchases by a further 2.3 billion cubic meters during the war. On top of that, [Hungary] also made money on transit, on the quantities that it was forwarding on," Vare replied.

Vare pointed out that Slovakia was bringing in up to €0.5 billion a year on the gas it was passing on, which is more than the Ukrainians. "This gas they sent on to Austria, when at the beginning of the year they had a 97 percent dependence on Russian gas, today is zero, because Austria withdrew after Gazprom refused to pay them the fine imposed by the international body. Since then Austria has switched to other sources."

Vare pointed out that Slovakia also resells Russian gas to Germany.

Vare was then asked whether Ukraine has any reason to extend the contract, as both Slovakia and Hungary have been pressuring the country to do so. Hungary is looking for a scheme whereby it can continue to supply Russian gas by buying it before it reaches Ukraine, and thus claiming that it is not actually Russian gas. Slovakia has threatened to suspend electricity supplies in emergency situations.

"According to the previous scheme, formally the gas was coming from Azerbaijan, but in reality it was still Russian. Now it's just Hungary trying to do the same thing, to call it its own gas, so to speak. In this case, it is the clause in the Association Agreement that will apply, which stipulates that Ukraine is obliged to transfer to the EU member states all the things that are theirs," said Vare.

"Slovakia's threat is, at the end of the day, connected to a particularly brutal situation, because Slovakia's electricity will be needed if and when Ukraine's electricity capacity is once again bombed by the Russians. So that is a particularly despicable way of doing things," Vare noted, adding however, that Poland would make up for any shortfall Slovakia might cause.

Finally, Vare was quizzed on what the suspension of transited gas would mean for Moldova, whose main power plant, which runs on gas, is located in the separatist region of Transnistria. Reportedly, Romania would be willing to supply electricity to Moldova, but the electricity price would have to double.

"Moldova has agreed to this, and has also taken the position of confiscating and nationalizing Gazprom's local enterprise, because it was actually Gazprom that took the initiative to cut off this supply. It was not because of the end of the Ukraine agreement, but primarily because of Gazprom's own desire. Moldova is also in a better position in the sense that their volumes are small and they can also bring their two billion cubic meters from the south via Turkey, Bulgaria and Romania if necessary. In terms of both electricity and gas, they will be able to solve their problem, but it will be more expensive," Vare said.

---

Follow ERR News on Facebook and Twitter and never miss an update!