As the Russian economy takes a beating due to sanctions and the costs of war, Moscow can rest easy knowing its continued dominance over European energy is all but inevitable
As the European Union focuses on never-ending sanctions against its number one energy supplier, Russia continues its conquest of Ukraine: a war that will not end until Moscow achieves its goals.
Of course, the EU has yet to sanction Russian exports of gas and oil, an act that would be akin to suicide from an economic standpoint. Due to this advantage, Russia will continue its energy dominance, with the invasion of Ukraine guaranteeing this for the foreseeable future.
From the Kremlin’s perceptive, “two birds one stone” best summarises this war. Not only will Russia achieve its geostrategic goal of blocking NATO from expanding eastwards, but it will also definitively cripple Ukraine’s capabilities of supplying energy to Europe. After all, Ukraine, with its massive deposits of gas and oil in the Black Sea and further deposits of shale gas in Donbas and Lviv was the only alternative to Russian energy within Europe.
Russian energy hegemony
Russia is the third-largest producer of oil and the second-largest producer of natural gas on the planet, producing 10.7 million barrels of oil and 648.5 billion cubic meters of gas in 2020 alone. On the European continent, it has traditionally had no competitor, supplying around 26% of Europe’s oil and a further 38% of Europe’s gas.
Ukraine prior to 2014 had the opportunity to challenge Russian dominance over European energy, it would not overtake Russia, but Kyiv could produce enough to make Moscow wary. Unfortunately, the “Texas of Europe” as the former US Energy Secretary Rick Perry called Ukraine, has already lost 80% of its oil and gas in the Black Sea, now under Russia’s Exclusive Economic Zone (EEZ). The Russian annexation of Crimea in 2014 has allowed Moscow to dominate the Black Sea and its plentiful resources, with the Crimean continental slope alone having an estimated 766.6 billion cubic metres of gas and 232.6 million tons of oil.
To make matters worse, the shale gas in Donbas will: if Russia finds victory in Ukraine, be under the newly founded republics of Donetsk and Luhansk. This is especially troublesome for Ukraine itself, as it signed a $10bn deal with Shell in 2013, with commercial gas production beginning in 2017.
Russia does not need the extra resources, its current yearly production far outweighs Ukraine’s, but by denying Europe any access to non-Russian energy, it can continue to have power over European politics.
Solutions for Europe?
One day the EU will no longer need Russian energy, or so goes the dream known as the European Green Deal. This dream of achieving net neutrality by 2050 requires a strong, well fuelled and supplied economy with a substantial industrial base.
Therefore, the EU must rely on traditional sources of fuel until then. Besides overall cost, a total transformation of Europe’s infrastructure will be necessary. The EU will need a tremendous amount of wealth, roughly $1 trillion, most likely escalating over the years. Meanwhile, it will be of utmost importance to secure energy supplies into Europe until this process is complete, preferably at the lowest possible price. The Russo-Ukrainian war will derail these plans, at least to an extent.
With Berlin having a zero-tolerance attitude towards nuclear energy, to the point where it began to use coal again, the economic powerhouse of Europe is dependent on Russia. Indeed, many nations across Europe are dependent on Russia to varying degrees. Germany, Italy and Poland receive over 40% of their gas from Russia, while the likes of Finland and Latvia are far higher, over 90%.
So how can Europe wean itself off Russian energy? The answer is complicated. Nuclear energy is a potential solution, but it is expensive, roughly $20bn per power plant. Moreover, it will take years to build said power plants, in other words, Europe would still rely on Russian energy for the foreseeable future.
Renewables are at the top of the list for many in Europe: however, the transition will take decades and cost billions. As stated previously, the EU would still need energy to power it until the great dream is complete.
Europe is not ready for energy independence
The EU has ambitious goals for its energy question, but such ambitions are unachievable if Europe allows its industries to collapse due to a lack of energy.
While foodstuffs, industrial equipment and other minor trade goods may be produced in Europe, albeit at a higher price, or imported from elsewhere, nothing can replace Russian gas and oil in terms of costs, ease of access and overall amount. This is the great thorn on Europe’s back, one that will persist for decades to come.
Interestingly the United States is partially to blame for Europe’s lack of non-Russian energy. Earlier this year the US decided to stop supporting the EastMed pipeline. This new gas pipeline would supply Europe from the coasts of Israel and Cyprus. However, due to the Biden administration’s green energy focus, gas is considered to be outdated. Furthermore, since the US seemingly refuses to tap into its gas and oil reserves, it will not be able to aid the EU in any way.
The EU finds itself with no way to counter Russian dominance in energy, and the Union will have to decide its next geopolitical maneuverers with great caution.
As the Russian economy takes a beating due to sanctions and the costs of war, Moscow can rest easy knowing its continued dominance over European energy is all but inevitable
