This article examines European concerns about Russian gas shortages, including how a European Union pledge to cut its consumption will affect Russia’s dependence on the commodity. It also considers the damage to Gazprom’s reputation, and the EU’s efforts to secure alternatives. Despite the European Commission’s commitment to reducing consumption, the Russian gas crisis has already caused a great deal of concern among citizens and policymakers.
Russia’s dependence on russian gas
The current European gas crisis was exacerbated by Russia’s refusal to transit more gas through Ukraine. This decision by Moscow sent shockwaves through Europe, and the impact of the gas shortage has even spread to faraway countries such as Ukraine and Poland. Critics of Russian gas exports claim that the country is weaponizing its supplies and blackmailing EU and German officials into approving the Nord Stream 2 pipeline.
The Kremlin’s overplaying of its cards may actually be an opportunity for the Ukrainian government. The European Union may take Ukraine’s concerns more seriously in the future if Putin continues to exploit the current gas shortage to exert political pressure. But it’s too late for that. This crisis may be a precursor to a future energy crisis. This article was co-authored by Dr. Aura Sabadus, a senior energy journalist covering Eastern Europe, Turkey, and Ukraine for the independent commodity intelligence services. Follow her on Twitter at @ASabadus.
While Europe’s dependence on Russian gas is not as great as some may fear, some countries are already preparing for the consequences of such a shortage. Bulgaria, for example, depends on Russia for nearly seventy percent of its gas supplies, and the government is taking steps to secure alternate sources. The government of Bulgaria has also begun building a pipeline to Greece. Although it hasn’t yet imposed any restrictions on its gas consumption, an interruption of Russian gas supplies could be catastrophic for the European economy.
Europe must act to protect itself against this crisis. Developing alternative routes to Russia is the only way to guarantee energy security for the European Union. The EU should work with partners on a new European energy strategy that takes into account the interests of all member states, as well as the EU’s climate goals. There are no easy answers to these questions. The first step is to understand the Russian motives behind Russia’s recent gas shortages.
EU’s efforts to secure alternatives
Europe’s goal to significantly diversify away from Russian gas is difficult, but not impossible, in the short to medium term. Despite the prospects of the Middle East and Caspian regions, much depends on the political will of others, as well as Europe’s ability to speak out in its own voice. Please note that the European Council on Foreign Relations (ECFR) does not take a collective position, and that each individual author’s view may differ from others.
Several countries have been stepping up their efforts to secure alternatives to Russian gas. One example of such an effort is a campaign to increase energy efficiency. Energy conservation measures could reduce gas demand in households. In addition to increasing the energy efficiency of buildings, the EU should take advantage of the high potential of renewable and low-carbon energy sources like LNG. But this will require a significant investment of time and money.
A concerted effort across multiple sectors and a sustained international dialogue on energy markets and security are required to make progress. Europe’s decisions and actions are strongly tied to global market balances. To successfully implement these measures, the EU needs to increase its capacity to import US liquefied natural gas. This will require global diplomacy and increased import capacity. A strong international dialogue and clear communication is essential.
The European Commission is pursuing a legal framework to secure alternative supplies of natural gas. A regulation introduced in 2017 requires member states to make arrangements for’solidarity gas’. Germany and Austria have already made legal arrangements for this type of assistance. The European Commission continues to investigate the market for gas and the alleged distortions of competition among gas operators. In the meantime, the Commission continues to assess the impact on consumers and the environment of European nations.
Gazprom’s reputational damage
While western European countries have shrugged off the bad reputation of Gazprom over the past few years, their overdependence on Russian gas has led to the current situation. Germany, for example, gets half of its fuel from Russia and is reliant on Gazprom for its gas supply. Former Eastern bloc countries, however, have no illusions about Gazprom and are more directly exposed to their gas supply.
The recent dispute has further complicated the situation for the Russian gas giant. While Europeans have long complained about Gazprom’s high prices and unreliability, the latest development is likely to put pressure on EU member states to accept the Nord Stream 2 pipeline. Meanwhile, record energy prices in Europe may encourage EU states to reduce their reliance on Russian gas. However, this is unlikely to happen overnight.
While Europe has a long-standing dependency on Russian gas, it has been a major source of conflict in recent years. Before the war, the EU imported 40 percent of its gas. By the end of this year, the EU expects its gas imports to fall to only thirteen percent. It hopes to phase out Russian gas altogether by 2027. For the moment, Europe is filling underground storage reservoirs earlier than before and expanding LNG handling facilities.
The Russian invasion of Ukraine has multi-level implications for the gas industry. While Russian military activity has not led to a major reduction in gas supplies to Europe, it has forced Gazprom to increase the transit through Ukraine. It also resumed capacity booking on the Yamal-Europe gas pipeline. Meanwhile, the price of natural gas in Europe has soared tenfold compared to a year ago.
EU’s pledge to reduce consumption
As the world continues to shift away from fossil fuels, the EU pledged this year to cut its consumption of Russian gas by two-thirds. The bloc pledged to boost renewable energy and import more gas from other sources. The White House and the European Commission said it could be achieved through energy efficiency measures like smart thermostats and heat pumps. The EU estimates that it will save about 15.5 billion cubic metres of gas in the next year, and by 2030 it hopes to eliminate the need for nearly half of that amount.
The EU’s commitment is a positive step, as it signals its commitment to phase out Russian gas imports and bolster renewable energy sources in Europe. While renewable energy sources will cost more, politicians will probably be tempted to opt for cheap and abundant Russian gas. While Russian gas may seem attractive in the short term, it is a risky option. EU members considering the phase out of nuclear power should reconsider their decision until affordable alternatives become available.
Besides investing in alternative sources of gas, the EU can also cut its dependence on Russian gas by using energy efficiency measures. Many countries within the EU rely on hydrocarbons for power generation, so any move to reduce regional gas consumption would not only help the region’s economy, but would also ensure more gas supplies from other sources. Even if the EU were to buy more gas from Russia, it would have to construct new pipelines to move it. Those pipelines could take many years to design, build, and operate.
The future of Russia’s economy is unclear. While gas and oil are essential for the EU’s energy needs, the future of the Eurasian gas market is unclear. Despite the EU’s pledge to reduce its consumption of Russian gas, Russia may still be able to provide up to 12% of the EU’s energy needs in the next two decades. While oil will almost certainly generate huge revenues and favorable trade balances for Russia, it will not be the source of political leverage as gas is.
IEA analysis on russian gas shortages
A new report by the International Energy Agency (IEA) highlights the impact of Russia’s lack of supply on the European market. The report shows that as of September 2021, Russia’s gas supplies to the EU market had dropped by more than 25% year-on-year and that, as a result, European storage facilities were under full capacity. Similarly, the first seven weeks of 2022 saw a 37% drop in Russian pipeline supplies to the EU. Furthermore, Germany’s last gas pipeline deliveries via the YAMAL pipeline occurred on 20 December 2021.
The IEA’s assessment of the situation has been accompanied by an official statement expressing its solidarity with Ukraine. The organization’s Governing Board met on 1 March 2022 and expressed its solidarity with the newly elected government of Ukraine in the face of Russia’s violations of Ukraine’s sovereignty and territorial integrity. This is a troubling sign for Europe, which relies on Russian gas for 40 percent of its energy needs.
The IEA has concluded that the European Union needs to reduce its dependence on Russian gas by one-third in the next year. While a reduction of this magnitude would be a substantial feat, the EU should also implement the European Green Deal as early as possible to reduce its energy dependency on Russia. The proposed European Union should be able to reduce its reliance on Russian gas by up to one-third by 2025, even without new infrastructure.
