Three years ago, Russia stood as the world’s top supplier of natural gas, with Europe as its largest consumer.
For European leaders, the economic benefits of affordable Russian energy outweighed any concerns about engaging with President Vladimir Putin’s regime.
However, the outbreak of Russia’s full-scale war against Ukraine has turned this dependency into a threat to the region’s economic and political security.
Fears that Putin could use gas, oil, and coal supplies as a weapon to punish European nations for their support of Ukraine have led to a frantic search for alternative energy sources. This shift has been bolstered by sanctions aimed at reducing the funds fueling Russia’s war machine.
Today, European leaders celebrate what they consider a radical shift in energy supply, as many countries have moved away from Russian gas, oil, and coal, relying instead on alternative sources.
Consumers have also reduced their energy usage, contributing to a drop in demand and ensuring that lights and most factories remain largely operational, despite Europeans facing higher energy costs.
Yet, many are unaware that Russia remains one of the continent’s major energy suppliers, and the European Union’s goal to end its reliance on Russian fossil fuels by 2027 is challenging to achieve.
Historical Context of Europe’s Dependency on Russian Energy:
The dependency started over half a century ago when the Soviet Union needed money and equipment to develop newly discovered massive gas fields in Siberia amid tensions with China and the United States. In return, West Germany sought cheap energy to support its booming industrial sector.
In 1970, the Soviet Union and West Germany signed the “Pipes for Gas” deal, providing thousands of miles of pipelines to transport Russian gas to Western Europe.
These supplies grew over the decades, with Germany depending on Russia for more than half of its gas needs and about a third of its oil imports.
Although countries like Germany have shifted towards wind and solar energy in recent years, piped Russian gas remained a convenient and affordable option for providing essential electricity when wind and solar were insufficient.
By the end of 2023, the EU’s imports of Russian fossil fuels had dropped to about $1 billion monthly, significantly down from the peak of $16 billion monthly in early 2022, according to a report by the Brussels-based research center Bruegel.
Current Challenges and Future Outlook:
Most of the remaining imports consist of natural gas, with Russia still accounting for about 15% of the EU’s total gas imports in 2023, behind Norway and the United States, which provide 30% and 19% respectively. Northern African countries follow at 14%, per European Commission data.
Despite attempts to eliminate dependence on Russian energy, major energy consumers like Spain, France, Belgium, and the Netherlands continue to import Russian liquefied natural gas (LNG) via oil tankers, sometimes mixing with other gas sources in the European pipeline network, resulting in its delivery to Germany despite commitments to avoid Russian gas.
The Difficulty in Canceling Russian Gas Contracts:
Many European clients are tied to Russia through long-term and complex contracts that are not easily dissolved.
Transitioning to other sources could be costly, particularly as global gas supplies are expected to remain tight for the next two years until new supplies from exporting countries like the USA and Qatar emerge.
As countries like Austria, Slovakia, and Hungary search for alternative energy sources, these landlocked nations face significant challenges due to their industries’ reliance on gas from the east, and they may incur higher costs if they depend on non-Russian gas reaching new LNG facilities in Western Europe.
To date, there is no comprehensive ban across Europe against importing Russian gas, although countries like the UK, Germany, and the Baltic states have decided to stop importing this fuel.
Moreover, some major European companies have long-term investments in the Russian energy sector and are hesitant to abandon them. For instance, French TotalEnergies SE remains a shareholder in Russia’s massive Yamal LNG project in the Arctic.
As Europe navigates the complex transition away from Russian energy, the continent faces ongoing challenges in securing alternative supplies and managing higher energy prices, all while striving to maintain energy security and economic stability amidst geopolitical tensions.
