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26th Mar 2023

War in Ukraine seen as watershed for EU gas addiction

  • Russia produces ten percent of global oil and supplies nearly 40 percent of Europe's gas (Photo: www.south-stream.info)
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Western sanctions, while unprecedented, have left the Russian energy exports largely unscathed – raising questions about the EU's willingness to break its addiction to natural gas.

And with prices of gas soaring, and costs for ordinary Europeans a looming political hot potato, there is resistance to making a clean break even though petroleum and oil and gas make up the country's largest export products by value.

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But on Monday (28 February), a number of EU energy ministers called on the rest of the bloc to make the Russian invasion of Ukraine a turning point for the way Europe gets its energy.

Cutting European demand for the coal, oil and gas imported from Russia would be "the best way to take on Vladimir Putin," Irish environment and climate minister Eamon Ryan said ahead of a ministerial meeting in Brussels.

"Our reliance on fossil fuels has cost us dearly," said Ryan, referring both to the EU's Russia-dependence and the climate.

Spanish energy minister Teresa Ribera said reliance on Russia had created "an immense fragility" in the European energy system that required a rapid acceleration of the transition to cleaner — and therefore non-Russian — sources.

Belgian energy minister Tinne van der Straeten echoed that. She noted that the war, despite its scale and unfolding horror, had not disrupted gas flows from Russia to the EU.

The invasion of Ukraine was not only "a watershed moment" for the security architecture of Europe but also for the bloc's energy system, EU energy commissioner Kadri Simson told a press conference.

The invasion "has made our vulnerability painfully clear," said Simons, who added that, in the long term, the best solution was an overhaul of the continent's energy systems under the European Green Deal, which mandates no net emissions of greenhouse gases by 2050.

Financing the war with euros?

Russia's sales of oil and natural gas accounted for about 36 percent of its budget in 2021, totalling over €100bn, according to data released in January by its finance ministry.

Those sales amount to 10 percent of global oil supplies — and 40 percent of Europe's gas demand.

To be sure, the EU and allies like the US are hurting the Russian economy — but they are mostly keeping oil and gas trade flowing in a bid to stave off inflation and volatility in the energy markets.

The EU, US, and their allies agreed on Saturday to cut off a number of Russian banks from the international-payments system SWIFT as a step toward isolating Russia from the international financial system.

Even so, authorities on both sides of the Atlantic are coordinating to spare those banks handling most of the energy flows to limit energy supply disruptions, a senior US administration official told a press briefing on Sunday.

UN secretary-general António Guterres said on Monday that events in Ukraine helped to illustrate how fossil-fuel reliance made the global economy and energy security vulnerable to "geopolitical shocks and crises."

His warning came as the latest report of the UN's Intergovernmental Panel on Climate Change (IPCC) on Monday sounded the alarm on the devastating impacts that climate change — driven by centuries of burning fossil fuels — has had on nature and people.

Hans-Josef Fell, a former member of the German parliament for the Green Party and the founder of the Berlin-based Energy Watch Group, said energy sanctions would be "the only way to really hurt the Russian economy."

A massive expansion of renewable energies would reduce Europe's energy and political dependence on Russia and, he said, finally put an end to "financing the Russian war economy with hundreds of billions of euros."

Analysis

What the Russia conflict might mean for gas prices

In the worst-case scenario gas suppliers wouldn't be able to rebuild their inventories over the summer, industries would have to shut down, and energy rationing may be inevitable.

Russia launches full-scale attack on Ukraine

EU leaders immediately condemned the invasion, with European Commission president Ursula von der Leyen calling on Russia to withdraw its forces and vowing further sanctions.

Russian banks, oil refineries to face EU freeze

Russian banks and oil refineries to be hobbled by new EU sanctions, as civilian deaths mount in Ukraine. US wanted to exclude Russia from SWIFT, but Germany and France favoured incremental approach.

It's not easy being green — and cutting Russian gas

There are growing concerns that the EU's push for alternative gas sources will simply lead to burning the most-polluting sources as Russian gas gets phased out. But the EU climate chief says there should be no taboos.

Opinion

EU's new critical raw materials act could be a recipe for conflict

Solar panels, wind-turbines, electric vehicle batteries and other green technologies require minerals including aluminium, cobalt and lithium — which are mined in some of the most conflict-riven nations on earth, such as the Democratic Republic of Congo, Guinea, and Kazakhstan.

Opinion

How much can we trust Russian opinion polls on the war?

The lack of Russian opposition to the Russo-Ukrainian War is puzzling. The war is going nowhere, Russian casualties are staggering, the economy is in trouble, and living standards are declining, and yet polls indicate that most Russians support the war.

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