Europe’s War of Energy

the first phase of the invasion began in 24 February of 2022. The physical operations of the energy trade changed little after Russia’s invasion of Ukraine on February 24th. Oil and gas have continued to flow from Russia to Europe, even through the pipelines which cross Ukraine. Since the invasion, energy prices have risen sharply, significantly benefiting Russia and other oil and gas producers. In early April, EU foreign policy chief Josep Borrell said that imports from Russia have been costing Europe at least €1 billion a day. Only in late June were physical gas supplies cut – not as a result of any Western sanctions but because Russia has chosen to deny supplies to countries such as Poland and Bulgaria, which refuse to pay in roubles, and to countries such as Finland, which has applied for NATO membership. In each of these cases, the limited supplies which have been cut have been easily replaced. However, on July 11th Russia also shut the major NordStream 1 pipeline for scheduled maintenance, potentially cutting up to 60 per cent of supplies to Germany. If Russia chooses not reopen the pipeline, those supplies will be harder to replace. The risk has led the government in Berlin to accelerate the implementation of the next stage of its emergency response plan. The price rises seen over the past year – 60 per cent for oil and a remarkable 400 per cent for natural gas in Europe – have been driven by two factors. First, the surge in demand as the pandemic faded around the world, and then after February 24th by fears that western sanctions and Russian retaliation would cut back trade and trigger a fierce competition for available supplies. [2]

Europe will have cut its natural gas imports from Russia by a third to a half. Supplies from the US and Qatar will flow to Europe through existing facilities, supplemented by projects such as the floating terminals being planned around a number of German ports. These imports will help to close the supply gap, but at a price. The energy security agenda will have moved beyond dreams of self-sufficiency to bilateral and perhaps multilateral deals. Direct long-term deals, already the norm for importers such as Japan and China, will have begun to dominate the market, marking the end of the open trade structure which has operated since the 1990s. [2]