Segrist: American LNG Unaffected by Cut-Off of Russian Gas Supply

The oddly late cut-off of Russia’s last natural gas pipeline link to Western Europe is another extraordinary moment in a war that’s about to enter its third year.

But any effects on the U.S. LNG market will be more mundane, said one analyst. Energy industry leaders had been well aware before 5 a.m., Jan. 1, when Gazprom, Russia’s national energy company, stopped the flow on its Urengoy-Pomary-Uzhgorod pipeline.

It marked the end of a historical partnership going back to the Cold War.

Pipelines and Cold War history

On June 1, 1968, Austria became the Soviet Union’s first natural gas customer on the other side of the Iron Curtain, signing an agreement to hook up to the Russian supply.

Deals between political enemies became a normal part of the cold war, said Evgeniia Kirillova, Lead Energy Market Analyst for Data at Energy Exemplar, in an email to Oil and Gas Investor. The deals sounded normal, considering the nations involved had nuclear weapons pointed at each other.

“European nations began to commit to long-term agreements, often spanning decades, while securing funding to develop the necessary infrastructure,” Kirillova said. “In response, the Soviet Union launched an ambitious pipeline construction program, using the latest technology and sourcing equipment from European suppliers.”

At the time, the USSR had plenty of experience building international networks. Austria connected the Soviets’ 390-mile Brotherhood Pipeline, which brought Russian gas to then-communist Czechoslovakia. As Austria already had a gas hub about a mile away from the Czechoslovak border, the connection did make sense, at least geographically, Kirillova said.

Germany eventually got into the deal with a long-term “Gas-for-Pipes” agreement.

“This landmark deal became the largest in the history of Soviet-German and Soviet-European economic cooperation and set the stage for decades of partnership,” Kirillova said.

At the time, problems elsewhere in the world strengthened the relationship. The 1973 OPEC oil crisis showed Europeans the dangers of overdependence on a non-diverse supply. Socialists in the USSR had a chance to earn hard currency.

“Europe’s growing energy needs made affordable Soviet gas a key pillar in maintaining its industrial competitiveness,” she said.

Eventually, the leaders of the solidifying EU began to take the steady supply of Soviet, and later Russian, gas for granted.

“The assumption had been that Europe and Russia were locked into a mutually beneficial, secure relationship since Europe needed gas and Russia had no infrastructure to sell that gas anywhere else,” wrote foreign policy analysts Samantha Gross and Constanze Stelzenmüller in a study for the Brookings Institution. “That belief turned out to be wrong.”

Fleeing Russia

The ongoing dependency between Europe and Russia was evident in January’s pipeline cutoff. Ukrainians and Russians have been trying to militarily kill each other for almost three years, and no one had thought about cutting off one of Russia’s primary sources of income?

While Europeans overwhelmingly condemned Russia for the invasion, they also pleaded with Ukraine not to shut down the Urengoy-Pomary-Uzhgorod.

In 2019, before the war, the two countries signed a five-year transit agreement. Europe, by then, was heavily dependent on Russian gas simply to keep from freezing in the winter. Ukraine, in turn heavily dependent on Europe to supply military aid, honored the contract until its expiration at the end of 2024.

Europe used that time to shift its energy supplies. Germany went so far as to reopen coal plants (at the same time it was shuttering nuclear plants). By 2023, Russia made up only 15% of EU gas imports, and the continent heavily increased its LNG supply from Qatar, North Africa and the U.S.

Prior to the Ukrainian invasion, Russia had eight pipeline routes for shipping natural gas to Europe, Kirillova said. The Nord Stream famously blew up in September 2022.

The others have shut down in far less dramatic circumstances. For example, the Yamal-Europe pipeline closed in April 2022 after Gazprom said it would accept payments in rubles only.

Overall, the EU has a non-binding goal of stopping all Russian gas transports by 2027.

As of the beginning of 2025, only one Russian pipeline still delivered gas to the west—the Turk Stream, which serves countries such as Hungary, Bulgaria, Romania and Greece. Since the invasion, Russia has increased the flow on the line by 23%.

The rest of the continent has increased imports from Norway’s blooming gas fields and LNG.

The Ukrainian-U.S. bump

Check any multi-year chart tracking the U.S. natural gas price and it’s apparent when Russia decided to invade.

The Henry Hub spot price was at $3.76/MMBtu in December 2021. By August 2022, as Europe scrambled to secure supply for the oncoming winter, the price hit $8.81/MMBtu. It was the highest the price had been since July 2008 and the highest since the U.S. began exporting LNG in 2016.

Since rapidly falling off in the following months, Henry Hub gas prices haven’t recovered to even half of that level.

While U.S. gas prices spent fourth-quarter 2024 rallying up to $4/MMBtu, the increase was due to cold weather, a rising demand for power generation and a rising global market for LNG.

Kirillova said the U.S. should not expect a jump in gas prices or LNG exports similar to the market in 2022. Three years is a long time for countries to rethink and change up their energy supply situation. The eventual closing of Russia’s last gas line to Western Europe has been baked into the cake.

“There is likely little impact to the U.S. LNG market in the short term, given most liquefaction and regasification capacity is fully booked,” she said. “Most of the potential issues with supply disruptions were accounted for years back, which created price shocks and ultimately resulted in strategic shifts away from Russian gas.”

Russia managed to surprise the world with its invasion, but the old Soviet Union’s network has been replaced by a much more nimble system.