Sat. Jun 15th, 2024

Europe’s Russian energy dilemma – Foreign Policy

European Commission President Ursula von der Leyen gestures as she speaks during a debate on the conclusions of the European Council meeting regarding Russian invasion of Ukraine during a plenary session at the European Parliament in Strasbourg, eastern France, on April 6, 2022. – EU leaders on April 6, 2022 said the bloc will soon have to sanction all of Russia’s hydrocarbon exports as they blamed Moscow for “war crimes” discovered in Ukraine, especially in the town of Bucha. (Photo by Frederick FLORIN / AFP) (Photo by FREDERICK FLORIN/AFP via Getty Images)

European Commission President Ursula von der Leyen and EU foreign policy chief Josep Borrell travel to Ukraine today alongside Slovak Prime Minister Eduard Heger, the highest profile delegation to visit the war-torn country since Russia’s invasion.

Their visit comes as Europe weighs further sanctions on Russia following reports of atrocities committed by Russian soldiers in the town of Bucha, near the Ukrainian capital Kyiv.

After focusing on Russian banks, oligarchs, and others close to the Kremlin’s inner circle, EU leaders are now considering even more drastic options: Banning Russian imports of coal, oil, and gas.

The economic pain of such a move would not just be felt in Russia—which gains as much as $1 billion per day from Europe’s energy purchases—but across Europe and the wider world, with an energy crunch spurring higher prices, a return to rationing, and a possible recession.

How much pain a European embargo (or a Russian cutoff) would cause on the continent is unclear, and depends on what kinds of energy Europe decides to block.

As Martin Wolf writes in the Financial Times, economists differ on the potential impact of a gas embargo, with the GDP of Germany, which imported 58 percent of its gas from Russia in 2020, expected to decline by as little as 0.2 percent or as much as 6 percent.

That uncertainty partially explains why European leaders have so far opted for the safest option: Banning Russian coal. Although coal is not a major part of Europe’s energy mix, the move would deprive Russia of roughly $4.3 billion in annual revenues. It’s also less likely to upset supplies, as the United States, Colombia, and South Africa could make up for the shortfall, according to a German industry group representing companies that rely on coal imports.

There’s also a strategic element, as Henning Gloystein of the Eurasia Group explained to NPR, with leaders worrying that going too big too soon may exhaust their options: “The big gun in Europe would be gas. And that is … sort of the last bullet they want to have in their sanction gun to be able to fire at Russia if things get really seriously worse from here.”

But that doesn’t mean Europe isn’t preparing for a future without Russian gas. It plans to dramatically increase imports of liquefied natural gas (LNG) from other suppliers, like the United States and Australia, to make up for the shortfall. The volume of new imports needed is roughly equal to the entire annual demand of South Korea. It’s an apt comparison, seeing as European importers would also need to outbid their Asian counterparts, contributing to higher prices overall and possible supply shortages in the countries that lose out on imports.

As Bloomberg reports, the race for gas could price India, Bangladesh, and Thailand out of the market, a phenomenon already taking place in Pakistan.

Nikos Tsafos, writing in Euractiv, argues for Europe to approach its gas search carefully: By helping the countries it outbids to develop renewable energy capacities, intervening in the global gas market, and by increasing production on its own territory.

If Europe ever does move on from Russian gas, the Baltic states of Estonia, Latvia, and Lithuania could be the trendsetters. On April 2, the head of Latvia’s natural gas storage operator Conexus Baltic Grid announced that Russian gas is “no longer flowing” to those three countries. Instead, the Baltic states will rely on reserves, a tactic that depends on a warm year ahead to prove successful.

By Chala Dandessa

I am Lecturer, Researcher and Freelancer. I am the founder and Editor at ETHIOPIANS TODAY website. If you have any comment use caalaadd2@gmail.com as email contact. Additionally you can contact us through the contact page of www.ethiopianstoday.com.

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