The Russo-Ukrainian crisis, which started on 24 February 2022, brought war back to Europe. This war has visibly impacted the energy nerve of Europe as Russia is the primary exporter of energy, for – Liquified Natural Gas (LNG), oil and solid fossil fuel. Germany, in particular, had maintained a pro-longed diplomatic front in a bid to continue its energy trade which is largely dependent on Russia. Europe’s dependence on LNG and oil imports from Russia has highlighted the need for Europe to diversify its energy trade. The attack on Ukraine by Russia has invited several sanctions against the latter, together with steering the discussion towards the urgent need to branch out in the LNG and oil global supply market. Similarly, in the context of India, there might be some lessons to draw to prevent such a situation which might arise due to the concentration of the energy trade from only particular countries.
The pursual of NATO membership by Ukraine, an erstwhile Soviet state, and the refusal of western states to adhere to Vladimir Putin’s demand to bar Ukraine and other post-Soviet states from being included within NATO, are central to spurring the Ukrainian Crisis. After Putin recognised “the non-government controlled areas of the Donetsk and Luhansk oblasts (administrative regions) in Ukraine as independent entities and sent Russian troops into these areas,” he launched his military invasion of Ukraine on the aforementioned date. Following the invasion, the European Union (EU) imposed several restrictive measures and economic sanctions against Russia and her allies. However, Europe too is feeling the ripples of these sanctions, as the EU depends on Russia for almost 40 per cent of its total gas consumption, and it “accounted for around 45% of the EU’s gas imports in 2021 and almost 40% of its total gas consumption.”
The case for European Energy Diversification
The EU is one of the largest importers of natural gas globally. The case for diversifying energy dependency is more specific to certain European countries, particularly Germany. The post-World War II German idea of pacifism is a prudent attempt at maintaining peace and cooperation in the region. Germany has been a strong advocate of relying on diplomacy to resolve any conflicts in the area. An example of this is the visit by German Chancellor Olaf Scholz to Russia on 15 February 2022, to attempt to negotiate a diplomatic solution between Russia and Ukraine. His visit aimed to revive the Minsk Agreement, where Germany had participated at the negotiations table along with France, Russia and Ukraine. This however, was unsuccessful as Russia was not keen on any talks regarding the situation. Further, even domestically, Scholtz was met with criticism for his inability to negotiate a deal. The leading LNG suppliers to Germany are “Russian piped gas led imports at 32 percent followed by Norway at 20 per cent and the Netherlands at 12 per cent.” Germany’s LNG imports are used in heating homes, industries, manufacturing, as fuel, and to generate 15.3 per cent of its electricity in 2021, as per the German Association of Energy and Water Industries (BDEW).” It is hence a crucial step to look toward diversifying the source of fossil fuel requirements for Germany and other European states, away from Russian shores. Among the other EU member states, Italy is in the second place when it comes to dependency level on the Russian gas supply as it buys “about one-quarter (24 percent) of Russia’s total natural gas exports worth $5.8bn.”
For Europe, especially Germany and the other countries most dependent on Russian energy imports, part of the answer will be to stop looking north in Russia’s direction and start looking south to Africa. As the United States and other EU countries continued to impose increased sanctions on Russia as well as provide weapons and tactical support to Ukraine, Germany had been remarkably non-committal on offering military assistance. German Chancellor Scholz continued to reiterate that his country’s foreign policies were attuned with those of Europe and the NATO, but also prevented third party countries like Estonia from supplying German-origin weapons to Ukraine. Scholz held that Germany would never favour providing lethal weapons to other countries. The common public and the domestic opposition heavily criticised Scholz for this perceived diplomatic failure.
However, focused international pressure from the global West to act more proactively has compelled Germany to make a U-turn in their policy regarding Ukraine. It declared his decision to suspend the Nord Stream 2 gas pipeline in the Baltic Sea, that “is owned by a company in which the Russian state has a controlling stake. Additionally, Germany Chancellor Scholz announced that “$113bn (£84bn) for the German army” and committed to meeting the target of NATO military spending of 2 per cent. The German government also announced that it would send in “1,000 anti-tank weapons and 500 Stinger anti-aircraft defense systems to Ukraine. [It also] authorised the Netherlands to send Ukraine four hundred (400) German-made rocket-propelled grenade launchers, and asked Estonia to ship over nine Howitzers.” Besides increasing military spending, Germany also sided with the European Union’s decision to suspend seven Russian banks from the SWIFT messaging system for global financial transactions, baring the ones associated with energy, from the SWIFT messaging system for global financial transactions. The Polish Prime Minister was critical of this decision by the EU to exempt Sberbank and Gazprombank from sanctions. Although China and Russia have set up their own alternative platforms, around 70 per cent of the transactions continue to be conducted through the SWIFT system.
Alternate or Plausible avenues of energy
The International Energy Agency (IEA) came out with the “10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas” which highlighted, among others, not signing newer contracts with Russia; looking for newer suppliers; alternate sources of energy; and opting for low-emission, clean and efficient alternatives, like nuclear energy and wind energy. The adoption of energy efficiency measures was also suggested in homes and industries. These objectives are in line with the EU Green Deal to reduce emissions in the future.
Over the course of the unfolding Ukrainian crisis, Europe’s reliance on its energy trade from Russia might face numerous threats. Any sudden halting of the LNG pipelines would be catastrophic for the German economy. The primary pipelines, originating from Russia, on which Europe depends are the “Yamal-Europe, which crosses Belarus and Poland to reach Germany, and the Nord Stream 1, which goes directly to Germany via the Baltic Sea.”
Source – US Energy Information Administration
In the case of France, it derives less than 20 per cent of its energy needs through LNG, with nuclear energy alone constituting 70 per cent. As the dependence on the energy trade with Russia through LNG pipelines is under the international community’s close radar, pressure has been building on Europe to diversify either its source of energy supply or look at alternate sources of energy because of the sky-rocketing prices. The US ban on Russian oil imports and subsequent calls of diversifying and phasing out oil and gas imports from Russia, all amidst the Ukrainian crisis, has affected the sharp climb of energy prices. There is also the fear of Russia closing the fuel pipelines as a reaction to the sanctions against it, as well as the military support provided to Ukraine. While addressing the German Economic Minister Robert Habeck, Stefan Liebing, the chair of the German-African Business Association, urged Habeck to consider exporting LNG from “African countries such as Algeria, Nigeria, Egypt and Angola, which could help free Europe from its dependence on Russian gas.” Algeria is a major supplier of LNG to Europe, with substantial reserves. It supplies Italy and Spain through its undersea pipelines and has an LNG terminal. From there, natural gas could be transported to Germany via pipelines. The Libyan gas field are another source of energy supply connected to Italy. There has been talks to develop the Eastern Mediterranean Pipeline Project to supply the required energy from offshore gas fields of Italy to Europe.
Source – Deutsche Welle
The major natural gas reserves lie with Nigeria, which contains about a third of Africa’s reserves. The Trans-Saharan pipeline, which could supply around 30 billion cubic meters of gas from Nigeria, is “equivalent to about two-thirds of Germany’s 2021 imports from Russia”. It has been proposed to join the existing LNG pipelines such as the “Trans-Mediterranean, Maghreb-Europe, Medgaz, and Galsi pipelines that supply Europe from transmission hubs on Algeria’s Mediterranean coast.” The Maghreb-Europe Gas Pipeline in Algeria “conveys natural gas through Morocco to Spain and Portugal, and the Medgaz pipeline links Algeria directly to Spain.” However, the operationalisation of the Trans-Saharan pipelines, which are still in the initial stage, would take some time to fill the energy gap for Europe in the short run. Alternatively, Nigeria holds around 200 trillion cubic-foot reserves of gas and is a great option for exporting gas to Europe. This energy rush has led to a subsequent worldwide increase in the price of goods and delays in the supply chain.
Europe also relies on shipping for LNG imports from West Africa. Yet, in the case of Germany, it doesn’t have any LNG import terminals. Similarly, LNG loading ports with floating liquification plants can be used to transport offshore gas to LNG tankers, such as in the Greater Torture Ahmeyin field. African states with huge gas reserves also see the opportunity of widening the energy market to “fill the gap of around 150-190 billion cubic metres caused by the Russian energy.” It is also important to secure the energy supply from terrorist activities and violence caused by armed groups in the region, which leads to insecurity and instability in supply. An example of this is Mozambique, in the Cabo Delgado area, that has deep reserves of gas. The importance of security of supplies was reiterated by the Economy Minister of Germany, Robert Habeck, who also signalled the necessity to diversify resources and has delayed Germany’s plan to go carbon neutral, by looking towards nuclear energy and coal.
Additionally, the Southern Gas Corridor (SGC), which had been initiated by the European Commission, would be linking the Caspian Sea to markets in Europe, and aims to increase and diversify European energy supply.” It was stated to be capable of supplying 10 billion cubic meters (bcm) by the end of 2020, which had the potential to be expanded later. Similarly, other gas pipelines connecting Central Asia and the Mediterranean region are “the Trans Anatolia Natural Gas Pipeline (TANAP) and the Trans-Adriatic-Pipeline (TAP) to transport gas from Azerbaijan to Italy via Georgia, Turkey, Greece, Albania and the Adriatic Sea, by listing them on the PCI [Project of Common Interest] lists.”
The United States of America has proposed to relax sanctions on Venezuela to open up alternate routes for energy trade. Qatar has also been identified as a supplier of energy to Europe. However, Qatar has clarified that it is operating presently at full operational capacity limit, and thereby cannot replenish the complete requirement of European countries who previously traded with Russia for gas. Hence, this makes the diversification of the energy needs of a country more significant.
Even within the EU, the stress has been on expanding the supply of energy and building new LNG terminals and interconnectors. The rise in LNG supply prices has led to unintentional stress in the shipping industry, as it has also brought global production outages and shipping delays. LNG cargoes headed for Asia through the maritime routes have been rerouted to European ports to cater to consumers willing to shell out a larger sum, amidst the surge in gas prices. This has also led to stockpiling of LNG resources to prepare for the next winter in Europe, where gas is crucial in heating homes. Shell and Total, the leading gas and oil agencies, have been working on regularising the flow of gas tankers from the US, Nigeria and Qatar, towards Asian markets. This is because Europe is well connected by LNG pipelines and can be substituted, when necessary, with cargoes from other sources. Besides, Japan and South Korea are the major importers in the Asian market, and Japan makes use of LNG to meet the energy gap from nuclear energy production.
LNG imported through LNG terminals is manner of diversification from pipelines. Furthermore, the European Commission had presented the EU Strategy for LNG and gas storage in 2016, which talked of improving energy security and diversification of sources of supply. But due to the limited supply by Russia, Europe had lesser storage of gas even in the winter months. A limitation of this is that there can be only a finite amount of storage to be kept in contingency for the next winter. In the case of Germany, the German President, while addressing the German Parliament, revealed that Germany would increase their gas storage capacity up to 2 bcm and would import gas in coordination with the EU.
As gas imports have gradually reduced, in addition to the sabotage on the Nord Stream 1 pipeline in September, Germany has opted to diversify its energy resources. European LNG-dependent European states have started concentrating on other avenues for energy generation. Wind energy and solar energy are seen as promising alternates to LNG and oil, though with the caveat of being dependent on weather conditions. However, these would require an ample amount of energy backup. The usage of coal for power generation purposes has been proposed as an option to decrease the dependence on Russian energy. Despite coal being known as the dirtiest fossil fuel, there has been the push towards its usage for electricity generation. In the short term, it is seen as a viable option to substitute the continent’s gas needs. Russia has also been the biggest supplier of coal to Europe, nudging states in Europe towards Colombia, South Africa, Australia, Indonesia and the U.S. Despite the sanctions being imposed, shipments of coal from Russia were still being sent to the U.K., Germany and Latvia.
Nuclear energy is another alternative energy generation method which Europe could expand on, and in 2022 it accounted for 24.6 per cent of electricity produced in the EU. Europe has pledged to phase out the dependence on Russian energy imports by 2030 according to the Versailles Declaration, and to develop “three key dimensions: a) Bolstering […] defence capabilities; b) Reducing […] energy dependencies; and c) Building a more robust economic base.” However, that goal can only be met in the long term.
In the case of Germany, as the energy crisis is deepening its impact on its economy, German Chancellor Olaf Scholz has authorised the country’s three remaining nuclear power plants to continue working through mid-April 2023. The initial plan was to phase out the rest of the nuclear power plants by the end of 2022. The picture below depicts the nuclear power plants of Germany, which are Isar 2, Neckarwestheim 2 and Emsland.
Mr Olaf Scholaz from the Social Democrat (SDP) had to overrule his part’s alliance partner the Greens oppositions of the operation of the three nuclear power plants. However, as nuclear energy accounts for six per cent of Germany’s energy sources, the option of nuclear energy can not be done away with. The chancellor also requested that ministries produce a viable law to increase energy efficiency and establish a phase-out of coal by 2030. In order to secure the security of the energy supply, Scholz also stressed on the development of new hydrogen-capable gas plants. Russia’s energy supply failure forced Germany to change the composition of its energy mix.
It can be reiterated that to ensure the energy security of a country, it is crucial to diversify its energy imports for the smooth functioning of the economic activities and domestic needs of a state. Additionally, to mitigate climate related crisis in the long-term, it is also important to attempt to diversify towards greener and more sustainable sources of energy generation.
The views expressed are those of the author and do not reflect the position of the Centre for Air Power Studies.