Author: Prachi Lokhande, Research Associate, CAPS
Keywords: European Union, EU, Energy, Natural Gas, Russia.
The European Union (EU) is currently facing a major energy crunch. Having faced an exceptionally long, cold winter last year, EU has entered this year with unnaturally low storage of gas. Other factors that have contributed to EU’s energy problems include a drop in Russian supply, truncated domestic production, increased Asian demand and the issue of maintenance of French nuclear reactors. This has left EU to face a problem that not many had anticipated. With scepticism surrounding Russian troop withdrawal from the Ukrainian border, the impending geopolitical crisis has huge implications for EU’s energy security. Given the possibility of a major Russian offensive in Ukraine, EU’s dependence on Russian energy is alarming and has set EU to scramble for alternatives.
Russia is an energy leviathan. It ranks second and third in the world’s production of natural gas and oil, respectively. 35% of Europe’s natural gas comes from Russia. According to Eurostat, Russia remained the largest supplier of oil and natural gas to EU in 2021. The bulk of the natural gas supply comes through pipelines, namely Nord Stream directly to Germany, Yamal through Belarus and Poland to Germany, Druzba oil pipeline to Czechia and Hungary, Blue Stream and Turk Stream to Turkey. Not all countries in Europe get a direct supply from Russia. Europe’s gas markets are internally well connected as an effect of Russia’s energy disruption post 2009 and Crimean annexation in 2014. In 2019, more than 60 percent of imports from Russia were energy products. In 2020, Europe imported 167.7 billion cubic metres of natural gas from Russia of which, Germany bought the most, accounting for 56.3 billion cubic metres followed by Italy, with 19.7 billion, and the Netherlands, with 11.2 billion cubic metres. According to Eurostat, in 2019, EU’s dependency rate was equal to 61 percent, which means that more than half of EU’s energy needs were met by net imports. Russia, being the main supplier of crude oil, natural gas and solid fossil fuels, is now dictating EU’s energy discourse and constantly reminds EU of its dependence on it.
Two situations could emerge from the above scenario. First, as a part of the greater west coalition against Russia, EU could take a hard military stand against the threat over Ukraine. This would have a direct impact on the energy issues in EU. Russia could sever its supply of energy in the face of a military standoff or imposed sanctions. Germany is the largest importer of oil from Russia thus giving it a priority in energy discussions with Russia. The controversial Nord Stream 2 project was completed in late 2021 but is not yet operational. Therefore, Germany has put forth the discussion about the continuation of Nord Stream 2. The pipeline is a joint project involving a consortium of Russian, German, Dutch, and French energy companies. If allowed to become operational, it will be able to pump 55 billion cubic metres of gas into Germany each year. The European consortium could either give permission for its full functionality, consequently giving Russia the ability to continue its weaponization of energy; it could also reject the project to show its anger. But this would also mean losing the project’s deterrent value.
Second, EU could recognize and renegotiate the perimeter that Russia seeks and give in to the demands of Russia and its territorial aspirations in eastern Europe. This would likely set off a chain of events resulting in Russian impunity. Russia could use its energy dominance to further its political goals, wherein the crisis could go beyond Ukraine. Looking back, Russia has reduced its supply volume to the EU since the latter half of that year. Russia is all set to weaponize EU’s dependency on itself.
What is EU’s plan of action in such a crisis? EU has a three-step plan to avert the possibility of reaching a critically low level of gas supplies. The first two steps involve a voluntary reduction in consumption and the provision of alternate LNG supplies. EU and USA are jointly working towards a continued, adequate, and timely supply of natural gas from different sources around the globe to avoid supply shock. US is already EU’s largest natural gas provider, and in the face of such crisis there is only so much that the US could provide. US and EU have reached out to Qatar to consider the possibility of diverting gas supplies from Asia to EU in case of an escalation of the crisis. The third step would have to be invoked in case of an emergency and could involve potential blackouts. In such a case, the priority would be to supply households with electricity since this receives legal protection under EU laws. Also, non-commercial industrial estates have already agreed to a voluntary cut back on gas usage.
A sanguine view of the situation would call it mildly problematic as it is highly unlikely that Russia would abruptly cut its supply through Ukraine to EU. Such an act would have mutual repercussions. By brusquely halting its supply, Russia would have to look for other, more substantial outlets for its gas consumption. Recently, Russia has agreed to a thirty-year supply contract to China via a new pipeline, which would bolster an energy alliance with Beijing amid the emerging issue in Russia-Europe geopolitical space. In the long run, this would increase Russian dependence on China and would not be conducive to Russia’s growing ambitions in Asian geopolitics.
EU’s green deal, launched in 2019, enunciates its plan for a carbon-neutral EU by 2050. This is envisaged through a framework of legislation and regulation aiming at a 50-55 percent cut in greenhouse gas emissions by 2030 compared with 1990 level. This is to be undertaken by slowly phasing out EU’s dependence on fossil fuels by eliminating the use of coal by 2030 and of oil and gas by 2050; an increased contribution from renewable energy sources is expected to complement these moves. Highly ambitious as it is, the current energy scenario does not support EU’s claim to carbon neutrality. In 2019, EU imported 320 billion euros worth of energy products. In the subsequent years, it stood second in global crude oil imports. While EU moves towards an ambitious embrace of carbon neutrality, its dependence on imports could hurt its energy security. EU urgently needs to reconfigure its energy security policies. The current trajectory of the international system points to an increase in the problems faced by EU as its energy policy moves towards an uncertain future.
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