What will Europe do if Putin turns off the tap?
Photo credit: https://unsplash.com/s/photos/russia-and-ukrain
A few days ago, on February 22, in a surprisingly swift response to Russia’s recognition of Ukraine’s breakaway regions, German chancellor Olof Schulz put the approval of a crucial gas pipeline, Nordstream 2, on hold. Now, with the conflict in full swing, the markets are already showing signs of an imminent crisis, with gas stocks surging. As Europe prepares for the worst in the coming weeks, it is also faced with a much larger question – one that has been floating around for some time to no avail: are we prepared for the future without Russian energy?
RUSSIAN GAS IN EUROPE
Ukraine itself, a crucial terminal in the past, currently plays a marginal role in the distribution of gas. In the present day, only Slovakia, Italy and Austria use it as a transit corridor. Thus, disruptions of Ukrainian pipelines only, due to possible damages to infrastructure, would be manageable, as all of the potentially affected states enjoy a number of alternative options[1]. However, if the sanction ping-pong continues, the majority of Europe may be affected.
The timing of the conflict is not without significance – and happens to be rather unfortunate. With winter weather still refusing to back down in many places, and the gas price crisis not yet over, a pause in gas flow could prove calamitous for thousands of households. Some European states (Bosnia and Herzegovina, Moldova, Macedonia, Finland and Latvia) rely exclusively or almost exclusively on Russian gas supply. In Germany, Italy and Poland, which are among the EU’s most populous nations, the share of Russian gas exceeds 40%[2].
Playing with the gas tap is, however, a double-edged sword. Russia’s economy heavily relies on European revenue. Can Putin afford to risk it? Unfortunately, his ace in the hole might once again be China. Just a few weeks ago Russian Gazprom finalised a big deal with China National Petroleum Corporation, agreeing on a large-scale supply of 48 billion cubic metres of gas per year[3]. While Europe remains, for the time being, the biggest consumer of Russian gas, it is clear that Putin has long been exploring other options amid rising tensions. Meanwhile, Europe’s efforts towards energy independence, away from Russia, were few and far between.
Nordstream 2 is the prime example of this. Since its conception, the project has been vehemently opposed as part of Germany’s controversial Energiewende plan. Among its fiercest critics were Poland and Ukraine, facing loss of revenue from existing pipelines, as well the US and the UK, which feared it would further tighten Russia’s grip on Europe[4].
The practical rationale behind the Nordstream plan is not without merit. Together with its older brother N1, N2 could provide for more than a quarter of European gas usage. From Russia’s perspective, it would allow it to slowly move away from continental Soviet-built pipelines going through Poland and Ukraine, and thus diminish control the two neighbours hold.
However, it might raise eyebrows whether, soon after the Crimea Crisis, was it ever reasonable to hand Putin the switch to a quarter of Europe’s gas supplies on a golden platter?
ALTERNATIVE OPTIONS
Unsure of Putin’s next steps, Europe could be forced to turn to its [very limited] alternatives. Norway, Europe’s second-biggest exporter, is already producing gas at maximum capacity “and a bit more”, but this cannot replace Russian gas, warned Norwegian Prime Minister, Jonas Gahr Stoere[5].
Mindful of Russia’s capriciousness, Europe hasn’t entirely neglected its search for a backup plan. There already exists a robust system of liquified natural gas (LNG) shipments. The US, LNG’s largest supplier, is ready and able to increase its export to Europe, as already manifested in December during the gas crisis. Detouring cargoes in response to an unexpected crisis has already proven to be palpable in 2011, when Japan shut its nuclear power plants after the Fukushima disaster[6]. But experts warn that this will not prevent prices from rising[7]. Additionally, Europe’s capacity to receive LNG is also limited to a little under 30 terminals[8].
Could the gas conundrum see Europe turn back to coal like the prodigal son? Amid ambitious plans and promises of net-zero, the European Union has quietly increased its coal imports – primarily from Russia, no less – since last year[9]. Yesteryear’s coal powerhouses, Germany and Belgium, alongside the Netherlands, were the biggest importers.
For states like Poland, still heavily relying on their own coal, the crisis could see them take a regrettable step back on the path to green transition. Ultimately the days of European coal mining are numbered due to dwindling resources. Increasing coal import, G7 reassures, is only a short-term solution, paradoxically serving to kick-start new technologies which in turn will “further accelerate the transition away from unabated coal capacity”[10]. However, even such a small bump could put into question Europe’s role as the harbinger of a carbon-free future, just minutes after the COP in Glasgow.
Despite the momentary detour towards coal, the conflict might provide a strong incentive for Europe to speed up its transition to green energy. German Vice-Chancellor, Robert Habeck commented about the need for renewable sources: “it is not only a climate-related issue, but a security-related issue right now”[11]. Simultaneously, nuclear power, which has been on the blacklist of European leaders for quite some time, might be resurrected or, at the least, its life span extended for a while.
IS IT FINALLY TIME FOR THE ENERGY UNION?
Ambitious plans for the EU-wide energy union haven’t moved past the planning stage. How the existence of such a structure would impact the current situation of the energy markets, one is left to wonder. The idea was introduced in 2014 by Donal Tusk, then Prime Minister of Poland, in response to the Russian annexation of Crimea. Now, we are facing an even larger threat from the East – yet the common energy strategy remains grossly underdeveloped.
The European Energy Union promised tight cooperation in a number of areas, among them energy, security and solidarity, particularly relevant in the present day. In the Framework Strategy, inadequate preparation for a major supply disruption was highlighted, along with the need for a build up of minimum stock reserve, the Commission further mused on the possibility of collective gas purchasing in the face of a crisis[12].
The focus of energy cooperation efforts so far has been primarily on delivering the promises of the Green Deal. While green transition is absolutely critical, the security concerns are not going to disappear. A better, more comprehensive energy union game plan should be on top of the Commission’s agenda in the upcoming months.
CONCLUSION
After years of a cat and mouse game with Russia, Europe received a wake-up call, the gravest one we could possibly ever imagine. The gas is still flowing today, but will it tomorrow? Even politicians themselves don’t have an answer to this question. If Putin turns off the tap, Europe’s hands are almost tied. What the EU can, and indeed should do, is take immediate steps to prepare the European energy sector for a more self-sufficient future. Nuclear France, coal-reliant Poland, rogue Germany and Austria, and everyone in between need to find a common ground where energy security plays a fundamental role alongside green transition.
As I write these words, on February 27, early afternoon, Chancellor Scholtz revealed plans to build two additional LNG terminals. The announcement was a direct response to the Russian invasion of Ukraine: “The events of the last few days and weeks have shown us that a responsible, forward-looking energy policy is not only crucial for our economy and our climate. But also crucial for our security”, Scholtz explained [13]. After the Nordstream dilemma, this could be a strong message that German energy policy is beginning to turn westwards, regrettably pushed by the current armed conflict waged by Russia in Ukraine.
References
[3] European Union Agency for Cooperation and Energy Regulators (2020)
[4] Jakub Wiech, Energiewende. Nowe Niemieckie Imperium (Wydawnictwo Defence24 Sp. z o.o. 2019)
[6] ibid
[8] King & Spalding, ‘LNG in 2018. An Overview of LNG import in Europe’ (2018)
[10] Carbis Bay G7 Summit Communique 2021
[11] https://apnews.com/article/russia-ukraine-business-environment-and-nature-europe-only-on-ap-3cbc959bcf128ec130116a5f9e2a60ba
[12] EU Commission, ‘Energy Union Package. A Framework Strategy for a Resilient Energy Union with a Forward-Looking Climate Change Policy’ 2015
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