Europe has dodged Putin’s gas bullet. But it’s still thirsty for cheap energy

By CNN

Published September 6, 2023 11:42 pm

CNN

Analysis by Luke McGee, CNN

(CNN) — From the moment Russia’s full-scale invasion of Ukraine seemed inevitable, Europe knew it would soon have to ask itself some very complicated questions.

High among those was whether the continent could wean itself off the Russian gas it had thirstily guzzled for decades – and avoid being at the mercy of President Vladimir Putin should he cut that supply off in response to support for Ukraine.

For Europe, energy security has always been a trade-off: Cheap, imported energy comes with the risk of dependency on the countries from which it originates.

In the case of Russia and its natural gas, officials initially speculated that a long, cold winter in 2022-23 could force Europe to temper its punishment of Moscow. After all, developed countries like those in the European Union could not reasonably let their citizens go cold for the sake of Ukraine.

A combination of luck, planning and Europeans’ support for Ukraine, however, left the energy war – once considered Putin’s ace in the hole – redundant. Europe had an especially mild winter while governments and citizens made a concerted effort to use less gas.

That combination of a warm winter and lower gas consumption created a window for Europe to pivot from its Wandel durch Handel (Change through Trade) policy – which assumed that Russia would fall in line with Western values for cash.

Step one was reducing imports from Russia. In 2021, the year before the full-scale invasion of Ukraine, 45% of all gas imported by the EU came from Russia. In Germany, that figure stood at 52%. Those numbers have since plummeted. According to EU data, in Q1 of 2023, Russia accounted for just 17.4% of all the bloc’s imported gas.

Step two was to take advantage of the warm winter and fill up gas reserves in preparation for the cold season in 2023-24.

Europe’s gas stocks are already so full this year that there is a consensus the Kremlin will not be able to weaponize energy in a way that would alter European resolve against Moscow and support for Ukraine. The EU as a whole hit its target of stocks being 90% full by mid-August, months ahead of its November 1 deadline.

What’s more, Europe has significantly diversified its sources of energy.

Now for the bad news. Despite these efforts, officials and analysts are fearful that however impressive these advancements have been, Europe’s energy is far from secure in the long term.

The most immediate point of concern is that for all Europe has diversified its imports of gas, much of that currently sitting in reserve is liquefied natural gas (LNG).

“LNG is such an obvious solution that it became the priority, but because LNG is also so flexible and tradable it’s a bit harder to trace the provenance,” says Milan Elkerbout, research fellow at the Center for European Policy Studies.

“That means indirectly some of the LNG can come from Russia still so contribute to their revenues,” he adds.

While the EU says most of its LNG is bought from the US, Qatar and Nigeria, it is often sold on exchanges where contracts are for volumes without any reference to origin.

The second – and arguably more important – area of concern is longer term.

Though Europe might have partially ditched the Change through Trade policy with Russia, it is still reliant on others for energy. And when it comes to energy security, dependency ultimately brings us back to that classic trade-off: economics versus risk.

One of the ways the EU hopes to shake itself from energy dependency is through its Green Deal, a lofty plan to make Europe the first climate-neutral continent by 2050. The project, which at current projections will cost over €1 trillion ($1.07 trillion), will be achieved through numerous means, from planting 3 billion new trees to renovating buildings to be energy efficient. Of course, massive investment in renewable energy and clean transport will also play a huge part.

The first major milestone in the Green Deal is for EU greenhouse emissions to drop by 55% before 2030, compared to 1990 levels. Critics are increasingly worried that slow progress to hit this target, on top of enormous costs for individual member states, will see some look to another foreign source to aid the energy transition: China.

Few in Brussels will tell you that the EU’s relationship with Beijing at present is satisfactory. EU Commission President Ursula von der Leyen has recently changed her view of China to a more hawkish position, talking in some detail of the need to “de-risk” Europe’s relationship with the country. However, she also accepts that many of Europe’s long-term plans would be best achieved working in partnership with China, including her ambitions on a green Europe.

Von der Leyen’s position reflects the divergent views among the EU’s 27 member states. Some are extremely hawkish and see China as an authoritarian bully and existential security threat; some see it as an obvious source of cheap solar panels, wind turbines and batteries. Others see no alternative to working with China, but wish to proceed with caution.

The threat, as some see it, is that China has strategically made itself a key player already in many of the technologies and critical raw materials that are essential to a green transition.

“China began its industrial strategy for green energy about 15 years ago. They’ve done it so well, securing natural resources like lithium for batteries, steel for wind turbines, and already built the manufacturing capacity to make all this gear,” says Adam Bell, a former UK government energy official.

“Meanwhile, Europe dithered and it’s now probably unavoidable that China will play a significant role in Europe’s green future without radical action,” he adds.

What does all this have to do with geopolitics and security?

“China’s state-subsidized capitalism, along with its control of a significant amount of critical raw materials, gives Chinese industry a significant competitive advantage, which European companies will increasingly find hard to match,” says Velina Tchakarova, a leading expert on European security.

“China’s tactics to divide and weaken unity among America’s European allies along with its regional ambitions in places like Taiwan could become a pressure point where China leverages its geo-economic influence through dependences on minerals and rare earths to achieve geopolitical aims,” Tchakarova says.

Multiple Western officials pointed to more direct security threats posed by Beijing if Europe does end up relying on it for its green transition. Those threats range from supply vulnerabilities, as Europe saw with Russia, to direct cyberattacks through technology created in China. While European officials are often embarrassed to address the matter publicly, senior EU security sources have previously told CNN that China is still the primary source of cyberattacks within the EU, most focused on corporate espionage.

China has repeatedly denied involvement in cyberattacks.

China is not the only threat when it comes to energy security in Europe. The EU imports energy from many countries whose neither democratic nor geopolitical aims match those of Brussels: Qatar, Saudi Arabia, Khazakstan, Libya, and, of course, Russia.

Europe has taken great efforts to address this and the pace at which it has responded to the Russian crisis is impressive, given it was once thought impossible. However, Europe’s large and aging populations – combined with its stagnating economies – still require huge amounts of energy if they are to sustain their current way of life.

As one EU diplomat put it: “It is one of life’s ironies that the countries holding the cards in energy are sometimes ones who are at best unreliable partners and at worst future enemies.”

Article Topic Follows: CNN-Opinion

Jump to comments ↓