I am wondering if it may be likely that Russia is just bluffing in regards to an invasion of Ukraine in order to keep the price of liquefied natural gas (LNG) high so that it will continue to profit from the sale of LNG to European nations during the winter months.

Russia is the world's second largest producer of LNG and it must be raking in a lot of money with the price of LNG being high at the present moment. The way I see it is that the price of LNG will likely remain high as long as Russia continues to publicly threaten to invade Ukraine which has the negative effect of unsettling the worldwide LNG market.

I am thinking that Russian troops will likely remain on the border with Ukraine until the Springtime when higher temperatures will decrease the demand for Russian LNG, and with the loss of the high profits from LNG sales, it will become too expensive for Russia to keep 100,000 troops and equipment stationed on the border with Ukraine.

Could Russia be bluffing on an invasion of Ukraine in order to keep profiting from the high price of liquified natural gas?

  • Why the vote to close?
    – user57467
    Jan 25, 2022 at 22:35
  • 3
    FYI, it's useful for analysis to differentiate between LNG and natural gas in general. IIRC Russia is 4th place in LNG, after US, Qatar, and Australia. It's also useful to differentiate between producers and exporters. US, for example, is probably the biggest producer, but consumes nearly all production at home. Russia is a massive producer and exporter of natural gas, but mostly by pipeline rather than ship (LNG), therefore it requires more fixed and thus long-term relationships with clients, since the pipes are less flexible (though more efficient) than LNG terminals
    – Pete W
    Jan 26, 2022 at 0:23
  • 1
    I didn't vote to close, but this doesn't seem verifiable to the public. What would you accept as evidence for a "yes" answer, or as evidence for a "no" answer?
    – Allure
    Jan 26, 2022 at 3:05
  • 2
    @user57467 There are other reasons that they could decide to not invade then this reason
    – Joe W
    Jan 26, 2022 at 3:48
  • 3
    @user57467 yeah, but it's not verifiable. Suppose I write an answer saying "yes, Russia is bluffing to drive up LNG prices". How would I prove it? I can't read the minds of the Russian government. But if I write "no, Russia is [something else]" (this is what they say they are doing) how would I prove the LNG hypothesis is wrong? It's just not possible. I think I will vote to close as not verifiable to the public. I will not, however, downvote.
    – Allure
    Jan 26, 2022 at 4:12

2 Answers 2


It is possible, but hard to prove (making this an iffy question for this site - I did not downvote however) and also pretty unlikely as a primary motivation:

The Economist had this to say, in How will Europe cope if Russia cuts off its gas?:

Without a war, JPMorgan Chase, a bank, forecasts that higher prices will lead to Gazprom making over $90bn in gross operating profit this year, up from $20bn in 2019.

but also:

That is an unpleasant prospect. But a bigger price would be paid by Russia over the longer term. One industry source notes that Gazprom would be likely to face “massive” commercial fallout, ranging from penalties payable to customers to a halt in dollars flowing to Russia for contract payments. Gazprom would find it difficult to secure any long-term contracts in Europe after such a display of aggressive unreliability. And the Nord Stream 2 pipeline so cherished by Mr Putin would surely bite the dust. A shutdown might even persuade China, now cautiously importing more Russian gas, that its long-standing concerns about Russian reliability are well founded.

As Mr Victor argues, such a brazen use of the energy weapon would probably lead Europe to try much harder to cut its dependence on Russian exports of gas “less because they are insecure and more because the revenue…is what funds Russian bad behaviour.” Mr Gustafson puts it pithily: “If Putin wanted to destroy Gazprom’s business in Europe, he couldn’t go about it in better way.”

I'm going to go one further: fossil fuels are quickly falling out of favor due to climate change. No, not today, not next year. Perhaps not even a decade from now. But you might still want to sell while you can. For now, natural gas is claimed to be a green solution, but the science backing that isn't that solid when you count in methane's (same as natural gas) extreme greenhouse effect.

If Russia manages to cut itself from its European gas customers for several years it may not fully recover the lost business before gas demand starts to really fall overall.

So while there is an immediate upside to stoking gas prices, it comes at a risk.

  • although the world is indeed moving towards green energy and converting over to electric vehicles, I have read recently that most of the charging stations for electric vehicles are going to be powered by electrical power plants that use natural gas to generate electricity. So, there will be a demand for natural gas for years to come.
    – user57467
    Jan 25, 2022 at 22:40
  • 2
    And you are not wrong, but it is not a long term solution and it is also gets criticized even as an interim solution. Natural gas is mostly attractive as quick-to-turn-on to provide baseline load backup when intermittent renewables are at a slack. It's "cheap" because the plants don't have to run all the time, but that advantage lessens if too expensive. And, once we know how to work around intermittency, somehow, natural gas loses much of its attraction. Jan 25, 2022 at 22:43
  • additional context to the JPM quote in this answer -- 2019 was a year when European (TTF hub) prices were near their cyclical lows of around $5 / MMBtu. Secondly, some massive expansion projects by Gazprom, starting up new gas fields in East Siberia and pipeline exports to China, have come online since then.
    – Pete W
    Jan 26, 2022 at 2:28

TLDR: No, the cost-benefit wouldn't work out, for reasons that I'll get to in a second. However some other parties to the conflict may, in part, have incentives of the kind the question suggests.

First of all, the vast majority of energy commodities are traded via contracts, usually arranged well ahead of time. The reason to arrange ahead of time is because energy commodities are notorious for both melt-ups and melt-downs, thus both buyer and seller have excellent motivation to reduce the risk profile.

Contracts can be over exchanges, via futures and options (basically highly standardized contracts with very open pricing mechanisms), or in the case of the energy world, quite often via direct contracts between buyers and sellers. The latter fall into several categories when it comes to the pricing scheme : fixed price (often for one-off tenders, i.e. a shipload on such-and-such a date), or in the case of long-term recurring arrangements or pipeline situations, they're quite often hub-indexed (i.e. track a strip of natgas futures on a particular exchange to reflect the buyer's locality), or oil-indexed (same but with energy-equivalent oil index). The hub-indexed and oil-indexed structures effectively introduce a moving-average filter into the price paid, something like order of 6-12 months timescale.

The point of this digression is that the price impact of the currently quite elevated European (TTF hub) natural gas price, has only a limited impact on the actual prices paid for the majority of LNG cargo today.

However, if the situation were to persist over a longer period of time, of course a seller with long-term contracts would eventually cash in.

A final natural gas market technicality is worth mentioning because of the way it affects incentives for the US. Due to limited LNG export capacity, North America's natural gas price zone is effectively isolated from the rest of the world. Thus we have prices in the $3-5 / MMBtu range in North America, while it is, at this moment, around $25 / MMBtu in Europe, and perhaps a little less in East Asia. The interesting dynamic arising from this is that, increases to global LNG demand don't affect North American natural gas price, when the transmission mechanism (export terminals) is maxed out. North American exporters (the owners of the export terminals) see the full swings in global price, but most North American consumers and producers see only a fraction of it.

Aside from that, the common motivational context is that the "benefit" of crisis pricing would go to all sellers of natural gas, not just Russia.

The point here is that if, for example, a significant natural gas exporter such as Norway or Indonesia (to use some neutral examples who to be clear would never do such a thing) were in a position to create a 6-month-long public perception of a crisis that would threaten the energy supply (but not their own), they would then benefit handsomely.

Now for the reasons against the proposition, which are unique to Russia:

First, Russia tends to have a larger share of its sales at fixed-price arrangements compared to some competitors.

Next, in the case of Russia, is the threat of economic sanctions. These are largely at the discretion of the US, who is a rival natural gas exporter, in a position to benefit from a price rise! This is in contrast the EU, Russia's primary natural gas customer, with a long-term relationship fixed by pipelines. Unlike the US, EU is quite prone to negative side effects, should they be forced to cut off their biggest energy supplier. However, the choice may not be theirs -- past experience has showed that US often applies sanctions unilaterally. Moreover, different EU members have different overriding geopolitical priorities (e.g. fear of Russia, or they have an LNG terminal on their territory). This adds up to an environment where Russia is likely to face sanctions if a war breaks out, even if the net effect of the sanctions is more destructive to EU than to Russia.

Next is the Nord Stream II pipeline, although this has arguably already been nearly mooted by strong signals from EU earlier this year that they wish to permanently delay its commissioning. But if there is any hope for Russia of bringing the pipeline into service, it would certainly be killed by a war.

Lastly, Russia enjoys extensive cooperation from European multinationals (think firms like Siemens, but more specialized for building gas terminals and processing plants, oil services and so forth). This cooperation would go away, and their host countries would react to any crisis by attempting to diversify their long-term energy-infrastructure-building partnerships elsewhere - i.e. to the seaborne market via Qatar, Australia, US, or to developing LNG exporters in Africa or South America.

So on the whole, Russia would experience some partial benefit in the portion of its energy exports whose format (LNG vs pipe) or contract terms (hub-indexed) facilitate profit. However, the inconvenience of undercutting its main customer, and potentially creating a crisis that would get out of hand, makes the proposition illogical.

However, it's possible to speculate about other parties, who wish to create some of the negative outcomes, and are in a position to create the perception of an imminent military crisis.

That's not to say it is the primary motivation for any party, but more like if there were to be, say, a vote in a legislature or parliament on a relevant national action coming as a result of the crisis, then legislative members with large energy exporting firms among their major donors, might perhaps see things in a particular way.

Not the answer you're looking for? Browse other questions tagged .