Page 98 - Russia OUTLOOK 2023

• Commodities

While European imports of Russian pipeline gas declined by more than
80%, shipments of Russian LNG to Europe ballooned by 50% during the
first nine months of 2022.

The imports of Russian LNG are part of a sustained push by the EU to replace
Russian pipeline gas with gas in the form of LNG. Russian LNG sales are
growing, including to Spain and Belgium and other countries that have been
fully engaged in Nato and EU efforts to sanction Russia. Countries that
previously did not import any Russian natural gas via pipeline are now buying
Russian LNG.
Almost 80% of Russian LNG exports have gone to Europe and Asia. The
country shipped an average of 2.78m tonnes of LNG per month in 2022, up
from 2.62mn in 2021 and 2.56mn in 2019. In September 2022 alone EU
countries purchased almost $1bn worth of LNG from Russia.

The demand for LNG in the EU will likely climb further in 2023. In 2022 the bloc
was able to use Russian pipeline gas in the earlier part of the summer to begin
filling its gas storage tanks before pipeline flows began to dwindle. Next year,
no such buffer will exist.

The mad dash for LNG shipments has resulted in extensive traffic jams across
Europe’s regasification terminals where LNG carriers can offload their cargo.
Imports of LNG have risen most in Spain, France and Portugal. However,
many EU countries do not operate regasification plants. Spain operates six
LNG terminals. And even with that capacity, more than a dozen vessels were
queued off the country’s coast in November waiting to offload their cargo.

The absence of a pipeline system connecting Spain to other European
countries also means that countries like Germany cannot easily receive gas
that arrives in Spain in the form of LNG. Plans to build additional pipeline
infrastructure connecting Portugal and Spain to France and Germany are in
the works, but will take several years to materialise. The global LNG market is
likely to tighten significantly in the months to come.
An economic slowdown in China freed up considerable quantities of LNG for
re-export to Europe, but Beijing announced in November that it would halt the
sale of LNG to foreign buyers in an effort to reduce the flow of LNG out of the
country. If China’s economy picks up in 2023 then analysts say that will only
tighten the LNG market further and keep prices high.

• Sectors

Economic activity has overall been steady following a strong decline in the
second quarter of 2022. At the same time, data are invariably vastly mixed
across sectors, in a sign of the ongoing structural shifts. Geopolitical and
economic uncertainty constrains private investment and raises the share of

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