Europe's energy future - challenges and opportunities
Davit Shatakishvili, MPA, Tbilisi State University and German University of Administrative Sciences Speyer
Russia's military intervention in Ukraine, among other circumstances, will inevitably alter the geopolitics of energy and result in a redistribution of forces. From the very first day of the Russian aggression, discussions began on economic sanctions, the importance of European energy security, and market diversification. This includes not only the desire to cause financial damage to Russia, but also to ensure its own stability and long-term energy sustainability, as well as to deprive Russia of the political and economic leverage, which it uses as one of its main tools for pursuing its interests. The Russian president seems to believe that his energy resources are so valuable to Europe that an attack on them is unlikely. This is partly true. Europe's high dependence on Russian energy sources does somewhat limit the West's immediate response, even in the event of military aggression, and pushes it to pursue a more cautious policy. However, new opportunities are emerging for Europe to take care of its own energy future and to practically realize the agreed upon goal of making Europe no longer vulnerable to potential threats from a single supplier. It is interesting to analyse how the world community behaves against the backdrop of the clear Russian aggression, keeping in mind the alternative market resources and possible scenarios for the development of events.
Possible energy response to the aggressor
For Russia, energy resources are the main source of budgetary revenues. In 2021, the country received up to $160 billion from gas and crude oil exports alone. Its daily production is about 11 million barrels of crude oil, half of which is used for domestic consumption, while 5-6 million barrels are exported daily. About 2.5 million barrels of exported oil go to the European countries, while 1.8 million barrels per day go to China.
Following the military intervention in Ukraine, the issue of sanctioning Russia's energy resources was actively discussed. Yet, Russia also has the resources to create a brief energy shock for Europe. A complete gas shutdown, for example, would cost Gazprom an average of $215 million a day. In the event of a three-month embargo, the total loss would be about $20 billion. The development of this scenario would have been more realistic in the period before the sanctions, given the $630 billion in financial reserves mobilized by the Central Bank of Russia. Despite the fact that, currently, these assets are frozen, there are also other types of cash in the country, and the decrease in their volume might be acceptable to a President Putin seeking to demonstrate his strength in Europe. Although, under European law, all importing countries are required to have a three-month reserve of energy resources, and Europe still has that capacity, a Russian decision to block the supply of gas would still would be a heavy blow.
Following the recognition of the so-called independence of the Donetsk and Lugansk regions by Putin, German Chancellor Olaf Scholz suspended the North Stream 2 certification process, saying that the escalation of the conflict inhibits development of the project. However, a few days ago, he also said that while Europe supports the imposition of tough sanctions against Russia, it is not ready to abandon energy imports from Russia. The United States has been actively discussing sanctions on Russian energy resources, while also calculating the impact on prices, so as to avoid counterproductive outcomes from the appropriate measures. As a result, the United States has imposed an embargo on Russian oil and gas, as did Canada. According to the British government, the import of Russian oil into the UK will be ceased by the end of 2022.
European energy security
During each crisis, the discussion intensifies about the significant dependence on Russian energy resources. The European countries are trying to gradually introduce and utilize renewable energy, however, it is taking time. So far, renewable energy sources account for just 22% of total energy consumption across Europe. Germany, for example, abandoned coal power plants in response to climate change, and partially shut down its own nuclear power plants after the Fukushima nuclear plant accident.
Europe receives about 40% of its gas supplies from Russia, followed by Norway (22%), Algeria (18%), and Azerbaijan (9%). 25% of the total energy consumption of Europe’s largest economy, Germany, comes from gas, and it receives 55% of its total gas supply from Russia.
In addition, Europe buys liquefied natural gas. It is noteworthy that in recent years, the United States has significantly increased liquefied natural gas exports to Europe. As liquefied natural gas is transported by ships, it requires the appropriate port infrastructure, which so far is present only in a small number of European ports. Another challenge in this regard is the lack of reserve capacity. That is why Germany announced the construction of liquefied gas terminals.
The West has begun to think more actively about its own energy security. As German Vice-Chancellor Robert Habeck said: "We will diversify our energy system, we will no longer buy this amount of coal and gas from Russia."
Sustainable energy alternatives
In general, changing an oil supplier, considering means of transportation, is much easier than doing so with a supplier of natural gas. Consequently, for those countries dependent on Russian energy resources, diversifying oil suppliers may be timely and effective.
Russia is the richest country in the world in terms of gas reserves, followed by Iran and Qatar. Europe has several ways to diversify its natural gas suppliers. For example, Norway, the Netherlands, and the United Kingdom could increase gas extraction through wells in the North Sea, from which about 30% of Europe's current gas supply comes. In addition, there is the possibility of increasing the output of Algerian gas pipelines. It is also possible to use Azerbaijan’s resources to supply parts of southern Europe.
A good alternative to natural gas is liquefied natural gas. Despite the high price, its main advantage lies in the fact that pipelines are not required for transportation and it can be moved from one point to another without issue. Along with the United States, Japan has also expressed readiness to export liquefied natural gas.
Europe also has the opportunity to diversify its oil suppliers. First, though, the Organization of the Petroleum Exporting Countries (OPEC) should increase its monthly production quotas for countries such as Saudi Arabia, Qatar, Angola, and Nigeria. Saudi Arabia can produce more than 3.5-5 million barrels per day, which would allow Europe to replace about 30% of its imported Russian oil. In general, oil production has reduced since 2020 due to the pandemic.
Another alternative under consideration is the easing of economic sanctions on Iran, allowing it to double production of the current 1.5 million barrels per day. Naturally, Iranian oil cannot be exported to Europe in its entirety, but if even just half of it was exported, it would be possible to replace 25-30% of Russian imports. According to reports, Iran has already announced an increase in oil exports.
Reportedly, the United States is also in talks with oil-rich Venezuela to increase oil supplies to the market in exchange for lifting sanctions. The US also has the capacity to increase its own oil production output. It has already started selling 1.3 million barrels of oil per day from its strategic reserves.
In addition to the above is very interesting technology for obtaining fuel from coal, which is actively used by the UK, as well as a number of countries in Africa and Asia.
What should we expect?
The world agrees that the most effective way to inflict financial and political damage on Russia is through energy blockades, however, Europe is unprepared to do so practically.
Clearly, there are several scenarios for the development of events. First of all, it is possible that regardless of the conflict, Europe will choose to maintain the energy status-quo. While unlikely, there is still a small chance that Russia will arrange a short energy shock for Europe. In this case, Europe will suffer, but the situation will not reach a critical level. Also possible, but unlikely, especially in Europe’s case, is that we see other countries following the example of the United States, Canada, and Britain, and applying energy sanctions on Russia. In any case, an increase in prices for energy products is inevitable.
It is essential that Europe be prepared for any eventuality. In the short term, in the worst-case scenario if the war continues, the sanctions imposed on Russia will bear fruit and may even become tougher. Against the background of Putin's impulsive actions, it is possible that Russia will leave Europe without gas in the autumn-winter period. It is therefore important for European countries to replenish their reserves and start negotiations to diversify markets.
In the medium term, it will be necessary to maximize the use of renewable energy sources and invest in their development. It is also important to enter into long-term contracts with potential energy suppliers. During this period, liquefied natural gas terminals and the appropriate port infrastructure need to be built to receive it.
In the long run, it is vital to continue the renewable energy reform, to achieve energy efficiency, and to create the appropriate infrastructure for it.
- Is Ukraine Winning the War and What Might Russia's Calculation Be?
- Russia's Diplomatic Offensive in Africa
- Russia’s New Foreign Policy Concept and the Occupied Regions of Georgia
- Europe's Energy Security – How is the Strategic Goal Progressing?
- Why Estonia’s parliamentary elections matter for Ukraine and Eastern Europe?
- Is America’s Ukrainian War Fatigue” Real?
- The Tenth Package of Sanctions - One Year of Russian Aggression
- Dynamics of China-Russia relations against the backdrop of the Russo-Ukrainian War
- The Russia-Ukraine War and Russia's Long-Term Strategic Interests
- Flight Resumption with Russia - Potential Consequences for Georgia
- Hybrid War with Russian Rules and Ukrainian Resistance
- Moldova’s challenges alongside the war in Ukraine
- Is Israel's New Government Shifting its Policy towards the Russia-Ukraine War?
- What does Russia want from Georgia?
- The Ninth Package of Sanctions - in Response to the Russian Escalation and Missile Attacks
- The Danger Russia’s Neighbors May Face after the Russo-Ukrainian War
- Belarus and Russia deepen trade and economic relations with occupied Abkhazia: A prerequisite for recognition of Abkhazia's “independence”?
- "Captured emotions" - Russian propaganda
- A Looming Winter Energy Crisis in Europe: Can Azerbaijan Become the Continent’s Next Large Energy Supplier?
- The Eighth Package of Sanctions - Response to Russian Annexation and Illegal Referendums
- What’s next for Italy’s foreign policy after Giorgia Meloni’s victory?
- War in Ukraine and Russia’s declining role in the Karabakh peace process
- The Russian Exclave of Kaliningrad and the Lithuanian "Sting"
- Seventh Package of Sanctions and Embargo on Russian Gold
- What could be the cost of “Putin’s face-saving” for European relations
- In line for the candidate status, Georgia will get a European perspective. What are we worried about?
- The break-up of the Hungarian-Polish coalition - an opportunity for the EU
- Failed Tskhinvali Referendum
- The War and Georgia
- "Autocratic Peace"
- “Rural Orbanism”- Polarization as a determinant for Hungary's political future
- Illegal Presidential Elections in the Tskhinvali Region: Why Bibilov Lost and What to Anticipate in Future
- How to Respond to Russian Ultra-Orthodox-Historic-Hegemonism?
- The War in Ukraine and the UK’s New Role in Eastern Europe
- What Will the Abolition of the OSCE Minsk Group Bring to the South Caucasus?
- The Presidential Election in France and Europe’s Political Future
- Will Pashinyan Be Able to Make a Drastic Turnaround in Armenian-Azerbaijani Relations?
- Why Has the Abkhaz Side Become More Active on Social Networks?
- Why a Neutral Ukraine Is Not on Putin’s Mind (Ukraine’s Neutral Status Is Getting Closer, but What Does It Mean to Putin?)
- Uncontrolled Mass Immigration and the Position of the Georgian Government
- Changes in Putin's propaganda narratives since the Russian invasion of Ukraine
- Ukraine will soon embark on a path of practical integration into the European Union. What about Georgia?
- Positions and Actions of Turkey in the Russo-Ukrainian War
- NATO’s possible expansion in Northern Europe and its significance for Georgia and Ukraine
- Political Winter Olympics in Beijing
- What Is behind Putin’s Sudden Gambit in Ukraine?
- Abkhazia in 2021: Energy Crisis, New “Minister” and Political Controversy
- L'Europe pourra-t-elle éviter le “déjà vu” ? (France, President of the Council of the European Union, and the Tensions in Eastern Europe)
- US-Russia Relations and the Issue of Ukraine
- The New Targets of Ramzan Kadyrov’s Regime
- What are the Prospects of the Eastern Partnership Summit Set on 15 December?
- The Upcoming EaP Summit - Why the Trio Initiative Should Finally Find Its Way
- What Will the Post-Merkel Era Mean for the EU’s Russia and Eastern Neighbourhood Policy?
- What Lies Behind the Growing Cooperation of the Georgian and Hungarian Governments
- “Doberman” as a Minister: Inal Ardzinba’s Prospects and Challenges
- The Belarus Crisis: How to Enhance Our Resilience Against the Russian Strategy for Its Near-Neighborhood
- Moldova’s Gas Crisis Has Been Russia’s Yet Another Political Blackmailing
- EU-Poland’s worsened relations and what it means for the EaP
- Lessons From Germany on Political Culture: What Georgia Can Learn From the German Parliamentary Elections
- Belarus One Year On: An Insecure Regime Under Russian “Protection”
- Why Did Iran-Azerbaijan Relations Become Strained?
- Russia’s Parliamentary Elections - What Can Be Said About the Regime’s Stability
- An Emerging Foreign Policy Trend in Central and Eastern Europe: A Turn from China to Taiwan?
- Vaccination: “To Be, or not to Be”…
- Can Georgia use China to balance Russia?
- Sharia Patrols in Kabardino-Balkaria: A Growing Trend or a Local Conflict?
- Belarus’ exit from the Eastern Partnership and what to expect next
- Pacta Sunt Servanda: Agreements must be kept
- The West vs Russia: The Reset once again?!
- Associated Trio, What is Next?
- Formation of a New “Political Elite” in Abkhazia - Who Will Replace the Old “Elite?”
- The symbolism of the EU flag and why a true Christian would not tear it down and burn it
- The Cyber-Dimension of the Geneva Summit
- Securitization of the Arctic: A Looming Threat of Melting Ice
- Europe in Anticipation of the Results of a “Harmful Deal”
- (Re)Mapping the EU’s Relations with Russia: Time for Change?
- USA, Liberal International Order, Challenges of 2021, and Georgia
- The Political Crisis in Moldova: A Deadlock without the Way Out?
- Russia's Testing or Bullying?
- ‘Vaccine Diplomacy’: A New Opportunity for Global Authoritarian Influence?
- Deal with the ‘Dragon’: What Can Be the Repercussions of the China-EU Investment Agreement?
- The End of the Russian Natural Gas Monopoly in Balkans
- Who did the judge sentence: Navalny, Putin or Russia?
- Biden’s Conundrum
- 2020 Developments in Abkhazia: “Elections,” the Pandemic and Deeper Integration with Russia
- The Hungarian Crisis: Is the EU Failing against Authoritarianism?
- Could Belarus Become a Prelude to the Great Polish-Swedish War 400 Years Ago?
- Vladimir Putin's Annual Grand Press Conference - Notable Elements and Messages
- COVID 19 Pandemic Economic Crisis and Reducing the Instability of Georgia’s National Currency
- Russia’s Energy Policy in the Tskhinvali Region
- Who Won and Who Lost with the War in Karabakh?
- What Russia has Gained in Karabakh
- What Armenia Did and Did not Lose as a Result of the Ceasefire Declaration in Karabakh
- Protests in Belarus, Lukashenko and the Russian Federation
- Some Thoughts on the Use of the Term „Post-Soviet Space“
- Georgia’s European Way During the Period of Pandemic Deglobalization
- Turkey's Caucasus Policy Against the Backdrop of the Latest Armenia-Azerbaijan Tensions
- Khabarovsk Krai Protests as an Indicator of the Russian Federation’s Stability
- Trio Pandemic Propaganda: How China, Russia and Iran Are Targeting the West
- From Russia with… a Canny Plan
- “Elections” in Abkhazia: New “President’s” Revanche and Challenges
- Georgians Fighting the Same Battle 99 Years Later
- Confrontation between Russia and Turkey in Syria
- Political Crisis in Occupied Abkhazia
- What is the Significance of Killing General Qasem Soleimani?
- What Will the New Dialogue Format with Russia Bring for Georgia?
- On the “Russian Culture Center” in Georgia
- Whither Economic Policy?
- Main Messages of Russian Propaganda
- Massive Cyberattacks On Georgia Calls For Defense And Resilience
- What do we know about the meeting of the Foreign Ministers of the Russian Federation and Georgia?
- New Focuses of the Anti-Occupation Policy
- Georgia's Problems are not Addressed at G7 Meetings: Who is to Blame?
- Vladimir Putin’s Main Messages in his Interview with the Financial Times
- Georgia and Russia’s Post-modern Fascism
- Dugin has Come Out as a Supporter of Georgia – How Did This Happen?
- The Outcome of the European Parliament Elections - What Does it Mean for Georgia?
- Deterring Russia
- On NATO, Russia and Pat Buchanan
- Does the Principle of Strategic Partnership Work in Ukraine-Georgia Relations?
- Modern Russia’s Own Wars of Religion
- Bolton’s visit to Moscow– what to expect in U.S-Russia relations?
- The Risk of the Renewal of the Karabakh Conflict after the Velvet Revolution in Armenia
- The Situation in Syria’s Idlib Province, Interests of the Parties and Threats
- The Helsinki Summit and its General Results
- Why It Is Necessary to Know the Day the Russo-Georgian War of 2008 Started
- Decisive Struggle for the Independence of the Ukrainian Church
- Georgia’s Position in the Westernization Index 2018
- Why Did the Results of the G7 Summit in Charlevoix not Meet Our Expectations?
- How to Win Cold War 2.0
- The Russian “Ambassador’s” Rotation in Abkhazia
- Why did the Foreign Ministers of G7 not remember Georgia during their 23 April 2018 Toronto Meeting?
- Georgia and the American Strategy
- Putin’s Pre-Election Economic Promises: Myth and Reality
- Let Geneva Stay the Way it is
- Turkey’s Military Operation in Afrin – a New Phase in the Syrian Conflict
- Kremlin New Appointments and the Occupied Regions of Georgia
- Dangers Originating from Russia and Georgia’s Security System
- Eurasian Custom Union and problems of Russian – Georgian FTA
- Is Georgia’s Export Growth Sustainable?
- Russia’s Influence over the Field of Security in Tskhinvali Region is Growing: Support for Full Integration
- What Awaits the People of Gali?
- Growth of Military Spending and Relations with Russia: Azerbaijan trying to Gain Advantage over Armenia
- Disrupt and Distract: Russia’s Methodology of Dealing with the West
- Russian Diplomats in Georgia – who are they, how many of them are there and what are they up to
- Putin’s Visit to the Occupied Abkhazia: Was our Reaction Actually Adequate?
- Pence’s Visit to Georgia: Several Lessons and What We Should be Expecting
- Is it Acceptable for Georgia to Declare Neutrality?
- Georgia’s European Perspective in the Context of EU’s Future Evolution
- Brexit Negotiations between the European Union and the United Kingdom have been re-launched: What will be their Influence on Georgia?
- How to Stop the “Creeping Occupation”
- Kremlin’s Policy in the Occupied Regions of Georgia Moves to a New Stage
- Syrian Civil War in the Context of Regional Security
- The Winnable Second Round of Russia’s Neighbors’ Struggle against Its Imperialism
- Turkey’s Domestic and Foreign Policy in the Context of Regional Security
- Post-Soviet States – Struggle for the Legitimation of Power
- Parliamentary Elections in Armenia – The Triumph of the Governing Party
- Current Foreign Policy of Georgia: How Effective is it in Dealing with the Existing Challenges?
- Observations on the Agreement Reached with Gazprom
- New Russian Weaponry in the Caucasus and Its Impact on Georgia’s NATO Aspiration