How Can U.S. LNG Become Competitive with Russian Gas in Southeast Europe and Ukraine?

The Challenge of Ukraine’s Gas Supply Amid Ongoing Conflict

Persistent attacks on Ukraine’s energy infrastructure have severely limited its ability to stockpile sufficient natural gas in underground storage facilities to meet winter demand. As of October 1st, when the new gas year begins, Ukraine’s Naftogaz will need to balance winter consumption with consistent and substantial short-term imports from Romania, Slovakia, Poland, Moldova, and Hungary.

At present, only deliveries from Poland are regular and reliable, though insufficient in volume. Supplies from other countries—especially Slovakia and Hungary—are shaped not only by political expediency but also by their national gas policies. These policies often exclude pure transit flows to Ukraine and, critically, prevent cheaper gas from reaching Ukraine than what they themselves consume. Hungary has long sold Russian gas to Ukraine at a premium, and Slovakia tends to follow a similar practice.

Barriers to LNG Competitiveness in SEE

Several structural and market factors have undermined the competitiveness of U.S. liquefied natural gas (LNG) relative to Russian pipeline gas:

• Limited Scope of U.S. LNG Sellers: American suppliers usually sell LNG only up to the terminal gate and show little concern for the competitiveness of their product further inland, at the borders of Ukraine or neighboring countries.
• Russian Political Pricing: Russian pipeline gas is priced conditionally lower, typically sold at a variable discount below the TTF (Title Transfer Facility) benchmark. In practice, Gazpromexport’s pricing is not market-driven but politically set—kept low enough to move over 45 bcm annually through Turkey, volumes that would otherwise have no storage destination. In 2025 alone, over 65 bcm of Gazprom gas has failed to find buyers domestically or abroad.
• Abandonment of Henry Hub-Based Pricing: U.S. LNG initially entered the market with a pricing formula tied to Henry Hub plus costs for liquefaction, shipping, regasification, insurance, and margins. Over time, this formula was abandoned in favor of linking prices to the more volatile TTF spot index.
• Russian Dominance on the Turkish Market: After the closure of the Nord Stream and Yamal-Europe routes, and with declining transit via Ukraine, Southeast Europe has become the only region where Russian gas still flows in large quantities. Liquidity on the Turkish gas exchange is increasing, but as long as Russian pipeline gas dominates and its price is politically manipulated, U.S. and other LNG will struggle to compete on market terms. A potential EU ban on Russian gas imports would only increase the surplus of Russian gas in Turkey, likely forcing even steeper discounts and encouraging traders to rebrand or blend Russian gas to circumvent sanctions.

US LNG Can Replace Russian Gas in the EU — But Will It?

As the only remaining Russian pipeline gas enters the EU via TurkStream, achieving a complete displacement of Russian gas in Southeast Europe would require replacing roughly 15 bcm of pipeline gas with about 10.9 million metric tons of U.S. LNG. This volume is fully manageable: the combined regasification capacity of the LNG terminals in Greece (Revithoussa and Alexandroupolis) and those located in European Turkey comfortably exceeds 25 bcm per year, more than enough to accommodate the necessary imports. Establishing LNG as a sustainable alternative in the region requires several key steps:

• Prioritizing LNG in the Vertical Gas Corridor: Routes 1, 2, and 3 of the Vertical Gas Corridor to Ukraine should rely primarily on LNG, given the absence of alternative non-Russian pipeline sources in the near future. Discounted transmission tariffs for these routes should apply exclusively to certified non-Russian gas destined for Ukraine—an achievable goal for both transmission system operators and traders.
• Extending Preferential Tariffs to Affected Countries: Since halting Russian gas imports would affect countries beyond Ukraine, these states should also benefit from preferential transmission tariffs along the Vertical Gas Corridor. Given the strained relations between Ukraine, Slovakia, and Hungary, the European Commission must take the lead. LNG will likely continue arriving mainly at terminals in Greece and Turkey, so countries along the transit routes to “landlocked” markets—especially war-stricken Ukraine—should gain access to these volumes under a “Ukraine first refusal” principle.
• The Case for an Anti-Dumping Investigation There is substantial evidence that Gazprom’s price discounts are often arbitrary and politically motivated. This alone should have prompted the European Commission’s DG Trade—specifically its Anti-Dumping and Anti-Subsidy Directorate—to launch an investigation long ago. Gazprom’s pricing strategy is not driven by market forces; it is shaped by state-level political decisions. Contract prices for Russian gas are often set through intergovernmental agreements, meaning market mechanisms alone cannot correct the distortions caused by such dumping practices. An anti-dumping investigation could provide a legal basis for imposing an additional tax on Russian gas imports, both to restore fair competition and to prevent politically priced Russian gas from undermining the EU market.

A Realistic Pricing Model for U.S. LNG

A realistic delivery price for U.S. LNG to a European terminal, based on the Henry Hub-plus formula and using market data for September 11–12, 2025, could look as follows (starting with a Henry Hub price of $3/MMBtu):

• Additional cost to reach from well-head to US export terminal (long-haul pipeline + terminal fees): $0.80/MMBtu
• Liquefaction: $2.80/MMBtu
• Shipping to Europe: $1.00/MMBtu
• Regasification: $0.60/MMBtu
• Commercial margins, insurance, and profits: $1.00/MMBtu

Total: $9.2/MMBtu, or about €28.9/MWh (at an exchange rate of 1 USD = 0.91 EUR). Currently, the lowest gas price in the EU is around €32/MWh.

Crucially, in long-term contracts, the Henry Hub price (about €9/MWh in this case) is the only major variable; all other cost components are relatively stable. Since September 2023, the Henry Hub-plus price has not exceeded the TTF price—and the fundamentals are unlikely to change.

Market Fragmentation and Capacity Constraints

Southeast Europe (SEE) remains the most fragmented segment of the EU gas market. It includes a mix of EU and non-EU states and companies, each pursuing different agendas and strategies, which has allowed Russian gas to dominate the region.

• Fragmented Market and Small Buyers
The highly fragmented structure of the SEE gas market, dominated by small buyers, limits transaction scalability—including for Ukraine. The EU’s shift away from long-term LNG contracts under its climate policy has weakened value-chain optimization and created reliance on large demand aggregators like Shell, BP, ExxonMobil, and Total. These companies naturally benefit from price differentials between U.S. and European hubs, often making U.S. LNG uncompetitive when benchmarked against TTF-indexed prices.

• High and Fragmented Transmission Tariffs
Until recently, LNG access to Ukraine was obstructed by fragmented and prohibitively high transmission tariffs across multiple Southeast European network operators. This issue is now being addressed through the gradual integration and reduction of tariffs along the three routes of the Vertical Gas Corridor. By contrast, Russian gas exporters have long benefited from preferential long-term transmission terms. For example, Gazexport pays significantly less to transit gas through TurkStream to Hungary than LNG traders have had to pay to deliver gas to Ukraine. A trader booking annual regulated capacity from Strandzha (on the Turkish border) to Horgoš (entry to the Hungarian system) via Bulgaria and Serbia—a route of roughly 1,010 km—would pay about €10/MWh per year. Yet, sending gas to Ukraine via Strandzha → Trans-Balkan reverse → Isaccea → Orlivka—a much shorter route of about 480 km—would cost around €11/MWh per year.

• Capacity Constraints and Infrastructure Bottlenecks
Russian gas enjoys 15 bcm/y of guaranteed capacity to reach Serbia and Hungary, while the main southern route to Ukraine relies on reverse flows through the Trans-Balkan Pipeline. A critical bottleneck remains: the original Trans-Balkan segment between CS Strandzha and CS Nova Provadia is now used by TurkStream, blocking onward flows to Ukraine. The obvious solution—constructing a bypass between Rupcha and Vetrino—has been conspicuously delayed. Instead, Bulgartransgaz has focused on less critical projects, such as expanding entry capacity at Sidirokastro–Kulata and Kresna, despite ample unused capacity there and on the Greece–Bulgaria interconnector. This pattern suggests intentional obstruction: the same actors who built TurkStream for Gazexport appear to be deliberately slowing the activation of full reverse capacity on the Trans-Balkan line, thereby prolonging Gazprom’s regional dominance.

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The Way Forward: A Transatlantic Agreement

The most viable path forward is direct engagement by the European Commission to negotiate a transatlantic framework agreement, under its auspices, for large-scale U.S. LNG deliveries to the SEE and CEE region—the last remaining area heavily exposed to Russian gas.

Such an agreement would prioritize Ukraine, while also including Moldova and other countries affected by the cessation of Russian gas supplies to the EU. Crucially, it would ensure U.S. LNG is priced no higher than fairly market-priced Russian gas based on the Henry Hub–plus formula. While this might disrupt certain brokerage schemes and financial flows—such as those benefiting Viktor Orbán—these are of minor consequence. TurkStream itself could even be repurposed to carry non-Russian gas, helping transmission operators avoid revenue collapse in the event of an EU ban on Russian imports.

Challenges to Implementation

This approach faces several obstacles:

• Opposition from Energy Companies: Major energy firms profiting from Henry Hub–TTF arbitrage are likely to resist, joined by some U.S. suppliers benefiting from the current system.
• Obstruction from TurkStream Allies: Politicians and businesses tied to Russian gas contracts will push back to protect their gains.
• Market Dynamics: Without a transatlantic framework, Russian gas will continue slipping into the EU via traders exploiting dumped prices, as current rules cannot prevent them from doing so.

Pilot Opportunity for Ukraine

A practical first step would be to test this EU–U.S. framework in Ukraine this winter to secure its energy needs. By removing the structural and political barriers outlined above, U.S. and other non-Russian LNG could outcompete Russian gas—not only through political will but through functioning market mechanisms—strengthening energy security in Ukraine and across Southeast Europe.

Ilian Vassilev