EU Moves to Phase Out Russian Gas by End of 2027: A Detailed Analysis

The European Commission has initiated a significant shift in its energy policy, effectively implementing a complete ban on Russian gas imports by the end of 2027. This measure, rather than a direct embargo requiring unanimous EU member state approval, is being enacted through new requirements for origin verification at key entry points into the EU gas network. This strategic maneuver aims to circumvent potential vetoes from countries heavily reliant on Russian gas.

The directive mandates that gas entering the EU must be accompanied by certificates proving it does not originate from Russia. Among the most critical entry points listed is “Strandzha 2,” which serves the TurkStream pipeline and is at present the only active gas pipeline entry point for Russian gas into the EU. This point has seen unprecedented gas volumes, reaching or slightly exceeding its maximum firm technical capacity of 56.7 million cubic meters per day during the recent winter, particularly after Ukraine ceased transit of Russian gas through its territory at the end of 2024.

A Technical-Commercial Approach to Decoupling

The EU’s approach is notable for its reliance on commercial and technical adjustments rather than a direct political embargo. The European Commission has declared that its decisions provide grounds for terminating existing gas purchase and transit contracts, citing “force majeure.” This mirrors a past move by the Russian president, which Gazprom used to halt gas supplies to Poland and Bulgaria in April 2022. However, numerous European companies successfully challenged Gazprom’s unilateral terminations in arbitration courts, securing favorable rulings. The Russian gas monopolist responded by leveraging Russian courts, which prohibited the company from complying with arbitration rulings. In the case of Austria’s OMV, this has led to the company actively pursuing compensation for an arbitration award by targeting Gazprom’s assets within the EU. This includes natural gas in the TurkStream pipeline, which remains Gazprom Export’s property until delivered to clients in Serbia and Hungary. Consequently, Bulgaria’s transmission system operator will bear the responsibility of enforcing the EU ban at the Strandzha 2 entry point, which should affect deliveries to Serbia, Hungary, Romania and beyond.

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Bulgaria’s Critical Role and Financial Strain

This decision was widely anticipated, especially as the European Commission signaled its intent to bypass potential vetoes from Slovakia and Hungary through a technical-commercial solution requiring only a qualified majority vote in the Council and adoption in the European Parliament. Notably, according to our sources, Bulgaria supported this measure despite facing the most direct and severe economic consequences.

Without revenue from the transit of Russian gas via Strandzha 2, Bulgaria’s transmission system operator, Bulgartransgaz, faces significant challenges in repaying the remaining debts incurred from the financing and construction of its section of TurkStream. This includes an estimated €220 million owed to the Arkad consortium. Furthermore, maintaining pipeline operations and funding future investments will become increasingly difficult. This financial strain is compounded by the operator’s plans to secure approximately 1 billion BGN (Bulgarian Levs) in new investments to expand its network, including the “Vertical Gas Corridor” initiative aimed at diversifying gas supply routes from south to north in Central and Eastern Europe.

Shifting Political Sands in Bulgaria

Bulgaria’s support for this decision marks a notable shift. Previously, when ex-Finance Minister Assen Vassilev attempted to impose a tax on Russian gas, representatives of the same political parties, currently in power, not only opposed the move but also saw GERB leader Boyko Borisov personally guarantee uninterrupted transit of Russian gas through Bulgaria to Serbia’s Vucic and Hungary’s Viktor Orbán.

Several factors likely explain this change. First, the European Commission’s unwavering determination to phase out Russian gas is undeniable. The current Bulgarian government, along with political figures who made commitments to Orbán—particularly Borisov and Delyan Peevski, the latter reportedly relying on Orbán’s support to secure his party’s and MEPs’ inclusion in the European Patriots for Europe Group—would risk a direct confrontation with Brussels by opposing the measure. Despite their past dexterity in navigating between Gazprom’s interests and its allies along the TurkStream route, a decisive moment has arrived. Bulgaria likely supported the decision to avoid being perceived as a primary advocate for Russian interests at a sensitive time for its accession to the Eurozone, thereby gaining time to explore alternative solutions and mitigate the economic fallout.

Anticipated Attempts to Circumvent the Ban

In recent months, anticipating the EU’s roadmap for phasing out Russian gas, efforts coordinated with Gazprom have intensified to attract American investors, ‘close to Trump’. into the ownership and management of key pipelines such as Nord Stream and TurkStream. The strategy, well covered in a recent ICIS article, appears to aim for major U.S. investment firms to acquire the debts of pipeline operators, using this as leverage in negotiations between the U.S. and the EU for exemptions. However, the nature of these pipelines as public infrastructure presents significant geopolitical, legal, and regulatory hurdles.

The increased visits of American investors to Sofia are no coincidence, although some have reportedly concluded that these efforts are futile. In the case of Bulgaria’s transmission system operator, this involves the aforementioned €220 million debt to Arkad. Given the synchronized efforts to acquire debts related to Nord Stream and TurkStream, Gazprom’s role behind these controlled information leaks is evident. Recently, the Russian outlet Gazeta, citing Die Zeit, and the website Reporter claimed that U.S. investor Stephen Lynch had purchased Nord Stream’s debts. While Die Zeit did publish an article on this topic over three weeks ago, the definitive claim that this deal is finalized remains unconfirmed. Experts familiar with Russian tactics suggest this is a typical informational operation aimed at partially neutralizing the public effect of EU’s decision to phase out Russian pipeline gas by the end of 2027.

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Strategies to Evade Restrictions

Methods to bypass such restrictions have already been observed. Two years ago, importers at the Strandzha 2 entry point reportedly began presenting certificates to customs authorities claiming that gas, entering Bulgaria via the TurkStream pipeline, originated from Turkmenistan. This practice is particularly relevant given the heightened diplomatic activity by President Rumen Radev and other Bulgarian officials toward Central Asian nations. It is plausible that certificates for Uzbek, Kazakh, Turkmen, or Azeri gas may soon emerge, ostensibly “de-Russifying” gas flows via the TurkStream.

The challenge lies in the nature of gas molecules, which are inherently difficult to trace. Consequently, the acceptance or rejection of such certificates ultimately depends on the diligence and scrutiny of customs authorities. While Gazexport and MET currently hold significant capacity lease contracts for the pipeline, this capacity can be transferred to companies with trading licenses operating in Bulgaria. One such entity is Sustainable Energy Supply, a joint venture between Litasco and Valentin Zlatev, known for his close ties to Bulgartransgaz’s CEO, Vladimir Malinov.

Adapting such schemes to appear credible will require time. Given the high stakes, direct European Commission supervision of gas flows from TurkStream at the Strandzha 2 entry point should be considered the final coup de grace to Russian pipe gas imports into the EU. This is especially critical given that Strandzha 2 remains the sole entry point on the EU’s list through which significant volumes of confirmed Russian gas continue to flow via dedicated pipelines from Russia, traversing the Black Sea and Turkish territory.

Evasion Tactics and Future Challenges

The European Commission’s proposal has stirred significant reactions and set in motion processes with far-reaching and systemic consequences for Europe’s energy landscape and its geopolitical alignments. The coming years will reveal the full impact of this ambitious move towards energy independence.

Ilian Vassilev