Ask any European company whether they’d be prepared to buy Russian gas or oil and you’d get a look of horror followed by outright denial.

Ask them whether they’d buy gas or oil that may be Russian, but sold under a different label, and you’d learn they’re already in talks to buy it.

As with the Emperor’s new clothes, what matters is the fairy story used to disguise the deals now being arranged to sell cheap Russian gas and oil on lucrative European markets. 

Since Russia launched its full-scale invasion of Ukraine in February 2022, it has lost most of its European market share either because of EU sanctions on oil exports or self-inflicted harm, like cutting gas supplies in failed attempts to undermine Western support for Kyiv.

The Kremlin’s efforts to launch big-ticket projects such as a new pipeline to China or scale up the output of liquefied natural gas (LNG) to rebalance its precarious financial situation have so far failed.

Nevertheless, oil and gas are hard to block and continue to leak through the Western sanctions regime — as long as there are cheap products to sell and willing buyers to open (back)doors, anything is possible. Remember gas molecules and crude oil don’t come with a national flag attached. They’re mostly origin-neutral.

Options abound.

Since the invasion of Ukraine, Turkey has been repeatedly singled out as a “pitstop” to camouflage Russian oil exports, helping Moscow to evade sanctions and sell the crude on international markets.

With the scheme working rather well, there is no reason not to replicate it elsewhere.

For more than a year, Turkey has been ramping up gas exports to Europe.

The sheer volume combined with a reported discounted sale price makes it difficult for alternative supplies to compete.

With Turkey importing gas from many sources including Russia, Azerbaijan, and Iran, as well as global LNG, it’s easy to hide the real origin of gas, even though, apart from Russia, hardly any other producer could beat Gazprom’s markdowns.

In recent weeks, Turkey’s energy minister has been busy announcing a flurry of new LNG deals with respectable international oil companies.

These may be needed to replace one of the country’s expiring long-term supply contracts with Russia.

They may also help Ankara extend that agreement, while also disguising the Russian gas in an emerging Turkish “blend” of sources.

A little further to the east, Turkey’s long-standing partner, Azerbaijan, is also keen to open backdoors.

Its oil and gas production may be limited but that doesn’t stop it from offering a myriad of opportunities.

President Ilham Aliyev is now courted by the Ukrainian and Russian presidents alike, as the country is offering to transit gas to Europe via Ukraine, once the current Russian agreement expires on January 1.

Azerbaijan’s annual production of 48billion cubic meters (bcm) met external and domestic demand amounting to around 40bcm in 2023.

While Azerbaijan could burnish its green credentials ahead of the COP29 summit in Baku in November, by promising to reduce flaring, it’s doubtful the spare volumes it could monetize would be sufficient to meet Ukraine’s minimum transit needs expected at 10-12bcm annually.

But that doesn’t matter to those keen to peddle the fairy story that Ukraine will transit Azerbaijani gas.

In fact, the market is so hooked on the cheap supplies now on offer that in September, when Ukrainian and international media outlets erroneously reported that Ukraine had agreed to the transit deal with Azerbaijan, gas prices fell 10% immediately.

The articles were retracted but companies are convinced Ukraine will sign the deal, even though, in private, many admit the gas will be of Russian origin, just sold under a different label.

They may have a point.

Earlier this summer, Ukraine introduced sanctions against Russian oil transiting its territory. It was merely a stratagem, as it later turned out.

Sanctions targeted Russia’s Lukoil but Russian oil continues to flow unhindered, albeit under a different name.

An agreement was reached for Lukoil to sell the crude to Hungary’s MOL which takes gas on the Belarusian-Ukrainian border before sending it onto other parts of Europe.

It would not be surprising if MOL also put in a guest appearance in a prospective gas transit deal.

As in the oil transit case, it could buy gas on Ukraine’s borders with Russia or Belarus and ship it to Europe via Ukraine.

In fact, MOL may well be a strong candidate to do so, providing an extra layer of credibility to the story that Ukraine transits Azerbaijani gas to Europe.

The company is now one of the biggest players in Azerbaijan’s upstream activities, signing a deal this month to develop gas reserves.

To boost its position, it may see its path cross with Lukoil once again.

The Russian private oil producer holds a 19.99% share in Azerbaijan’s Shah Deniz offshore gas project.

Since Lukoil’s fortunes seem to be changing, being sanctioned in Ukraine and facing headwinds for its Bulgarian refining operations, it would make some sense for it to pull the plug on its share in Azerbaijan’s Shah Deniz offshore gas project and sell it to MOL.

MOL’s successful expansion spree may be a testament to its business acumen but Hungary’s close Kremlin ties will also have helped.

With Brussels seemingly reluctant to batten down the hatches, Russia’s options to return to European markets are varied and abundant.

The only obstacle would be, ironically, its very reliance on others to open backdoors. Splitting the spoils with too many sidekicks may not prove that profitable, after all.

Dr. Aura Sabadus is a Non-resident Senior Fellow with the Democratic Resilience Program at the Center for European Policy Analysis. She works as a journalist specializing in European energy markets for the London-based Independent Commodity Intelligence Service (ICIS). Twitter: @ASabadus.

Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.