Opinion: the energy crisis in Europe gives the upper hand to Putin

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This is not the first signal that Russia is ready to hold Europe hostage to skyrocketing natural gas prices. But with Europe currently facing an energy crisis, context and timing matter – on both sides of the Atlantic. It’s pretty clear that Washington and Brussels need to be careful of what’s going on in Chizhov’s mind – and Putin’s in particular.

For Europe, the price of not getting closer to Russia could be debilitating gas shortages this winter, not to mention soaring gas prices. With natural gas being the main heating fuel for Europe, this is a potentially existential threat. And lately, prices have shown a tendency to fluctuate widely, often on the spur of, or prompted by, flippant remarks made by one man: Vladimir Putin.

On October 6, for example, prices jumped early in the day, reaching a level 10 times higher than their level at the start of the year, Financial Times reports. Within hours, however, Putin observed: “Let’s think about the possible increase in supply in the market, only we have to do it with caution. Settle with Gazprom and discuss it. (In other words, I can flip a switch and your savings and your company can be turned upside down.) Within hours, prices reversed sharply, the newspaper notes.

This barely subtle kind of pressure comes at a most sensitive time for Europe.

Germany is still trying to concoct a coalition government – and identify a successor to Angela Merkel as chancellor – after an election in which no clear leader emerged. As French President Emmanuel Macron is set to launch his own re-election campaign, rising gas prices as winter approaches could damage his reputation.

Europe could be at an inflection point in its energy vulnerability vis-à-vis Russia, for two reasons.

A new pipeline connecting Russia’s gas fields to Germany, dubbed Nord Stream 2, is moving forward. It aims to strengthen Europe’s access to gas, but also to grant Russia even more control over this access, which the United States stressed when it opposed the project. (Recently, the Biden administration lifted the related sanctions, giving an effective green light, despite its concerns.)

At the same time, Europe is moving forward with a transition from fossil fuels to clean, renewable energy sources. But this transition has not yet taken place. As Europe seeks a bridge from dirtier sources like oil and coal, relatively clean natural gas is considered a good choice.

And for gas, Europe depends on imports, especially from Russia.

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France, for example, imports almost all of its natural gas. France is one of the world leaders in nuclear technology, but Macron had previously pledged to rely less heavily on it. (Amid high energy prices and his looming re-election campaign, he’s backed off a bit, promising quick new nuclear investments, but the fact remains that Macron has pledged to which by 2035, France will not have more than 50% of its power. This should reinforce the importance of gas.) Germany, too, is turning away from nuclear and doing it even more quickly: the government by Merkel promised shut down all German nuclear power plants by the end of next year.

As Germany and France seek to reduce their dependence on nuclear power, they will likely turn to natural gas, at least until more wind and solar projects can come online.

Putin, one might guess, probably sees this as a rare opportunity to exert significant political and economic leverage. With Nord Stream 2 still under construction, Russia is already Europe’s main gas supplier, accounting for 41% of its imports. A shift to gas by Europe and a new pipeline to Russia to get it only strengthens Putin’s power.

Putin has already quietly demonstrated what life could be like on a continent that has become deeply, perhaps existentially, dependent on the Kremlin to meet its most critical energy needs. Russia transports only limited quantities through the current pipeline system that passes through Ukraine, and its state gas producer Gazprom is filling national stocks before replenishing storage sites in Europe.

As energy prices rise and the global economy struggles to grow after its post-2020 rebound, the gas shortage is already putting parts of Europe at risk of energy stagflation. These pressures could very well intensify, offering a possible foretaste of what may be on the near-term horizon, until Europe achieves a credible and sustainable transition to renewables.

Putin would clearly see a complete transition of the EU away from gas and towards renewables, as an imminent threat to his influence. This is yet another reason for Putin to look to Nord Stream 2 to reap as many benefits (financial and geopolitical) as possible before the EU can achieve its green conversion.

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The United States may not like the pipeline – former Secretary of State Mike Pompeo called it a Russian “coercion” tool – but there’s probably little Washington can do about it. Having already angered so many forces in Western Europe over a host of issues, including the withdrawal of the United States and NATO from Afghanistan and the covert security partnership developed between the United States, the United Kingdom and the Australia, the Biden administration must indeed be very careful.

The United States may have non-geopolitical reasons to oppose Nord Stream 2 – and it might have reasons to view natural gas supplied by the United States as a possible answer for Europe. The United States remains Europe’s largest supplier of Iliquefied natural gas, which can be transported by tankers.

Yet LNG is more expensive, relies on long-distance supply, and must be converted from liquid to gas on arrival. And there is already strong competition from other regions, especially China, for LNG. Nord Stream 2 would result in a guaranteed supply of natural gas to Europe, assuming EU member states approve it in the coming months. So for Europe, it remains an attractive option.

From a Russian perspective, Nord Stream 2 presents another beauty, beyond serving as a potentially cheaper competitor to US LNG: it could allow Russia to significantly reduce its natural gas shipments via the existing pipeline that crosses the Ukraine and from which Kiev collects transit fees. This could give Putin even more leeway in his rivalry with the decidedly pro-Western government of Ukrainian President Volodymyr Zelensky, who just tagged this summer Nord Stream 2 “a dangerous geopolitical weapon”.

Russia’s warnings to Europe could also be seen as a warning to the United States to back down in its determined opposition to Nord Stream 2 – and its opposition to Russia’s broader efforts to forge ties. more restrictive with Western Europe. Nord Stream is indeed a fait accompli. Yet perceived American hostility towards him could create a new wedge between Europe and America, at a time when the Trump administrations and now Biden have done enough to degrade transatlantic relations.

In this sense, the United States should back off and let the pipeline move forward without complaining too much. Until Europe stops relying on fossil fuels and makes a full green transition, Putin will keep the upper hand.

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