Russian aggression marks a turning point for European energy policy

As Vladimir Putin ordered troops into Russian-held regions of south-eastern Ukraine on 21 February 2022, the Nord Stream 2 pipeline – the €9.5bn project to double Russian gas flows into Europe – stood operational, waiting only for the final certification by the German government and the European Union. The full invasion of Ukraine, just three days later, changed everything, ushering in a comprehensive recalibration of European energy policy.

For decades, Europe has been excessively reliant on one country – Russia – to meet energy demand. Dependence on a single actor to fulfil supply needs contradicts the fundamental tenets of energy security. The security implications of this overreliance have been evident for some time, but the allure of comparatively cheap gas and oil maintained this relationship of convenience. In 2021, 45% of total EU gas imports came from Russia, accounting for almost 40% of the bloc’s consumption, according to the International Energy Agency (IEA). As such, European consumers remained acutely vulnerable to any supply disruption.

It took a full-scale war on the continent for a realignment of European energy policy. Nord Stream 2 was shelved, the Ukrainian electricity grid was synchronised with the continental European grid and the European Commission presented the REPowerEU proposal to rapidly reduce dependence on Russian fossil fuels and accelerate the transition to clean energy sources. By November 2022, Russian pipeline gas imports stood at 12.9%, a precipitous decline compared to 2021 levels.

The strategic and normative imperative to move away from Russian energy imports has significantly impacted Europeans. In the context of global supply constraints, securing alternative energy sources has been challenging and, in a tight international market, has increased prices. This substantial energy price hike is the main component of Euro-area inflation, and European energy citizens are bearing costs as the EU rapidly diversifies its energy supply.

The EU’s expeditious decoupling with Russian pipeline imports in 2022 was successful because of the collective solidarity underpinning this shift. However, it is worth highlighting that not all member states are equally reliant on Russian gas to power their economies and not all European political leaders share the same steadfast commitment to isolate the Putin regime and force an end to this brutal war.

As inflation rips through the EU, causing a serious and sustained cost-of-living crisis, it is plausible that this collective European divestment of Russian energy imports could change. Analysts recognise the possibility that Russia could selectively increase gas flows to some countries in return for political favours. Indeed, “[e]nergy weaponisation can work both ways: not only cutting demand, but also sending cheap energy to friends,” notes a recent policy brief published by think tank Bruegel.

In its bid to eliminate Europe’s energy dependence on Russia, the European Commission’s REPowerEU plan recognises that accelerating the green transformation is the most effective way to bolster energy sovereignty and strengthen economic growth. This geopolitical necessity to turbo-charge renewable energy production constitutes an adrenaline shot for Europe’s ambition to lead on international climate action. However, the accelerated roll-out of renewable energy projects alone will not address the structural challenges currently facing the European energy system.

Over the short and medium term, European policymakers will need to integrate and institutionalise certain measures, which were introduced as ‘emergency procedures’ to brace for winter ahead. As the EU recasts its energy policy, burden-sharing mechanisms and joint procurement initiatives will need to be strengthened. It is essential that Europe enhance its gas storage capacity and increase the number of liquefied natural gas terminals, while also ensuring that new gas contracts are ad idem with the commitment to reach net-zero emissions by 2050. Perhaps, most significantly for Europeans, gas demand reduction practices will need to be regularised going forward.

In August 2022, a Council Regulation set a target to reduce natural gas use in the EU by 15% between August 2022 and March 2023. This measure was introduced to ensure the security of supply in the face of further energy weaponisation by Russia during the coldest months of the year. Across the EU, member states implemented a wide range of instruments, targeting consumers, businesses and industry, with the aim of limiting gas use during the ‘heating period’. In the context of a highly volatile international gas market, the continued disruption caused by Russia’s war in Ukraine and the current limitations of the European power sector, the coordinated reduction of gas during colder months will be necessary for upcoming winters and, perhaps, even beyond 2024.

If all Russian pipeline gas to Europe stopped, gas consumption would need to fall by 20% in winter 2023/2024, under normal weather conditions, according to Bruegel. The full cut-off of Russian gas to the EU has not yet occurred, but such a scenario is a credible possibility. Of course, even further reductions in European gas consumption levels would have a deleterious and wide-ranging set of effects on economies and standards of living for citizens.

Russia’s weaponisation of energy impacts ordinary energy consumers, who need fuel to heat, eat and move. As the disruptive move away from Russian energy sources continues over the coming year, European citizens will face record-level utility bills and will be required to reduce the amount of energy they consume. As the European Central Bank urges the wind-down of temporary government energy subsidies, a more durable approach to support those in society most affected by energy-price hikes is warranted.

The decision by European leaders to sever the energy relationship with Russia is an appropriate, albeit overdue, policy choice. Russia’s full invasion of Ukraine has marked a turning point in European energy policy. While the months ahead will be characterised by instability in the energy sector, the REPowerEU plan charts a pathway to a resilient clean energy system, one which is independent of Russian imports.

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.