EU prepares plan to cut final Russian energy ties: Market reaction uncertain

The European Union is set to unveil a new plan aimed at severing its remaining energy ties with Russia, focusing on the role of private companies in the process.

The European Commission's plan, which is scheduled for release on May 6, will propose granting companies more powers to divest from Russia, including enabling them to end contracts early and urging them to avoid future deals with Russian energy suppliers, Politico revealed.

This initiative comes as part of the EU’s broader strategy to reduce its dependence on Russian energy, which remains a significant challenge. Although the EU has successfully reduced its reliance on Russian energy sources since Russia’s invasion of Ukraine in 2022, it still imported 19% of its natural gas from Russia in 2024, leaving the bloc vulnerable to economic manipulation and blackmail. EU Energy Commissioner Dan Jørgensen emphasised the necessity of the roadmap, stating that it will help the EU achieve full energy independence from Russia.

Despite these efforts, the plan faces potential obstacles, particularly from within the market. Energy companies may not fully embrace the EU’s strategy, and some may seek to resume purchasing Russian energy if it becomes politically or economically attractive again. Experts, including Maria Shagina from the International Institute for Strategic Studies, point to the fact that many EU member states are still concerned about competitiveness and the potential economic impact of abandoning cheap Russian energy, especially if political conditions change, such as the possibility of a peace deal with Russia.

The EU’s energy strategy, which was initially a key priority for European Commission President Ursula von der Leyen, has been delayed several times due to geopolitical factors, including attempts to negotiate a potential gas deal with the U.S. under the Trump administration. While much of the EU's Russian energy imports have been curtailed, the bloc has still spent over €200 billion on Russian energy since the war in Ukraine began, with a significant portion spent on gas.

The “roadmap” is intended to send a clear message to the energy market that buying Russian gas is no longer acceptable when there are alternative suppliers. One of the key aspects of the plan is the introduction of legal options that would allow companies to break long-term contracts with Russian suppliers without incurring severe penalties. This move is designed to maintain pressure on Russia, particularly as momentum stalls for tougher new energy sanctions.

However, the plan faces strong opposition from some EU member states, notably Hungary. Hungarian Prime Minister Viktor Orbán has expressed his intention to block any new energy sanctions, raising the possibility that the EU might struggle to reach consensus on a tougher approach. This has led officials to explore options that don’t require unanimous consent from the EU’s 27 member countries, though even these alternatives are likely to face pushback, particularly from Hungary’s EU Commissioner Olivér Várhelyi, who recently launched a procedural objection to the plan.

At the same time, there is growing concern within the EU that energy companies may be tempted to return to Russian fuel supplies if the political situation improves or if cheaper Russian energy becomes available. Patrick Pouyanné, the CEO of French energy giant TotalEnergies, suggested that pipelines from Russia to Central Europe could resume operations, and that the continent would not fully resist an offer of cheap energy. However, Cristian Signoretto, head of Eurogas, cautioned that major hurdles such as legal complexities and damaged infrastructure would complicate any efforts to renew business ties with Russia.

Despite these challenges, many EU members are pushing for the bloc to stick to its long-term strategy of reducing reliance on Russian energy, particularly as Russian energy exports continue to fund the Kremlin’s war machine. Estonia’s new energy minister, Andres Sutt, stated that anyone opposing tougher energy sanctions is essentially against peace and the future stability of Europe’s economy.

While market forces will undoubtedly play a key role in shaping the EU’s future energy landscape, the bloc’s commitment to breaking free from Russian fuel remains clear. However, as the situation evolves, the EU’s energy future may be determined by both geopolitical developments and the actions of energy companies that are closely watching the changing political and market dynamics. Ultimately, the EU's strategy will have to navigate a delicate balance between securing energy independence and addressing the economic and political realities of energy markets.

By Tamilla Hasanova