The End Of The Gas Superpower

How Russia Lost the European Market and Failed to Find a Replacement for It.

There is a difference between losing a market and losing status. The Russian gas industry has faced both at the same time, but it is the latter that will prove more difficult to reverse.

Until 2022, Gazprom was more than just an exporter: pipeline gas served as a tool for exerting political influence over Europe and as one of the pillars of the federal budget. Today, according to available estimates, this model has been dismantled—not temporarily, but irreversibly—and attempts to build a replacement for it in the East and in the liquefied natural gas market are running up against limits beyond Russia’s control.

The Lost Monopoly

Before Russia’s full-scale invasion of Ukraine, Gazprom supplied up to 40% of the European Union’s pipeline imports, and its total gas exports reached approximately 180 billion cubic meters per year. This was not merely a commercial position, but also a lever that allowed Moscow to conduct foreign policy from a position of strength, and Europe at times had to take this lever into account when making its own energy decisions. Existing LNG projects—primarily “Yamal LNG” and “Sakhalin-2”—complemented the pipeline model by providing access to the global market without being tied to fixed infrastructure.

By 2025, total Russian gas exports had fallen to 124.7 billion cubic meters, and Russia’s share of the European Union’s pipeline imports fell from 40% in 2021 to 6% in 2025. The reasons are well known and cannot be attributed to a single factor: the diversification of supply sources in Europe, damage to the Nord Stream gas pipelines, and the European Union’s deliberate political decision to abandon Russian gas as a risk category. Importantly, this process is irreversible—not because the pipeline cannot be physically repaired, but because trust in Russia as a reliable supplier has been destroyed politically, not technically, and for this very reason, it cannot be restored through negotiations.

The “Pivot to the East” That Never Happened

Attempts to compensate for the loss of the European market by turning to China have not yet yielded results comparable in terms of revenue. “Power of Siberia” has reached a design capacity of only 38 billion cubic meters per year—a figure that is clearly insufficient to replace the lost European volumes, which amounted to tens of billions of cubic meters annually.

More telling is this: the “Power of Siberia–2” project, which was publicly touted in Moscow as a strategic breakthrough, is not materializing. In September 2025, Gazprom and China’s CNPC signed a memorandum described as “legally binding,” but according to several think tanks tracking the negotiations, a commercial agreement has yet to be reached. According to the Institute of Energy and Finance, which has ties to Russian business circles, negotiations on the project’s implementation are “effectively frozen at the initiative of the Chinese side”—even though the technical and design documentation has long been ready. Beijing is insisting on a price close to the domestic Russian rate and on significantly more lenient “take-or-pay” terms than those in the agreement for the first “Power of Siberia” pipeline. Even Putin’s visit to China in 2026—which coincided with the blockade of the Strait of Hormuz and a surge in global energy prices—that is, at a time that was theoretically most advantageous for Russia—did not lead to the signing of a contract. This is telling: the more Moscow becomes dependent on a single buyer, the fewer incentives that buyer has to hurry.

LNG: The Last Line of Defense, Which Is Also Falling

Unlike pipeline gas, Russian liquefied natural gas (LNG) remained relatively free from sanctions for a long time and continued to generate foreign exchange revenue. In 2025 and early 2026, the European Union purchased nearly 49% of all Russian LNG, which accounted for up to 20% of the EU’s total LNG imports; the main hubs were ports in France, Spain, and Belgium. For Novatek, the leader of the Russian LNG market, and the industry as a whole, this channel remained, in essence, the last major source of foreign exchange revenue in a premium jurisdiction.

It is precisely this channel that is now being shut down—gradually, but irreversibly. The REPowerEU Regulation, which incorporated the sanctions into permanent European legislation, established a ban on imports of Russian LNG under short-term contracts effective April 25, 2026, and as of January 1, 2027, a ban on long-term contracts and on the transshipment of Russian LNG through European ports will take effect. For pipeline gas, the comparable deadlines are mid-2026 and fall 2027, respectively. According to available forecasts, the United States will be the main beneficiary of the resulting market niche, capable of supplying up to 66% of European LNG imports by 2026.

Technological Stagnation

The lack of its own effective gas liquefaction technologies and dependence on foreign suppliers have created a problem for the industry that cannot be solved simply by announcing a new project. Novatek has been forced to postpone construction of the third train at the Arctic LNG-2 plant and freeze the Murmansk LNG project. Without access to Western turbines, heat exchangers, and specialized tankers, the government’s goal—to increase Russia’s share of the global LNG market to 20% by 2030—has become virtually unattainable; the industry has entered a phase of stagnation and technological decline.

This is most clearly evident in the area of logistics. Russian LNG, especially from Arctic projects, is critically dependent on specialized Arc7 ice-class tankers. Sanctions against “Arctic LNG-2” forced foreign partners to withdraw from the project, creating an acute shortage of vessels of this class. In response, Moscow resorted to forming a so-called “shadow fleet”—vessels acquired through intermediaries on the secondary market and re-registered under flags of convenience. According to maritime analysts, at least six gas tankers were added to this fleet in 2026, including the renamed Orion, Kosmos, Merkuriy, Luch, and Avacha—obsolete vessels about twenty years old, acquired shortly before they were commissioned to transport products from “Arctic LNG-2.”

Western countries are shifting from broad sanctions packages to targeted measures specifically against this fleet. In June 2026, the United Kingdom imposed targeted sanctions for the first time against four gas carriers, depriving them of insurance coverage, access to ports, and the ability to undergo maintenance. Experience with similar measures in the oil sector shows where this leads: forced vessel downtime, the need for “ship-to-ship” transshipment operations far from ports, and a significant increase in logistics costs. At the same time, the 21st package of EU sanctions currently under discussion includes a direct ban on the sale of new gas carriers to Moscow—in other words, Western regulators are attempting to block not only the operation of the existing fleet but also the very channel through which it is replenished.

The Shift Toward Asia and the Cost of a One-Sided Partnership

Following the effective loss of the European market, Moscow has been forced to redirect its main LNG supplies to Asia, where China remains the dominant—and, in essence, the only—major buyer. Despite the construction of the Lunkou terminal to receive production from “Arctic LNG-2,” actual shipments remain modest—about 2.6 million metric tons per year, compared to the plant’s design capacity of 19.8 million metric tons. China purchases Russian gas at a significant discount, which reinforces Russia’s one-sided dependence on a counterparty capable of dictating the terms of the deal with virtually no restrictions.

The European Union’s complete ban on Russian LNG imports, set to take effect in 2027, combined with targeted sanctions against the tanker fleet, leaves the Russian gas industry with extremely limited room to maneuver. Russia voluntarily dismantled its own pipeline monopoly in Europe and is now steadily losing ground in the LNG segment. Instead of stable revenues in euros and dollars, the industry is increasingly shifting to settlements in yuan and barter arrangements—which in itself means a significant decline in the quality of foreign currency revenue, even if its nominal value is partially preserved.

Target in the crosshairs

On July 7, Ukrainian drones attacked the (CS) “Krasnodarskaya,” which is part of the infrastructure for gas supplies via the “Blue Stream” pipeline across the Black Sea to Turkey.

The strike can be seen as a signal to Moscow that if attacks on civilian infrastructure do not stop, Russia could lose its pipeline gas exports.

Currently, all Russian natural gas exports travel via the “TurkStream” and “Blue Stream” pipelines: in 2025, 18.1 billion cubic meters were transported to Southern and Southeastern Europe via transit through Turkey, and 21.2 billion cubic meters were supplied directly to Turkish consumers. Gas is pumped across the Black Sea floor via the “Blue Stream” pipeline by the “Beregovaya” compressor station, and via the “TurkStream” pipeline by the “Russkaya” compressor station.

Ukraine has already demonstrated impressive success in bringing Russian oil refining to a standstill through long-range strikes. The capabilities of Russian air defense systems to counter Ukrainian air raids have proven to be extremely ineffective. Air superiority clearly lies with Ukrainian weapons systems. Both the “Beregovaya” and “Russkaya” compressor stations are located just a few hundred kilometers from the Ukrainian border, which further increases the chances of Ukrainian UAVs taking them out as if at a shooting range.

Ukraine is fully capable of destroying both compressor stations. If that happens, pipeline gas exports will come to a complete halt. The financial losses would amount to several billion dollars, and if the strikes continue and prevent the restoration of operations at both compressor stations, the cost will reach $13.5–14.5 billion—which is precisely the amount Russia is projected to earn in 2025 from the sale of 39.3 billion cubic meters of gas via the Black Sea gas pipelines.

As for the rapid restoration of gas-pumping units, under sanctions it will be very difficult to do so, even given the current level of localization in turbine production.

The only factor preventing the shutdown of compressor stations could be Turkey’s dependence on Russian gas. Russian gas accounts for an estimated 40% of Turkey’s total consumption. It is not difficult to foresee a negative reaction from Turkey. But Ukraine has repeatedly demonstrated a firm stance in defending its vital interests during the war.

So if Kyiv decides that the benefits of depriving Russia of gas revenues will outweigh the costs of strained relations with Turkey, Ukraine will move to cut off Russian gas exports entirely.

What does this mean for the “energy superpower”

Due to the war against Ukraine, the Russian gas industry has suffered a strategic defeat—not in the sense of a one-time failure, but in the sense of losing a structural position that is virtually impossible to restore within a reasonable timeframe. The industry has lost its traditional European market and has been unable to effectively compensate for the loss by shifting its focus to Asia—primarily China—and has faced systemic constraints in the development of the liquefied natural gas (LNG) segment—both technical, sanctions, and logistics.

The transition from the status of an energy superpower that dictated terms on the global market to that of an isolated supplier of raw materials with limited export potential, technological backwardness, and significantly reduced foreign exchange earnings will have long-term negative consequences for the Russian economy.

This is a case where the loss of market share and the loss of status coincide: gas ceases to be an instrument of influence precisely when it becomes a commodity that must be sold on others’ terms.

Igor Volobuev, The Moscow Times

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