This first part of the series “Gas, War, and Europe” aims to analyse the different factors that have shaped the longstanding dependency of the European Union (EU) on Russian gas, and how these have laid the foundations for the energy crisis triggered by the war in Ukraine. For this, the spotlight is placed on the interdependence of economic, political, and infrastructural issues as the main factors capable of explaining the current situation.
By Adrián Merino Puente
Introduction
Energy – and especially gas – relationships between the EU and Russia have traditionally been based on the common European wisdom on interdependence, whereby both the buyer and the supplier of energy are seen as mutually dependent [1]. Thus, the complex interrelations between politics, economics and strategy that dominates the EU-Russia relationship have been oversimplified to a mere commercial transaction while ignoring two key issues.
Regarding energy, the main European political narratives tend to ignore that, in highly developed economies, demand is not price elastic and tends to remain constant despite price increases. Therefore, Europe, as the consumer, has seen how its bargaining power has been reduced by the constant and unavoidable need for energy [2]. Moreover, in a country where Putin retains all political and economic power as well as significant social support, European capitals seem to ignore Russia’s willingness to face negative consequences in order to pursue its geopolitical goals [3].
Hence, the longstanding dependency on Russian gas along with the political reluctance to diversify markets and import infrastructures have led Europe into a delicate scenario in the context of the war in Ukraine.
THE Economic problem
During the months leading up to the invasion of Ukraine, Russian gas accounted for around 50% of the total EU imports, even reaching 80% and 90% in some cases [4].
In this sense, the predominance of Russian gas in the European market has been directly tied to the rise of Gazprom. Since the fall of the Soviet Union, this “private” company controlled by the Kremlin has almost regained the monopoly over the production and distribution of natural gas in Russia, spreading across Europe through the full or partial control over 116 subsidiaries and the partnership with Western European corporations [5]. Furthermore, Gazprom has succeeded in establishing long-term contracts between 15 and 25 years with the majority of European gas companies. This has been supplemented by its partial control over gas distribution industries, pipelines, and storage facilities.
As a result, European dependence on Russian gas, as well as Gazprom’s influence over Central and Western European energy companies, have ended up becoming a coercive power in the hands of Moscow [6].
Thus, when Russia invaded Ukraine, Europe faced a particular problem. The lack of alternatives to Russian gas left European economies exposed to gas import reductions and price increases controlled by Moscow, jeopardising economic stability and complicating a joint response by the EU in the form of economic sanctions and military aid to Ukraine. Since then, there has been a succession of statements from different authorities acknowledging the mistake. As stated by former German environment minister Norbert Röttgen, governments too easily gave in to industry pressure for available and cheap Russian gas, ignoring the geopolitical risks [7].
THE Political problem
Along with the economic interests, European dependence on Moscow’s gas has also been largely shaped by Russian political influence and by political visions that misunderstood the reality of EU-Russian relations.
Throughout the 2000s and 2010s, Russia successfully forged ties with many far-right political parties from Western Europe, such as the AfD (Alternative for Germany), the FPÖ (Freedom Party of Austria), the Italian Northern League and Forza Italia, or the French Front National. In this way, Russia guaranteed itself favourable political discourses to reinforce the expansion of its economic interests and, when the first invasion of Ukraine took place in 2014, to reject the imposition of large-scale sanctions [8].
In line with this, the role of particular political figures is of great relevance. In Italy, former Prime Minister Silvio Berlusconi has a long history of strong ties with Moscow. During his tenure as Prime Minister, he stated that the Crimean annexation referendum was legal and legitimate. Now, in light of Rome’s support for Ukraine after the February invasion, he expressed his concerns about the deterioration of Italy’s relationship with Russia [9]. Similarly, former German Chancellor Gerhard Schröder strongly supported the increase of relations and economic interdependence with Russia. Surprisingly – or not – after his term he was appointed as the chairman of the joint German-Russian Nord Stream pipeline, controlled by Gazprom [10].
However, the lack of European political coherence has not only been the result of Moscow’s influence or the establishment of “mutually beneficial” relations. After the Russian invasion of Ukraine in 2014, Merkel’s government failed to impose a reduction in Russian gas imports and the economic sanctions were not as strong as expected. The cause was, as mentioned above, the rejection and pressures from German industry and the idea that interdependence with Russia could still influence Moscow’s behaviour [11]. Along the same lines, after years of public support for the Nord Stream 2 pipeline project, German President Steinmeier admitted the mistake of “holding on to Nord Stream 2,” and justified it by stating that “we held on to bridges that Russia no longer believed in and that our partners warned us about” [12].
THE Infrastructre problem
Despite the relevance of economic and political factors in explaining the current energy crisis, there is a point where all of them converge: the infrastructure problem.
The European widespread preference for Russian gas over the past decades resulted in a concentration of pipelines to connect Russia with its customers, with four networks to the north (Brotherhood-Soyuz, Yamal, and Nord Stream 1 and 2) and two to the south (Blue and Turk Stream) [13]. However, this concentration led to the disregard or underfunding of alternative import infrastructures, thus reducing the EU’s ability to move away from its reliance on Russian gas.
In this context, the pipelines connecting the EU with alternative suppliers such as Norway, Algeria, or Azerbaijan have proven to be insufficient to replace the Russian gas flows. This has been due to either the infrastructures being already at full capacity or the impossibility for suppliers to increase their gas production [14]. In the face of this, the other major alternative is Liquefied Natural Gas (LNG). Despite the existence of a relatively strong regasification infrastructure, the lack of interconnections is again a problem for its use as an alternative to Russian gas.
Spain currently has six regasification facilities accounting for 30% of the whole European regasification capacity [15]. However, Spanish facilities are only at 50% of their capacity due to a lack of connections with France and the constant rejection of projects such as the MidCat pipeline. These rejections were heavily influenced by French interests in protecting its nuclear industry and, until the latest Russian invasion of Ukraine, by German investments in gas connections with Russia [16].
Conclusion
The current energy crisis unleashed after the outbreak of the war in Ukraine is the result of longstanding economic and political dynamics that have transformed Europe’s energy dependence into a coercive measure in Moscow’s hands. Thus, as the EU hastily tries to reduce its dependence, the various strategic failures, but also the potential solutions, have gradually been revealed.
References
[1] Richard Anderson, “Europe’s Dependence on Russian Natural Gas: Perspectives and Recommendations for a Long-Term Strategy,” George C. Marshall European Center for Security Studies (September 2008).
[2] Anderson, “Europe’s Dependence on Russian Natural Gas.”
[3] Gerald Stang, “The bear and the beaver: Russia and European energy security,” European Institute for Security Studies (July 2015).
[4] Statista Research Department, “Dependence on Russian Gas in Europe 2021, by Country,” Statista, October 7, 2022, https://www.statista.com/statistics/1201743/russian-gas-dependence-in-europe-by-country/.
[5] Anderson, “Europe’s Dependence on Russian Natural Gas.”
[6] Nathalie Hinchey, “The Impact of Securing Alternative Energy Sources on Russian-European Natural Gas Pricing,” The Energy Journal 39, no. 2 (March 2018): 87–102, https://doi.org/https://doi.org/10.5547/01956574.39.2.nhin.
[7] Patrick Wintour, “‘We Were All Wrong’: How Germany Got Hooked on Russian Energy,” The Guardian, June 2, 2022, https://www.theguardian.com/world/2022/jun/02/germany-dependence-russian-energy-gas-oil-nord-stream.
[8] Raphael Cohen and Andrew Radin, “Russia’s Hostile Measures in Europe. Understanding the Threat,” Santa Monica: RAND Corporation, 2019, https://www.rand.org/pubs/research_reports/RR1793.html.
[9] Elena Giordano, “Berlusconi has ‘reconnected’ with Putin, sent him wine and a ‘sweet letter,’ according to report,” Politico, October 18, 2022, https://www.politico.eu/article/berlusconi-has-reconnected-with-putin-sent-him-wine-and-a-sweet-letter/.
[10] Cohen and Radin. “Russia’s Hostile Measures in Europe, ” https://www.rand.org/pubs/research_reports/RR1793.html.
[11] Reuters, “Merkel - No one should doubt EU resolve on Russia sanctions,” Reuters, April 5, 2014, https://www.reuters.com/article/uk-germany-russia-idUKBREA340AU20140405.
[12] Laurenz Gehrke, “‘Mistake’ not to object to Nord Stream 2, says German president,” Politico, April 4, 2022, https://www.politico.eu/article/german-president-admits-having-been-mistaken-on-nord-stream-2/.
[13] Planete Energies, “Gas Pipelines between Europe, Russia and Caucasia,” Planete Energies, April 25, 2022, https://www.planete-energies.com/en/medias/infographics/gas-pipelines-between-europe-russia-and-caucasia.
[14] Mike Fulwood et al., “The EU Plan to Reduce Russian Gas Imports by Two-Thirds by the End of 2022: Practical Realities and Implications,” Oxford: The Oxford Institute for Energy Studies, March 2022, https://www.oxfordenergy.org/publications/the-eu-plan-to-reduce-russian-gas-imports-by-two-thirds-by-the-end-of-2022-practical-realities-and-implications/#:~:text=Energy%20Transition%20Research-,The%20EU%20plan%20to%20reduce%20Russian%20gas%20imports%20by%20two,of%20Russia’s%20invasion%20of%20Ukraine.
[15] King & Spalding, “LNG in Europe 2018. An Overview of LNG Import Terminals in Europe,” King & Spalding, 2018, https://www.kslaw.com/attachments/000/006/010/original/LNG_in_Europe_2018_-_An_Overview_of_LNG_Import_Terminals_in_Europe.pdf?1530031152.
[16] Giorgio Leali and Clea Caulcutt. “France to look into MidCat pipeline again as energy crunch tightens,” Politico, September 28, 2022. https://www.politico.eu/article/france-pledges-to-reconsider-midcat-pipeline-amid-iberian-pressure/.
