Russia Threatens Europe Gas Supply
Russia may halt gas supplies to Europe, with President Putin citing the Iran conflict and the emergence of new high-paying buyers. The warning has already triggered volatility in energy markets, signaling potential knock-on effects for global shipping fuel surcharges and the cost of energy-intensive imports headed to the Caribbean.
Europe's reliance on Russian natural gas has significantly decreased, but the threat of a complete cutoff still looms over a continent bracing for the end of the 2025-2026 winter with potentially low inventories. By late 2025, Russia's share of EU natural gas imports had dropped to 15%, a steep decline from 48% in early 2021. Despite this, the EU started the 2025-26 heating season with its lowest opening gas storage levels since 2021, setting the stage for increased reliance on pricier Liquefied Natural Gas (LNG) imports to replenish stocks. Russia has been actively rerouting its energy exports eastward, cementing a strategic partnership with China. The existing "Power of Siberia" pipeline is set to be supplemented by the much larger "Power of Siberia 2," which will transport 50 billion cubic meters (bcm) of gas annually from fields that once supplied Western Europe. This long-term, 30-year agreement provides Russia with a stable alternative market, reducing its economic dependence on European buyers. This is not a new playbook for Russia, which has historically used its energy resources as a geopolitical lever. The Nord Stream 1 pipeline, which once carried 55 bcm of gas directly to Germany, was halted indefinitely by Gazprom in 2022. Its successor, Nord Stream 2, was completed in 2021 but never became operational after Germany withheld its certification following Russia's actions in Ukraine. In response to reduced Russian supplies, Europe has scrambled for alternatives, with Norway surpassing Russia as the continent's top pipeline gas supplier. The United States has also become a critical partner, massively increasing its LNG exports to the EU. Total EU LNG imports surged by 24% in 2025 alone, effectively offsetting the sharp decline in Russian pipeline deliveries. For supply chains, the immediate impact of this energy volatility is felt in shipping costs. Geopolitical disruptions, like the recent attacks in the Red Sea, have already forced carriers to reroute vessels around Africa's Cape of Good Hope. This diversion adds up to 14 days and can increase fuel costs by as much as $2 million per round trip, leading to emergency surcharges and higher insurance premiums that directly inflate the cost of goods.
