Looking at the post-WW2 chaos, Winston Churchill famously said: “Never let a good crisis go to waste!” The statesman was equally known for his sarcasm, optimism and insightful analyses. Well, the European Union has had no shortage of challenges. On top of the migration crisis, the Covid-entailed economic recession, the transition forced on us by the climate change and the populist-illiberal revolt against the European institutions and values, now we have an energy crisis in the form of an unprecedented gas shortage, too. The question is: will the current EU leaders have former British PM Churchill’s strategic thinking, situational awareness and ambition that are so sorely needed to utilize the opportunities lying in this crisis?
The magnitude of the gas price shock is clearly shown by the fact that an average European household currently pays five times more than last year. Although several EU member states have regulated household energy prices, it cannot be a long-term solution and offers no remedy for the problems of industrial providers at all. If the coming winter happens to be longer and colder than usual, sky-rocketing prices won’t be the only challenge: even gas supply can suffer difficulties, which already caused a lot of headache all around Europe in 2006 and 2009 amid the financial disputes over the Russian-Ukrainian transit supplies.
Having relatively low energy reserves and suffering from import dependency, our continent faces very serious challenges with the shortfall of gas supplies.
Undoubtedly, the current gas shortage is the result of multiple unfortunate coincidences. Firstly, Europe’s very few remaining gas sources have just been exhausted or closed down in recent years. For example, the Groningen gas field, which used to work with full capacity until recently, was closed down by the Dutch government after multiple earthquakes induced by the operations. The UK is not doing any better: even though it was a major gas exporter not long ago thanks to its North Sea fields, the country now must resort to import after the gradual exhaustion of its gas sources. This makes Norway almost the last gas exporter left in Europe, but the Scandinavian country, due to its geographical position, can only provide safe supply to a certain part of our continent.
As a result, most of Europe is left with relatively few options in terms of gas supply: they must obtain gas through pipelines or in liquid (LNG) form from outside the continent.
As far as the gas pipelines are concerned, many of Europe’s supposedly reliable partners of several decades have suddenly realized that energy can be more than just a source of predictable profit: it can be used for political blackmail, too. For example, Algeria, despite being the provider for two-thirds of the gas needs of the two states in the Iberian peninsula, i.e., Spain and Portugal, has just turned off the taps on the Maghreb pipeline going through Morocco. The reason: Algeria wants to apply pressure on its neighbour in their decades-long dispute over the Western Sahara territories. However, there’s another factor that has a much larger impact on Europe: the stoppage of the gas supply coming from the direction of Russia. Most European countries almost exclusively rely on Russian sources, and one third of the continent’s gas needs are covered by Russian stocks. Since post-Soviet Russia had several arguments with Ukraine over such issues as tapping into the pipelines or the financial settlement of transit fees, Russian state-owned Gazprom decided to fund the construction of multiple pipelines bypassing Ukraine in recent decades.
They first built the Yamal-Europe pipeline going through Belarus and Poland, then the Blue and Turk Streams under the Black Sea through Turkey, and finally the two parallel Nord Streams under the Baltic Sea to deliver Russian gas to Germany directly.
So there’s no shortage of gas pipelines. But then why is there a shortfall in gas supply? After the Russia-Ukraine conflict broke out in 2014 and Moscow annexed the Crimea, the Russian gas contracts and especially the German-Russian gas pipeline became a political issue. So much so, that the United States sanctioned the companies involved in the construction of the pipeline, while Germany’s energy regulator has held off from giving the clearance to Nord Stream 2, even though the works have been completed for quite a while. Some analysts believe the stoppage of the Russian supply is a response to the German authorities’ reluctance. While Russia denies it, suggesting increased domestic demands as the reason of the shortage, Kremlinology experts know that energy is a often used weapon in Russia’s political maneuvers and such coincidences are extremely rare.
Unfortunately, international market trends do not benefit Europe, either. China’s gas demand has doubled over the past decade while Japan’s, Korea’s and India’s transition from carbon-based energy production increases gas prices as well.
No wonder Russia has already started concocting grand plans to satisfy the exploding Asian energy market by building new pipelines from the Siberian gas fields to the East.
It is a warning sign that the world’s largest LNG exporter Qatar is holding up and supplying only the highest bidder.
At the moment there is no way to predict how persistent the high gas prices will be or how they will impact Europe’s economy, but we can already see that Europe’s gas import dependency must be reduced as soon as possible.
The most logical reaction seems to be to accelerate the transition to renewable energy.
The question is whether EU member states, who tend to enforce their national interests in the area of energy policy, are able to coordinate their efforts and develop a common energy policy with the involvement of EU institutions. Until we get an answer to this question, we can always hope this winter will be shorter and milder than usual.
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Source: Press release
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