Rerouting Europe's gas transit landscape - Effects of Russian natural gas infrastructure strategy on the V4

The Russian gas transit through Ukraine and the possibility of circumnavigating the historically dominant route poses a serious challenge to European gas markets. With the application of market modelling tools, this paper examines Russian export strategies to Europe using different transit route combinations. Although the cessation of Ukrainian transit would not endanger the security of gas supply in Europe, it would result in higher prices in all scenarios. In scenarios that include Nord Stream 2 and TurkStream 2, Ukrainian transit is non-essential for Russia to maintain its current share of EU gas imports. At the same time, the results show that limiting Ukrainian transit is less profitable for Russia: even if all the planned infrastructure is completed, shutting this route would result in losses of close to 5 billion € per year in Russian gas sales. Since it appears inevitable that Nord Stream 2 and TurkStream 2 will be built, a no transit scenario is a real possibility thereafter. In this case the V4 should lobby for Balkan Stream, with investment costs borne by Gazprom. However, if there are continued deliveries via Ukraine there is no need for Balkan Stream. •There would be no need for Nord Stream 2 and TurkStream 2 to supply Europe.•In all infrastructure scenarios, the V4 interest is to keep Ukrainian transit.•If transit will stop, V4 has to push for more gas infrastructure form the South.•Russian profit and European welfare are highest, when the Ukrainian system is used.•Russia can increase its market share but not the profit earned on the new infra.