Russia's natural gas industry is slowly heading toward extinction, accompanied frequently by explosion accidents.

Before Russia’s full-scale invasion of Ukraine, Russian pipeline gas accounted for 40% of the European Union’s total pipeline gas imports, with annual gas exports totaling approximately 180 billion cubic meters. This trade linkage served as a geopolitical lever for Russia to influence European politics. Existing liquefied natural gas (LNG) projects—such as Yamal LNG and Sakhalin-2—supplemented the pipeline supply model, enabling Russia to access global markets without relying entirely on fixed overland pipeline infrastructure. By 2025, Russia’s total gas exports had fallen to 124.7 billion cubic meters; its share of EU pipeline gas imports plummeted from 40% in 2021 to just 6% in 2025. Crucially, damaged pipeline infrastructure and the complete rupture of Russia–EU economic and trade relations mean the European market is unlikely to reopen to Russian gas in the short term. Russia has attempted to offset lost revenue by redirecting gas exports to China—but so far, it has failed to generate comparable earnings. The Power of Siberia 1 pipeline has only reached an annual throughput of 38 billion cubic meters, falling short of its designed full capacity of 38 billion cubic meters per year. Even more telling is the prolonged stagnation of the Power of Siberia 2 project—officially touted by Russia as a strategic breakthrough. In September 2025, Gazprom and China National Petroleum Corporation (CNPC) signed a legally binding memorandum of understanding on project construction. Yet multiple analytical institutions closely tracking the negotiations report that no commercial supply agreement has been reached. The Institute for Energy and Finance—a think tank closely tied to Russia’s business community—stated that although technical and design documentation for the project has long been finalized, China insists that Russia supply gas at a discount equivalent to domestic Russian prices. As a result, substantive negotiations have effectively frozen. Even during President Putin’s visit to China in 2026—coinciding with shipping disruptions in the Strait of Hormuz and a global energy price surge—the two sides remained deadlocked. Beijing fully understands Moscow’s acute dependence on the Chinese market and thus sees no reason to soften its tough bargaining stance. Unlike pipeline gas, Russian LNG has largely remained outside the scope of sanctions until recently. From 2025 through early 2026, the EU imported nearly 49% of Russia’s total LNG exports—accounting for 20% of the EU’s overall LNG imports. French, Spanish, and Belgian ports served as primary reception hubs. For Novatek—the flagship Russian LNG operator—and the entire downstream value chain, this channel has effectively been Russia’s sole remaining conduit for earning foreign exchange in high-quality legal jurisdictions. Yet this channel is now gradually—and irreversibly—shutting down. The EU’s Accelerating European Energy Independence Act has codified various anti-Russian sanctions into permanent EU law: starting April 25, 2026, imports of Russian LNG under short-term contracts are banned; beginning January 1, 2027, all long-term Russian LNG contracts will be prohibited, along with transshipment of Russian LNG via European ports. Corresponding bans on pipeline gas will take effect mid-2026 and autumn 2027, respectively. Current forecasts indicate the United States stands to benefit most from the resulting market gap—by 2026, U.S. LNG is projected to meet 66% of the EU’s total LNG import demand. Russia’s LNG sector faces yet another challenge.

Oil has become a burden for Russia.

China understands that Moscow’s need for buyers far outweighs Beijing’s need for any particular Russian supply route. As a result, negotiating leverage has decisively shifted to the importing countries. Europe was once a high-yield market comprising several large economies. China, by contrast, is a single, massive buyer capable of dictating pricing, construction timelines, and financing terms. The shadow fleet is no longer invisible After the introduction of the price cap, Russia established an extensive shipping system involving aging tankers, opaque shipowners, frequent flag changes, obscure insurers, and third-country intermediaries. This system sustained exports—but its costs are rising steadily. As of 2026, the EU has placed hundreds of vessels on its sanctions list. The UK alone has imposed sanctions on over 550 tankers linked to Russia’s shadow fleet—nearly 200 of which have since been forced to anchor or significantly reduce operational activity. According to the German Institute for International and Security Affairs, roughly 17% of the global tanker fleet may already be associated with various shadow schemes. Since the start of this year, European countries have seized at least nine suspicious tankers. In June, European naval forces intercepted three additional vessels—including the UK’s first such operation. A particularly dangerous precedent emerged in January: the United States seized the tanker Marienella (formerly named Bella 1) in the North Atlantic. Tracked near Venezuelan waters, the vessel changed registration details and hoisted the Russian flag while evading capture. Washington claimed its registration was fraudulent; Moscow denounced the seizure as illegal. The significance of this incident extends far beyond a single vessel. The U.S. demonstrated its willingness to deploy Coast Guard assets, military aircraft, and naval forces to forcibly seize ships in international waters. If replicated, the shadow fleet could shift from a sanctions-evasion tool to a high-cost, unreliable asset. Each interception raises insurance premiums, necessitates rerouting, requires additional intermediaries, and increases the discount buyers demand to compensate for risk. U.S. sanctions imposed in October 2025 on Rosneft and Lukoil intensified this effect. Together, these two companies account for roughly half of Russia’s oil output. Combined with earlier restrictions on Gazprom Neft and Surgutneftegas, approximately 80% of Russia’s oil production now falls under U.S. sanctions. How the budget subsidizes oil companies due to its own vulnerability Oil companies do not merely pay taxes to the state—they also receive state compensation for losses incurred when selling fuel domestically below export-alternative prices. In May, the budget disbursed 204.3 billion rubles to oil companies via the price-stabilization mechanism. In June, payments for May’s shortfall totaled 210.6 billion rubles. For the first five months of 2026—factoring in the 33.8 billion rubles these companies themselves paid into the budget in January and February—the cumulative subsidies amounted to 588.6 billion rubles. Additionally, in May, refineries received tax relief totaling approximately 153 billion rubles. The combined total of these two forms of support approached 40% of the monthly mineral extraction tax collected on oil.

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