Energy

How War in Ukraine affects energy relations between EU and Russia

Tural Sultanli Analysis 21 April 2022
How War in Ukraine affects energy relations between EU and Russia

On March 25 Joint Statement between the United States and European Commission on European Energy Security rose once again debate whether European Union should wean itself on Russia’s energy or not. War in Ukraine is rising pressure on European countries to alter their energy policies with Russia dramatically. Even though European countries well united to cease the Russia aggression, putting embargo on Russian energy resources would not be seen as viable option considering the interdependence between EU and Russia in energy sector.

How can EU divorce Russia?

Breaking the ties with Russia in energy sector may be the hardest decision for some of the EU countries in 21st century. Event though some European leaders showed strong stance in banning Russia’s energy sources, it would not be that easy to put embargo on gas. In the short term, putting ban on gas does not seem as a reliable option for Germany, Italy and eastern European countries which vastly depend on Russia’s gas.

For instance, Germany’s dependence on Russian gas makes the government in Berlin consider every single step before they make catastrophic decisions. As the  Vice-Chancellor and Economic Affairs and Climate Minister of Germany, Habeck said same day “Germany is quickly cutting its dependence on Russian energy. But we still need to act prudently” points out the importance of gas for Germany. According to the Energy Security Progress Report, making Germany independent from Russian energy resources might be as quickly as seen in oil and coal. When it comes to gas, it is still remaining as a complex issue for Germany due to its high dependence on Russia gas. However, the process of safeguarding energy consumption of Germany is being worked faster, and Germany aims to be completely independent from Russia’s energy by 2030.

Keeping Europe Warm (Alternatives)

On the other hand, current situation has brought many issues by itself such as alternatives energy resources for EU.  There are many options but none of them can completely help EU to wean itself off Russian gas in a short time. Additionally, there are technical and political bottlenecks in every option which demand considerable time to negotiate. As an example, US willingness to fill Russia’s gap in Europe with LNG, in the short run, seems unrealistic. Because the most of the energy related companies in USA are private thus making contracts with European countries and constructing new LNG facilities will be a long process. Moreover, exporting more LNG from US to Europe might put EU into another dilemma. Decarbonization of Europe, in light of Green Deal, is one of the most important issues for EU. Therefore, importing LNG from US or other countries, which is harmful enough triggering climate change, will not be welcomed by climate activists and it is going to increase public pressure on EU countries.

That brings into mind countries such as Azerbaijan and Turkmenistan. It has to be said that, it is also challenging for post-soviet countries to export gas to Europe because of Russia’s threatening impact on them. Current nature of Russia’s asymmetrical relationships cannot be anticipated and is more hazardous with tension in Ukraine.  Russia’s main interest in Azerbaijan and Turkmenistan’s energy sources is to make these two countries, export their natural sources to Europe within Russia which gives Russia more control on Europe.  That is why, Azerbaijan and Turkmenistan’s energy as an alternative to Russia, seems unlikely to be put in an agenda by EU.[1]

Russia’s Brave New World

In Post-Soviet era, Russia has used its energy resources as a tool against its partners. From time to time, Russia followed stick and carrot policies.[2] It can be seen from, 2006 and 2009 crises between Russia and Ukraine in gas sector. When Ukraine wanted to act more independently, Russia blackmailed Ukraine by rising prices or cutting gas supplies to Europe and Ukraine. But when policies of Ukraine formed a ground for Russia’s interest, Kremlin was decreasing the price of gas for Ukraine. Russia was not pleased with Ukraine’s importance as a transit country either. Therefore, it has already diversified its energy routes in order to make Ukraine less important as a transit country.[3] Last one of them was Nord Stream 2 which certification process was halted by Germany on 22 February just before Russia started to invade Ukraine. Former Russian president, Dimitry Medvedev responded to Germany’s decision by saying “German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline. Well. Welcome to the brave new world where Europeans are very soon going to pay €2.000 for 1.000 cubic meters of natural gas!”. It points out how Russia use European countries’ dependence on Russian gas as a political tool in order to make its partners more vulnerable.

Moreover, Kremlin has special relationships with Gazprom and other oil and gas companies in Russia. It is therefore difficult to distinguish Gazprom internal policies from Russia’s foreign affairs. Russia is able to make decisions about prices and contracts which threat energy security of EU countries. Recently, Putin signed an order that EU countries should pay for gas with rubbles, which main goal of this order is to make EU countries open accounts in sanctioned Russian banks thus leaving EU in paradox.  Putin’s demand was rejected and said it is illegal due to the contracts has been made in the past by G7 countries. That is why, Europe will continue to pay with euros and dollars. Putin’s statement is also important from another perspective which Putin may decide to cut supplies completely. Turning off the taps would put EU countries in a position that might have severe consequences on EU unity. Therefore, Germany and other EU countries have to seek immediate ways for reliable energy sources and be coldblooded to protect EU from Russia’s possible threats simultaneously.

Europe is not the Only One Lose in This Relationship

However, it will also affect Russia in many ways. EU is the most reliable energy importer for Russia. This will make Russia, which its economy mostly rely on fossil fuels, find new partners in energy sector. In this direction, the first possible partner seems as China, which already buy fossil fuels from Russia. Considering the China’s revisionist stance in international politics, it might be said that China may improve its relations with Russia in energy sector. Especially, it can be clearly seen from the joint statement declared between Russia and China on February 4, just before opening of Winter Olympics in Beijing.  Meanwhile, Rosneft and Gazprom signed contracts with CNPC in oil and gas supply.  China’s stance about sanctions and its neutral position in UN meetings, which are also essential to comprehend China’s intentions. However, it is still unclear that, whether China can take responsibility to be sanctioned by Western world or not. President Biden has made this clear that, any help to Russia will cause sanctions on China. Moreover, considering Russia’s ability to use energy as a political tool, China would not want to be heavily dependent on Russian gas either.

It is true for India as well. In March, India has quadrupled its oil import from Russia. On the other hand US press secretary Jen Psaki said “Think about where you want to stand when the history books are written in this moment in time. And support for the Russian leadership is support for an invasion that obviously is having a devastating impact.” when she answered a question about India’s willingness to buy crude oil from Russia on 15 March. It obviously outlines how US’s reaction would be like to any possible help to Russia and it could impose new sanctions on these countries. For that reason, China and India would not want to draw attentions on themselves in the current climate. 

As a result, EU is still remaining as the best option for Kremlin considering the routes and exports channels has been made for decades between Russia and Europe. Thus, should Europe insist to free itself from Russian natural sources, Russia will sell its biggest market out which would be difficult to be replaced by another country.

How to Live in Brave New World

Comprehending asymmetrical energy relationship between Russia and Europe is complex. It has to be considered that, there are other probabilities that connection between Russia and EU would not be cut due to the war in Ukraine. Consequences of the war would bring different perspectives to relations between EU and Russia. It would be possible to see EU and Russia together again provided that sanctions on Russia could change Putin’s regime in Russia. In this case, Europe would no longer need to diversity its energy routes as much as quickly. It is true that it would take considerable time to set up relationships with Russia again, but once new government in Kremlin could assure European leaders about energy security of Europe, they would probably give Russia second chance. Because Russia would be still beneficial for Europe, considering the past energy relations.

On the other hand, Putin’s unclear vision is hard to be foreseen. Therefore, potential new disputes between Russia and EU could end up with new wars in Europe which NATO would be part of that. It is the most dramatic scenario. Regardless of these scenarios, it is hard to draw far-reaching conclusion over ongoing war in Ukraine and how it would bring to conclusion energy relations of both parties (Russia and EU). However, we should embrace brave new world anyway, as D. Medvedev did.

References:

[1] Ernest Wycıszkıewıcz, “From August War to January Gas Row: Implications For Post-Soviet Energy Landscape”, “Geopolitics of Pipelines’’ edited by Ernest Wycıszkıewıcz, The Polish Institute of International Affairs, Warsaw 2009, p.173-188

[2]  Ernest Wycıszkıewıcz “Russian Oil and Gas Sector: Internal Determinants and External Aspirations”, “Geopolitics of Pipelines’’ edited by Ernest Wycıszkıewıcz, The Polish Institute of International Affairs, Warsaw 2009, p.13-54

[3] Andrzej Szeptycki “Relations Between Russia and Ukraine In The Gas Sector” “Geopolitics of Pipelines’’ edited by Ernest Wycıszkıewıcz, The Polish Institute of International Affairs, Warsaw 2009, p.85-116

 

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