Firstly, we need to be prepared for North Stream -2 to be built. Russian gas will become bigger in Europe. As a result, the alliance between Russia and Germany will intensify. Only a sufficient amount of U.S. gas and strong partners can maintain a democratic balance on the European continent. These are Ukraine and Poland.
Secondly, gas transit through the Ukrainian route may be stopped in January 2020. This situation will have negative consequences for both Ukraine and the EU.
The situation in Europe. When stopping the Ukrainian route, it will be necessary to search for new sources of supply of 7.3 billion cubic meters of natural gas per month. The capacity of the infrastructure will allow to сoveronly 6.0 billion cubic meters. These are new markets for U.S. and Norwegian gas sales.
Europeans gas shortages will drive prices up to 20%, including for the U.S. LNG. The uncovered deficit will be 1.3 billion cubic meters per month. It will be most noticeable in the markets of Italy, Turkey and the Balkan countries. Price rises and deficits will lead to higher gas costs at European hubs.
Then the price of electricity and coal will increase. EU consumers will have to pay an extra €7 billion in the first quarter of 2020. The price situation will stabilize after six months, or earlier, that provided Russian gas supplies are resumed through Ukrainian route.
The situation in Ukraine. After the transit stop, new gas flows to Ukraine should be opened. Otherwise, Russia will strengthen its influence on Ukraine. The main focus is on cooperation with Poland. Since this country has an LNG terminal and will connect to Norwegian gas in the future.
Our strategic proposal. Ukraine with partners need to create an Eastern European gas hub in Ukraine. It will become a tool for influencing the European gas market. Ukrainian gas storage facilities should become a reserve for U.S. and Norwegian gas in Europe. This will allow us to regulate prices in the European market. We propose to compete with German and Austrian hubs that sell Russian gas. This proposal is a strong element of the energy security of Ukraine, democratic Europe and the USA.
What is energy security for Ukraine? This is one of the main guarantors of our state's independence. We must be strong because we have a great potential for strategic cooperation.
This is to support civilized rules on the European continent.