Russia Losing Its Grip Over European Energy Dominance

Multiple sources of natural gas will soon remove Russia from Europe’s energy marketCommentary To Russia’s great misfortune, its leader, Vladimir Putin, has overplayed his hand in Ukraine. What was supposed to be a quick military conquest of Ukraine that would amplify Russia’s military, diplomatic, and economic influence in Europe has become a disaster on all of those fronts. Windfalls  Even though the skyrocketing price of energy has led to a windfall for Putin, it will likely be only a temporary win. Yes, Moscow has benefitted from high grain prices and has been able to demand that energy be purchased in Russian rubles instead of dollars. But as things stand today, these outcomes will also prove to be short-lived and ultimately detrimental to Russia. In fact, the decline of Russia’s most critical sources of power is already underway. Not only have Russia’s vaunted military forces been shown to be not nearly as powerful as advertised, but they have been heavily depleted in Ukraine thanks to stiff resistance and Western anti-tank and anti-aircraft weapons. Putin’s NATO Pushback Boomerangs on Him Furthermore, Moscow’s invasion of Ukraine has driven both Finland and Sweden into seeking admission to NATO. That’s a definite setback for Putin’s desired degradation of NATO. What’s more, Western economic sanctions and Russia’s diplomatic isolation have damaged Russian prestige among the wealthiest and most powerful Western nations. Finland’s President Sauli Niinisto gives a press conference to announce that Finland will apply for NATO membership at the Presidential Palace in Helsinki, Finland, on May 15, 2022. (Alessandro Rampazzo/AFP via Getty Images) The cumulative result is that Russia is weaker today than it was before the invasion. Russia’s war against Ukraine has changed the energy calculus in Europe, if not the world. As former Clinton adviser Paul Bledsoe observed, “Russia’s invasion of Ukraine has hastened the globalization of gas markets and has complicated them significantly.” From Energy Bully to Outcast But it gets worse for Russia. The ultimate insult of the Ukraine invasion is that Putin has poisoned his best source of revenue upon which the Russians heavily depend. For decades, Europeans have relied on Russia for 40 percent of their energy needs to run factories and heat homes and offices. Future projections show Europe relying on Russian gas for up to 60 percent of their energy needs. This overreliance on Russian energy has given Moscow strategic power and influence over Europe and its economy. Whenever European policy has contradicted Moscow’s interests, energy could be withheld from Europe as a way of persuading the Europeans to change their policy to Russia’s liking. This is going on right now. Today, at the time of writing, Russia has cut off Finland from Russian natural gas. On May 10, Ukraine announced that almost one-third of Russian gas flows to Europe would be suspended or redirected elsewhere. But Moscow’s days of energy power dominance will be gone sooner than later. The Beginning of the End for Russian Energy Dominance On the Russian side of the equation, up to 75 percent of Russia’s natural gas revenues come from the European energy market. That number will be falling shortly. Moscow will look to the Asian markets to offset the loss of European revenues, but it won’t be soon enough. The Astora natural gas depot, which is the largest natural gas storage in Western Europe, is pictured in Rehden, Germany, on March 16, 2022. Astora is part of the Gazprom Germania Group. (Fabian Bimmer/Reuters) Transporting natural gas necessitates hundreds of miles of pipeline infrastructure that takes years to build and billions to finance. Russia simply doesn’t have the time, money, or technical capability to make that happen. Another option is liquified natural gas (LNG), where the gas is cooled to a liquid and then shipped or trucked in, but it’s expensive and can’t deliver the continuous volume capacity that a pipeline can. Again, Russia lacks the financial and technological capability to do this in any meaningful way. Of course, the European Union’s efforts to access non-Russian oil and coal sources are already underway. It’s now diligently considering other sources that don’t come with awkward strings attached, such as threats of nuclear war, invasion, or both. In fact, the EU has already said that it will seek to replace up to two-thirds of Russian natural gas with other suppliers and renewables by the end of 2022. Europe is considering the United States, North Africa, and Israel, among those sources. US and Other Gas Suppliers Help Europe The United States has agreed to supply the EU with natural gas equivalent to 10 percent of what the EU currently gets from Russia. As a global leader in natural gas production, the United States can and will increase exports to Europe. But as a consequence, it puts U.S. economic interests at odds with Russia’s. That will likely be poorly

Russia Losing Its Grip Over European Energy Dominance

Multiple sources of natural gas will soon remove Russia from Europe’s energy market

Commentary

To Russia’s great misfortune, its leader, Vladimir Putin, has overplayed his hand in Ukraine.

What was supposed to be a quick military conquest of Ukraine that would amplify Russia’s military, diplomatic, and economic influence in Europe has become a disaster on all of those fronts.

Windfalls 

Even though the skyrocketing price of energy has led to a windfall for Putin, it will likely be only a temporary win. Yes, Moscow has benefitted from high grain prices and has been able to demand that energy be purchased in Russian rubles instead of dollars. But as things stand today, these outcomes will also prove to be short-lived and ultimately detrimental to Russia.

In fact, the decline of Russia’s most critical sources of power is already underway. Not only have Russia’s vaunted military forces been shown to be not nearly as powerful as advertised, but they have been heavily depleted in Ukraine thanks to stiff resistance and Western anti-tank and anti-aircraft weapons.

Putin’s NATO Pushback Boomerangs on Him

Furthermore, Moscow’s invasion of Ukraine has driven both Finland and Sweden into seeking admission to NATO. That’s a definite setback for Putin’s desired degradation of NATO. What’s more, Western economic sanctions and Russia’s diplomatic isolation have damaged Russian prestige among the wealthiest and most powerful Western nations.

Epoch Times Photo
Finland’s President Sauli Niinisto gives a press conference to announce that Finland will apply for NATO membership at the Presidential Palace in Helsinki, Finland, on May 15, 2022. (Alessandro Rampazzo/AFP via Getty Images)

The cumulative result is that Russia is weaker today than it was before the invasion. Russia’s war against Ukraine has changed the energy calculus in Europe, if not the world. As former Clinton adviser Paul Bledsoe observed, “Russia’s invasion of Ukraine has hastened the globalization of gas markets and has complicated them significantly.”

From Energy Bully to Outcast

But it gets worse for Russia.

The ultimate insult of the Ukraine invasion is that Putin has poisoned his best source of revenue upon which the Russians heavily depend. For decades, Europeans have relied on Russia for 40 percent of their energy needs to run factories and heat homes and offices. Future projections show Europe relying on Russian gas for up to 60 percent of their energy needs.

This overreliance on Russian energy has given Moscow strategic power and influence over Europe and its economy. Whenever European policy has contradicted Moscow’s interests, energy could be withheld from Europe as a way of persuading the Europeans to change their policy to Russia’s liking.

This is going on right now. Today, at the time of writing, Russia has cut off Finland from Russian natural gas. On May 10, Ukraine announced that almost one-third of Russian gas flows to Europe would be suspended or redirected elsewhere.

But Moscow’s days of energy power dominance will be gone sooner than later.

The Beginning of the End for Russian Energy Dominance

On the Russian side of the equation, up to 75 percent of Russia’s natural gas revenues come from the European energy market. That number will be falling shortly. Moscow will look to the Asian markets to offset the loss of European revenues, but it won’t be soon enough.

Epoch Times Photo
The Astora natural gas depot, which is the largest natural gas storage in Western Europe, is pictured in Rehden, Germany, on March 16, 2022. Astora is part of the Gazprom Germania Group. (Fabian Bimmer/Reuters)

Transporting natural gas necessitates hundreds of miles of pipeline infrastructure that takes years to build and billions to finance. Russia simply doesn’t have the time, money, or technical capability to make that happen.

Another option is liquified natural gas (LNG), where the gas is cooled to a liquid and then shipped or trucked in, but it’s expensive and can’t deliver the continuous volume capacity that a pipeline can. Again, Russia lacks the financial and technological capability to do this in any meaningful way.

Of course, the European Union’s efforts to access non-Russian oil and coal sources are already underway. It’s now diligently considering other sources that don’t come with awkward strings attached, such as threats of nuclear war, invasion, or both. In fact, the EU has already said that it will seek to replace up to two-thirds of Russian natural gas with other suppliers and renewables by the end of 2022.

Europe is considering the United States, North Africa, and Israel, among those sources.

US and Other Gas Suppliers Help Europe

The United States has agreed to supply the EU with natural gas equivalent to 10 percent of what the EU currently gets from Russia. As a global leader in natural gas production, the United States can and will increase exports to Europe. But as a consequence, it puts U.S. economic interests at odds with Russia’s. That will likely be poorly received in Moscow or wherever else Putin may be residing.

North African suppliers and others will bring that amount up to 24 percent of what the EU imports from Russia. Unfortunately, North African suppliers are less reliable due to political instability.

A Leviathan Game Changer?

However, Israel may be a long-term energy source for Europe with its Leviathan natural gas fields just offshore in the Eastern Mediterranean.

Epoch Times Photo
The platform of the Leviathan natural gas field in the Mediterranean Sea is pictured from the Israeli northern coastal city of Caesarea on Feb. 24, 2022. (Jack Guez/AFP via Getty Images)

The Politics of Power and Energy

That said, getting the natural gas from the Eastern Mediterranean to Europe isn’t so simple. There are significant diplomatic and financial challenges in routing the pipeline through Greece or Turkey.

In 2020, Israel signed a deal with Greece and Cyprus to route the pipeline. But financing for the pipeline’s construction is not yet in place. Also, Turkey’s opposition to the plan led to its maritime accord with Libya, which has been an obstacle to its completion. Its support of Hamas, an avowed enemy of Israel, also complicates Israel’s coordination with Ankara.

Finally, Turkey has been unable to find its own energy in the Mediterranean, allowing it only to play a role as a spoiler in the project. Ankara’s resistance to the plan rests on its goal of having the pipeline run through Turkey and/or Turkish Cyprus, and not Greece, which would allow it to enjoy the revenue and political influence that comes with it.

That Turkey-Greek impasse remains unresolved.

But so, too, has the United States played a spoiler role in the EastMed project. The Trump administration was in favor of it. But in January 2022, the Biden administration cited its environmental impact concerns about the EastMed pipeline project, as well as the rationale for it, and withdrew U.S. support for it.

Russia’s Window of Dominance Is Closing

Leviathan gas is already flowing to Egypt, Jordan, and other regional customers. But critics say that a pipeline to Europe is not only too expensive, but geographic challenges are significant. Also, some estimates by U.S. administration officials say construction could take up to a decade.

But a pipeline may not be the only option for getting Israeli natural gas to Europe. For years, a multi-billion-dollar, floating liquid natural gas terminal in the Eastern Mediterranean has been proposed. Such a plan would quickly lift Israel into a global energy power.

With various proven natural gas suppliers moving to replace Russia’s place in the European market, Europe will have more energy options. The end result is that Russia’s window of energy dominance in the world is rapidly closing.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


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James R. Gorrie is the author of “The China Crisis” (Wiley, 2013) and writes on his blog, TheBananaRepublican.com. He is based in Southern California.