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Mutually assured disruption: Energy as a weapon in the Ukraine crisis

Europe depends heavily on Russian oil and gas; Russia depends heavily on oil and gas revenues. As the Ukraine crisis deepens, who has the upper hand in the energy war?

Hear more from Joshua Keating about this story:

The pipes that bind

For years, the nations of Europe that rely on Russian oil and gas have discussed the need to wean themselves off of Russian supplies, but kicking the habit has been difficult.

“They’re getting more gas from alternative sources, and there’s more renewables and more energy storage, but they’re still dependent to a great extent on Russian gas,” Richard Morningstar, a former U.S. ambassador to Azerbaijan and founding chairman of the Atlantic Council’s Global Energy Center, told Grid.

Russia also supplies about 27 percent of Europe’s crude oil, though oil is a more fungible commodity and easier to transport, so the risk of disruption isn’t quite so high.

Mutually assured disruption

The fear now is that if it comes to war in Ukraine, and European countries join the U.S. in sanctioning Russia and providing aid to Kyiv, Russia might turn off the taps entirely. This probably wouldn’t lead to people freezing — for one thing, unlike last year, this has been a mild winter — but as leaders from Kazakhstan, Mexico, France and other countries have learned in recent years, the quickest way to get people calling for the overthrow of the government is to quickly raise their energy prices. If Russia were to cut all supplies later this month, supplies would hit minimum levels by April or late March in the event of bad weather. Eastern European countries that rely most heavily on Russian imports would be the worst hit.

So which side has the upper hand here?

“Russia has leverage in the short term, but I would say Europe has the long-term leverage,” Filip Medunic, who leads the Task Force for Strengthening Europe Against Economic Coercion at the European Council on Foreign Relations, told Grid. “You can’t underestimate the long-term importance that the European market has for Russia.” Of course, it’s possible that in Putin’s mind, the short-term goal of bringing Ukraine under control may be worth the long-term damage.

The German question

When it comes to Ukraine and the “energy war,” no European country has attracted more attention than Germany, whose new chancellor, Scholz, took power just two months ago.

Russia looks east

There is another major player in this mix of energy and geopolitics.

During his visit to Beijing for the Olympic opening ceremony last week, Putin met with Chinese President Xi Jinping, the first face-to-face meeting the Chinese leader has held with a head of state since the start of the pandemic. Ukraine was very much on the table. Energy was as well.

While the deals had almost certainly been in the works for some time, the fanfare with which they were announced seemed deliberate. Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security’s Energy, Economics and Security Program, told Grid that part of the messaging involved “sanctions-proofing” — in other words, making clear to the rest of the world that Russia has alternatives if it loses business in Europe — as well a longer-term strategy. “Russia is looking and saying, where is the demand for these resources we produce going to come from over the next five, 10, 20 years? It’s going to come from Asia, it’s going to come from China,” she said.

Ukraine in the middle

On the other hand, Ukraine relies increasingly on Russia for most of its coal imports. Ukraine is also heavily dependent on imports of gasoline and bitumen, the petroleum product used to pave roads, much of it from Russia and Belarus, which appears to be cooperating with the Kremlin in the Ukraine crisis. Andrian Prokip, an energy analyst at the Kennan Institute’s Kyiv office, told Grid that while Russia alone has limited energy leverage over Ukraine, “if Russia, Belarus and maybe Kazakhstan start working together, it’s going to be a problem.”

A greener, safer future?

Perhaps one silver lining of the Ukraine crisis — and its confluence of energy and geopolitics — is the extent to which it underlines the importance of shifting away from fossil fuels, which in addition to cooking the planet, make countries dangerously dependent on suppliers. Some European leaders are making this point directly. The German Greens, who are coalition partners with Scholz’s Social Democrats, have opposed Nord Stream 2 for both environmental and national security reasons.

The EU has pledged to make the continent carbon neutral by 2050. But over the next 30 years, Europe still needs energy — and in the short term at least, renewables alone won’t be enough. As Morningstar notes, while this crisis highlights the urgency of the energy transition, “it also underlines the importance of gas right now to energy security. It’s not an either/or proposition. We have to do everything we can to move as quickly as possible on the energy transition, but that includes gas in the short- to mid-term.”

Even if the crisis pushes Europe to finally end its reliance on Russia, that doesn’t mean it will quit gas. It may just mean more reliance on liquefied natural gas shipped from overseas.

When it comes to Ukraine, we don’t yet know the precise role the energy weapon will play. But there’s a good chance it will remain a part of Russia’s arsenal long after this crisis is over.

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