What a Russia-Ukraine peace deal could mean for Europe’s gas supplies

Europe is pushing ahead with plans to ban gas imports from Russia by the end of 2027, effectively limiting Moscow’s energy future in the region and leaving behind a slew of stranded assets.

The dual Nord Stream 1 and 2 subsea pipelines were the first casualties of Russia’s invasion of Ukraine; the infrastructure was sabotaged in late 2022, and the second pipeline, which cost $11 billion to build and was intended to double the flow of cheap Russian gas to Germany, was never approved for use.

More precisely, there was speculation that the major energy infrastructure could be revived if the war between Russia and Ukraine ends and a peace agreement is concluded between the parties.

But talks to establish the basis for a ceasefire are moving at a snail’s pace, and neither side is willing to cross “red lines” on permanent surrender of territory, whether sovereign or occupied. I’m talking via British news site UnHerdVance said Monday that the United States “will try to resolve this issue” but “cannot say with confidence that we will reach a peaceful resolution.”

Hopes for a deal have raised questions about what economic and energy ties could be restored between Russia and the rest of the world, and whether a ceasefire could lead to peace as far as Europe is concerned. Reintegration of Russian gas and revitalizing the Nord Stream gas pipelines.

Given Russia’s all-out invasion of Ukraine in 2022 and its efforts to rid the region of cheap Russian gas, such a move would be highly contentious and divisive on the continent.

In 2021, that is, before the war, imports from Russia accounted for approximately 45% of Europe’s gas consumption. This year, forecasts expect imports to be 13%.

Ukraine would be outraged by any move that would benefit the occupier, and Poland has called for the pipelines to be “dismantled”, one of which has never been used.

However, Ukraine also took advantage of an old pipeline running through the country by collecting transit fees. The Russia-Ukraine gas transit agreement expired at the end of 2024, and the two countries chose not to renew the agreement due to the war. Nord Stream pipelines were specifically designed to bypass Ukraine and avoid such fees, but the transit agreement could be one of many tools available during negotiations if the tap is turned back on.

The United States will likely resist the return of Nord Stream as it hopes to weaken Moscow and increase its market share in liquefied natural gas (LNG) sales to Europe. But Germany, which is directly dependent on the pipeline and whose industries struggle with high energy costs, may find it difficult to resist the lure and return of Russian gas supplies.

The European Council and the Parliament reached an interim agreement in December on a regulation to phase out Russian gas imports. A complete ban on imports of liquefied natural gas (LNG) and pipeline gas is planned to be implemented from the end of 2026 and autumn 2027, respectively.

Danish Energy Agency in January allowed For Nord Stream 2 to carry out conservation works on damaged pipelines located within Denmark’s exclusive economic zone (EEZ) in the Baltic Sea.

Although containment work on Nord Stream 2 has not yet begun, the agency told CNBC, “The aim of the work is to prevent further gas explosions and the ingress of oxygenated seawater, which could potentially lead to corrosion.” he said.

The agency said the permit was granted with a set of conditions aimed at ensuring safe operation of the pipeline. The company added that, among other conditions, it must submit an annual plan for the pipeline facility “so that the Danish Energy Agency can continuously monitor the company’s plans for the future of the facility.”

“In addition, all conditions in such permits must be met before the pipelines can be put into operation. No such application has been made to the Danish Energy Agency,” it said.

So are the Norstream pipelines salvageable now?

Sergey Vakulenko, senior fellow at the Carnegie Russia Eurasia Center, told CNBC that the pipeline damaged in the sabotage incidents should be partially replaced and that reviving the remaining undamaged pipeline would not cost “a lot of money.”

“I think they can still be repaired, salvageable. So you may have to cut off a few miles.” [the damaged] open and replace the pipeline. But it can be done,” he told CNBC in October.

“It could easily cost $1 billion or something like that, but we still have one.” [pipeline] “It has enough operational power to be used,” he said. When asked whether pipelines filled with stagnant gas were currently being maintained, Vakulenko said, “Not at all.”

The continent has not fully recovered from the energy crisis resulting from the large-scale invasion of its neighbor. The Dutch Title Transfer Facility, Europe’s main benchmark for natural gas prices, rose to double pre-war prices in early 2025. According to IEA. By shifting public narratives from energy transition to energy addition, the race for artificial intelligence further increases energy constraints.

“So if you’re not too sensitive to buy Russian gas, if you don’t have to keep your nose too tight when buying it, then of course there are a lot of commercial and economic reasons for that. [to do it]. If it becomes politically and ethically acceptable, there will be plenty of incentive to do so, but that is for the period when there is actually some rapprochement between Russia and Europe, and that is [a] big ‘if’,” Vakulenko said.

But Tancrede Fulop, Morningstar’s utilities and renewable energy analyst, told CNBC that reintegrating Russian gas will be very difficult, at least in the short term, because of new European legislation. However, he also noted that the legislation contains some exceptions for Hungary and Slovakia in cases of emergency.

The EU said the policy change also stemmed from its drive for energy independence after Russia “weaponized its gas resources”. As a result, member states are likely to steer clear of over-dependence on a single state in the future and instead invest in increasing overall domestic capacity.

Does Russia want jobs from Europe?

Another looming question is whether Russia will want to sell its gas to Europe.

““Everyone thinks that the energy crisis started with the war in Ukraine, but it actually started in 2021,” said Fulop, pointing out the many factors of cold winter, low wind speeds and therefore high gas consumption.

The fact that the EU was late in opening Nord Stream 2 to operations also contributed to the crisis. “So Russia began to reduce the flow of gas to the EU,” he said before the war began. This suggests that the move from Russia may have been aimed at putting pressure on Europe to speed up Nord Stream 2.

On the other hand, according to Vakulenko, “Russia is not in a very strong position in the negotiations.” “For Russia, this gas is a resource deadlock. So you can expect this [that Europe] “We can negotiate a good deal.”

Russia also viewed Asia as an alternative partner to Europe and deepened ties with China through the Power of Siberia pipeline.

Fulop said that “the message is quite worrying” about a possible conflict with Russia, even if a peace agreement is reached with Ukraine, given the violations of European airspace in recent months.

Ultimately, the readoption of Russian gas “does not seem like the most realistic scenario.”

Perhaps it helps that gas prices have fallen recently as market watchers price a peace deal, he added. The EU will also benefit from new export terminals in the USA

“This is a downward trend in terms of gas prices, a positive for Europe, which could offset the end of Russia’s gas imports,” Fulop said.