Winter is Coming: Can Europe Win the Energy Battle with Russia?

Winter is ComingCan Europe Win the Energy Battle with Russia?

With the Kremlin disrupting supplies of gas to the EU as part of its war effort against Ukraine, Nikola Mikovic looks at who will suffer most in the coming showdown

The European Union is determined to end its dependence on Russian gas. Quite aware that its energy giant Gazprom will sooner or later have to leave the European market, the Kremlin appears to be attempting to make this energy crisus as painful as possible. How will the upcoming gas crisis affect “the old continent”?

Europe’s farewell to Russian energy will be a long-term process. The EU aims to reduce its dependence on Russian oil and gas by two-thirds by the end of the year and to zero by the end of 2027. But in order to achieve such an ambitious goal, European countries would first need to find a way to survive the coming winter without Russian gas. That is why the EU plans to save as much natural gas as possible for the heating season. That is easier said than done.

Brussels claims that Moscow is using gas as a weapon, and is trying to blackmail the European Union.

According to the new EU energy rules, member states must ensure that the underground gas storage infrastructures are filled up to at least 80% of their capacity by 1 November. In an attempt to prevent Europe from ensuring its energy security, Gazprom has started deliberately reducing gas supplies via the Nord Stream 1 pipeline. On 11 July the pipeline connecting Russia and Germany via the Baltic Sea was closed “for annual maintenance work”. Even though Nord Stream 1 was reopened on 21 July, flows of gas never went back to normal. On 27 July, Gasprom halved the amount of natural gas flowing through the pipeline to just 20% of capacity.

As a result, the EU members that are still purchasing gas from Russia will have a hard time filling their gas storage prior to the winter. Brussels claims that Moscow is using gas as a weapon, and is trying to blackmail the European Union. Gazprom, on the other hand, insists that the only reason why it cut gas supplies to Europe is the delayed return of the turbine equipment, which Germany’s Siemens Energy had been servicing in Canada.

“Problems remain with unrepaired engines at the compressor station”, Gazprom said, accusing Siemens of “failing to fulfil its obligations” and “not returning a repaired turbine engine for the Nord Stream 1 pipeline”. 

However, Russian energy analyst Mikhail Krutikhin argues that Gazprom’s decision to reduce gas supplies to Europe is a purely political action which is “tantamount to declaring a gas war”.

“There are eight gas pumping units at the compressor station, and the absence of one turbine does not affect the pumping volumes in any way”, Krutikhin explained. 

The Kremlin, for its part, said that Moscow is “not interested in a complete stoppage of Russian gas supplies to Europe”. In other words, Russia will likely continue supplying a limited amount of gas to the EU countries, aiming to prevent them from filling their underground gas storage.

As a result, some EU members will have to reactivate coal power plants, even though last year Brussels announced an ambitious goal to reduce greenhouse gas emissions by 55% by 2030. Certain European nations are expected to turn to nuclear power, and those nations that have LNG terminals will seek to increase imports of liquefied natural gas from major producers such as Qatar and the United States. But the recent fire at Freeport LNG’s plant resulted in the reduced US natural gas export capacity, and Europe can unlikely count on additional volumes of the American LNG at least until the end of the year. 

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In the short term, Europe will likely remain dependent on Russian gas, which means that some EU members may have a hard time dealing with energy shortages this winter. In the long term, however, Europe may find a sustainable alternative to Russian energy.

“In the next five to seven years, Europe can almost completely switch to liquefied natural gas (LNG), as well as to natural gas from other producers”, said Sergey Vakulenko, an independent energy analyst based in Bonn, pointing out that the EU can count on gas supplies from Azerbaijan, and also from the Eastern Mediterranean, where several fields have recently been discovered. 

Indeed, reports suggest that Azerbaijan has already increased gas supplies to the EU from 8.1 billion cubic meters in 2021 to an expected 12 billion cubic meters in 2022. The EU also plans to purchase gas from Israel, and buy additional volumes of Nigeria’s LNG.

It is not a question of if Europe can survive without Russian gas, but if Russia and its sanctions-hit economy can survive without the European market. 

It is, therefore, not surprising that Nigerian energy officials will attend the Gastech conference – the world’s largest gas forum that will take place in Italy’s Milan in September. The summit will also be an opportunity for European energy leaders to reach deals with other significant gas producers. 

However, according to the International Monetary Fund experts, alternative sources could replace only 70% of Russian gas supplies, which means that Europe will almost certainly face with gas shortages, at least during the transitory period of the EU’s energy decoupling from Moscow.

But in the long-term, it is Russia, rather than Europe, that will get the short end of the stick. The Kremlin hopes to switch gas volumes from Europe to Asia, namely to China, even though the existing Russian pipeline infrastructure cannot transport nearly as high volumes of natural gas as it provided to Europe in 2021 – 155 billion cubic meters, or around 40% of the EU’s total gas consumption. 

Last year, Gazprom exported 16.5 billion cubic meters of gas to China, and even if Moscow manages to increase it to 38 billion by 2025, it will still be a drop in the ocean compared to the amount of gas it used to sell to Europe. Thus, it is not a question of if Europe can survive without Russian gas, but if Russia and its sanctions-hit economy can survive without the European market.