Vladimir Putin’s warmongering in Ukraine has laid bare the strategic costs of Europe’s energy dependence on Russia. While the EU and other western powers have hit Moscow with unprecedented and devastating sanctions, they have pulled their punches in the energy sector so that oil and gas can continue to flow from Russia to western power plants and refineries. The problem, of course, is that hard currency keeps flowing the other way.
While the US, too, is loath to see oil prices rise further, the EU is in a special position. More than one-third of its oil imports and 40 per cent of its gas imports come from Russia. It missed an opportunity to reduce this dependence after Putin first invaded Ukraine in 2014; if anything, energy imports from Russia rose in that period to substitute for the decline in coal use and Germany’s turn away from nuclear energy. This mistake was worse than mere negligence. The then German chancellor Angela Merkel oversaw the construction launch of the Nord Stream 2 pipeline in 2018, actively helping Putin gain a strategic advantage. It took last week’s aggression by Moscow for her successor to suspend the certification of the already-completed pipeline.
In addition, European countries let their stored gas reserves sink to below-average levels this winter. In hindsight, some of this was Moscow’s doing; according to the IEA, Russia’s giant state gas producer Gazprom owns 10 per cent of the EU’s gas storage capacity but accounts for half of the shortfall from storage levels in an average year.
Europe must now urgently find stop-gap solutions to substitute for Russian gas in the event that Putin cuts off energy supplies in response to sanctions and Europe’s laudable support for Ukraine. Even if this could be ruled out – which it cannot – the EU should in any case put itself in a position to embargo Russia’s oil and gas sales should this be judged the best way to increase pressure on the Kremlin.
Doing without Russian gas is difficult. But it is not impossible. Spring is on the way, some additional liquefied natural gas can be purchased on world markets, and both fossil and nuclear power generation can be rolled back into service. Energy conservation measures can take demand down to manageable levels. Oil is less of a challenge given the depth of global oil markets and larger European reserves.
Still, a meaningful reduction in Europe’s energy dependence on Russia would come at a high price, economic and political. Macroeconomic policy must be adapted to a potentially worsening negative supply shock. EU countries must agree on ways to compensate those most exposed to higher energy prices, both within and between countries. A unified approach to a common challenge necessitates support for countries with the highest share of Russian gas in their energy mix, and co-ordinated efforts to address bottlenecks in gas distribution and electricity transmission across the continent.
In the longer run, strategic concerns fortunately dovetail with the EU’s decarbonisation goals. Instead of heeding calls to renew fossil-fuel extraction in Europe – projects that would take time to build but cement dirty energy infrastructure for decades – accelerating the growth in both generation and transmission capacity of carbon-free energy is essential. So are greater incentives for carbon and energy efficiency by consumers and businesses. The legitimate place of nuclear in Europe’s energy mix should now be put beyond doubt.
In the words of German finance minister Christian Lindner, carbon-free energy is the energy of Europe’s freedom. The time to invest in it is now.