Tuesday

28th Jun 2022

Ukraine war forcing EU to redouble energy diversification

  • The EU has scrambled for alternative supplies from Norway, Qatar, the United States, Azerbaijan, Egypt and Israel (Photo: nord-stream2.com)
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With war threatening to devastate Ukraine, the European Union is expected to redouble efforts on a key home front — by coming forward with a raft of proposals next week aimed at further diversifying energy supplies.

Ukraine, which is currently the scene of raging battles, is a vital transshipment country for natural gas flowing from Russia to Europe. And even as Europeans continue to deplore the Russian actions in Ukraine, they continue to rely on Russia for around 40 percent of their gas demand.

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Those purchases seem likely to carry on regardless, handing the Kremlin cash to continue its war of aggression in Ukraine.

Each day, Europe is paying around €600m for gas and €350m for oil, according to Simone Tagliapietra of Brussels think tank Bruegel.

Pipelines crisscrossing the country have recently been delivering far more gas compared to before the invasion, Myron Wasylyk, a top advisor at Ukraine's main oil and gas company Naftogaz, told EUobserver on Wednesday (2 March).

Nevertheless, the Russian military presence in eastern regions poses considerable risks at facilities where people have been evacuated or attacked, said Wasylyk.

For those reasons alone the pressure now is on the EU to redouble efforts to break that dependency.

The war had made "painfully clear" that Europe cannot afford to leave its energy security in the hands of Russia, Kadri Simson, the EU energy commissioner, told European lawmakers on Thursday.

Among the most important goals, said Simson, was to raise gas storage levels to 80 percent capacity by September from their current level of 30 percent. That would be "the real challenge," she said.

Although she did not lay out her proposal in detail, Simson said she would come forward next week with a raft of options that include boosting green hydrogen projects and upping investments in renewables.

She also would make it easier for EU governments to spend more on energy without breaking the bloc's anti-subsidy rules.

In addition, Simson's proposals may also allow EU countries to tax windfall profits made by energy companies over recent months, according to Reuters. Governments could then reinvest that money in renewables and energy efficiency projects.

Europe certainly could be doing much more to diversify its energy supplies, the International Energy Agency said on Thursday.

By accelerating the deployment of solar and wind, ramping up energy efficiency and not signing any new contracts with Russia, the EU could reduce its imports of Russian natural gas by 30 percent within a year, the IEA said in a report.

In the short term, LNG has been identified as an alternative solution to Russian gas – with imports reaching a record high in January. About 44 percent of EU LNG now comes from the US, according to Bruegel.

The EU also has scrambled for alternative supplies from Norway, Qatar, the United States, Azerbaijan, Egypt and Israel.

EU lawmakers are calling for yet tougher restrictions on Russian energy imports — and some still want a full embargo. Among them is Andrius Kubilius, a former Lithuanian prime minister.

"My opinion is very clear. We need to introduce a full embargo to energy imports from Russia immediately," said Kubilius.

"Nobody is under any illusions anymore," IEA chief Fatih Birol said, warning that Russia uses gas as "an economic and political weapon."

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.

EU backs gas as 'green' amid energy supply concerns

The European Commission has decided to include gas in its new guidelines for clean and sustainable finance - a move that responds to the bloc's environmental goals and the dramatic rise in energy security concerns.

Agenda

War in Europe and EU summit - next week's agenda

The war on Ukraine will dominate the European Parliament's plenary meeting in Strasbourg too. Estonian prime minister Kaja Kallas will discuss Europe's new security reality with MEPs.

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