Global energy security

Not since World War II has the threat to global energy security been as severe as it is today.

Russia’s brutal invasion of Ukraine and the consequent geo-economic war between the Kremlin and the West disrupted global gas markets at a scale unprecedented in recent history. The Kremlin’s use of its power over energy markets as leverage – and Europe’s efforts to wean itself off of Russian natural gas and avoid a massive shortage this winter – are triggering price hikes and rerouting flows around the world.

No one is left unaffected, even those who thought they had prepared for every eventuality. For example, Pakistan, which had secured several long-term natural gas import contracts to increase its energy security in recent years, has seen partners break those deals to send their gas to new clients offering to pay more. The coffers of both the developed and developing world are being drained.

Meanwhile, the Kremlin is using the global energy crisis it created to sustain its economy in the face of severe international sanctions. Moreover, it is weaponising Europe’s dependency on Russian natural gas to try and break Western resistance to its ambitions in Ukraine.

Earlier this week, Moscow tried to tighten its squeeze on Europe further, saying it plans to reduce gas supplies through the Nord Stream 1 pipeline to Germany to just 20 percent capacity. In response, European Union energy ministers swiftly announced an agreement for the bloc’s members to gut gas usage by 15 percent this winter.

This was an attempt by Europe to show it would not give in to Russian pressure and abandon Ukraine in order to fill up its gas reserves. Such conflict-driven demand reduction, however, means that an already likely recession is now all but guaranteed. Following Gazprom’s latest cuts, analysts already predict the EU will not be able to reach its own target of refilling gas storage to 80 percent capacity by winter. Now that Europe made it clear that it is finally – and perhaps much belatedly – ready to take the steps to cut its need for Russian gas at any cost, the Kremlin will do everything it can to inflict maximum pain on Europe in the short term, while the dependency remains.

A recent German poll found that at the moment, 58 percent of the population is supporting sanctions against Russia despite potential negative impacts for Germany. Russian President Vladimir Putin is working to bring that number down – down to the point that it becomes untenable for Germany’s leaders to push for policies to support Ukraine and help the West win its confrontation with Russia. The waining of public support for the sanctions regime in the face of economic difficulties is an equally significant risk for other European governments.

Europe’s leaders are now facing the herculean task of simultaneously helping their industries survive on a reduced energy supply, supporting Ukraine’s war effort and maintaining public support for the sanctions regime amid a cost-of-living crisis largely manufactured by Russia that seems to have no real end in sight.

Energy is perhaps the most consequential front in the ongoing geo-economic battle between Russia and the West, and thus Europe needs to strengthen its hand there first.

After moving to address the demand side of the equation, now it needs to address the supply side of the problem to be able to shore up its economy to the furthest extent possible, and insulate public support for Kyiv and the sanctions regime against Russia.

There are some obvious steps that European governments can take – but have been reluctant to in fear of domestic backlash – to resolve the supply issue swiftly.

The Netherlands, for example, can pump billions of cubic metres of extra natural gas across Europe by increasing production at the Groningen gas field. Bewilderingly, however, it is still planning to take the entire operation offline next year over the risk of minor earthquakes in the surrounding area and some pushback from environmentalists. Germany can also increase its future capacity to supply energy simply by extending the lifespan of its nuclear power plants that are meant to come offline at the end of the year. The governing coalition said it is now considering this option, but the Greens – including Foreign Minister Annalena Baerbock – continue to resist the move. The party’s stance on this issue is somewhat understandable – after all, Germany’s Green Party was in large part borne out of Germany’s Cold War-era anti-nuclear movement. Nevertheless, by blocking a relatively straightforward and low-risk solution to a major problem facing the nation, it risks failing the test of being a responsible government partner at a time of war, less than a year after its best-ever election result.

Beyond increasing their own production capacity by any means possible, European nations should of course also work on forming new partnerships with suppliers outside their region. The global gas crisis and its impacts are by no means limited to Europe. It is therefore imperative that Europe seeks to bring together the international community to coordinate global supply.

When the world last faced such a major energy crisis, the Allies had significant control over the world’s oil supplies. British Petroleum and its predecessors, and the forefathers of the modern United States energy majors, controlled most of the Middle East’s petroleum at the dawn of World War II. Britain established the Petroleum Warfare Department and the Petroleum Board – which brought together all allied energy firms, including US ones even before Pearl Harbor brought the US into the conflict directly – to coordinate supplies for the war.

Today, ownership of global energy supplies is far more diversified. And while the US has pledged to use its role as a liquefied natural gas (LNG) exporter to support Europe, a fire this June at its flagship liquefication plant in Freeport, Texas has seen export capacity fall by some 17 percent. Thus addressing global gas shortages will require a coming together of key public and private players from across the world to develop a strategy for this winter.

Excerpted: ‘Europe can withstand Russia’s energy threats’.

Courtesy: Aljazeera.com