The escalating Russia-Ukraine tension has caused growing concerns among Western countries. In addition to worries that the two may come to a war, Europe’s energy crisis—which is already a disaster—has also moved into the spotlight.
The EU heavily relies on natural gas imports, with Russia being the largest exporter representing a 43% share, followed by Norway and Algeria. As high as 20% of imported oils also come from Russia, demonstrating its great relevance to the bloc’s energy security, particularly in the situation where natural gas prices have surged in Europe in recent months. In late January, Goldman Sachs warned that the soaring prices “are not necessarily a one-off,” while prices are likely to double in 2025. Further, if low temperatures continue to hit the region in February and March, blackouts are likely to occur.
Similarly, S&P Global Platts warned that any conflicts affecting natural gas supplies in Europe can in turn hit electricity, carbon and coal prices. A few days ago, Ursula von der Leyen , President of the European Commission, said that even if Russia decides to reduce or stop sending gas to the continent, the EU will still be “on the safe side” this winter.
However, if gas supply suspension or termination should happen, the European energy crisis could deteriorate and make household electric bills further go up.
Notably, temporary gas source reduction and long-term gas source shrinkage are completely different scenarios. Simone Tagliapietra, a senior fellow at the European think tank Bruegel, indicated that Europe can get through half a winter without imports from Russia, but running the European economy with the absence of gas supply from the country is an entirely different challenge. Even if there is enough time to get prepared, there is a huge energy gap that the EU must fill.
Since the energy crises in 2006 and 2009, Europe has been strengthening its energy resilience by spending billions of euros on building infrastructure, importing natural gas through LNG terminals, and has recently increased the shares of LNG from other countries such as the US and Qatar. In 2020, the bloc saw a 9% drop of gas imports from Russia.
As Bruegel reported, an additional weekly capacity of 17TWh can be added thanks to gas imports from Norway, North Africa, and Azerbaijan, which are nearly an equivalent to the supply from Russia. Nevertheless, Tagliapietra believed that fully substituting Russia’s share can be extremely costly, if not impossible.
Tagliapietra added that if an extreme cold wave hits Europe in February and that Russia stops providing gases, the EU’s gas storage will become empty by late March.
As a geopolitical intersection between the West and Russia, Ukraine used to be a crucial player of Europe’s energy system. In the 1990s, natural gases were transported from Russia to the continent through Ukraine. Later on, however, alternative pipelines were established, namely Yamal-Europe (from Russia through Belarus to Portland and Germany), TurkStream (from Russia to Turkey), Blue Stream and Nord Stream 1 (from Russia to Germany, with Nord Stream 2 awaiting approval). Consequently, the natural gas imports going through Ukraine dropped by 70% between 1998 and 2021.
For now, Western countries might regard the pending review on Nord Stream 2 as a countermeasure. On January 27, the US and German officials both indicated that sanctions against the pipeline will be imposed if Russia invades Ukraine.
(Credit of the first image: Flickr/Ian Richardson CC BY 2.0)