On September 2nd, Russia flexed its energy weapon once again when it refused to resume natural gas supplies to Germany via the Nord Stream 1 pipeline, citing “repair work.”
Putin knows the stakes are high for Europe. The continent has been facing an energy crunch since last fall. Gas and electricity prices are forecast to rise around 40 percent within the Eurozone, according to Deutsche Bank. The war in Ukraine, meanwhile, has brought the threat of Russia’s energy weapon to the forefront of the European Union. If energy prices continue to increase, and if shortages threaten industries and households, Western unity and solidarity with Ukraine could falter. Governments may feel pressure to try to patch up relations with Moscow to get access to cheap energy sources.
And yet, Russia’s strong-arm tactics are proving far less effective than Putin hoped. Europe and Germany have taken quick action to source alternative gas over recent months. They will likely manage their energy needs this winter, despite the heavy cost of higher energy prices. If Berlin and Europe hold the course beyond this winter and continue energy diversification efforts, there is real hope the continent will finally end its fossil fuel dependence on Russia.
Until now, Europe had been in a mess with gas. The continent was around 40 percent dependent on Russia in 2021, despite ongoing efforts at diversification. Germany’s dependence was the most acute: not as a percentage of the country’s energy mix, but because it imported by far the largest volume of Russian gas in Europe. Around 95 percent of its gas needs were met by imports, over half of which came from Russia.
To understand how Germany got here, look no further than Nord Stream 1. The pipeline was conceived at a time of long-standing political tensions between Kyiv and Moscow, which resulted in a number of gas interruptions to Europe, including in the winter of 2009. As the largest European industrial power, Germany sought to ensure its gas supplies would not be dependent on transit through the Ukrainian pipeline system. Designed to get cheap gas directly from Russia, Nord Stream 1 embodied Germany’s period of opportunism under Chancellor Gerhard Schröder, who developed a close friendship with Vladimir Putin and, after leaving office, went to work for multiple Russian state-owned companies.
This reliance on Russia meant that Germany was acutely exposed to the Russian company Gazprom’s strong-arm tactics over prices and fluctuations in supply. This month’s “repair work” excuse to explain the interruption of Nord Stream 1 operations (although the pretense was subsequently abandoned) was in line with the Kremlin’s past tactics. Whether in the Baltic States, in Ukraine, or in Central Asia, Russian energy companies have a long history of announcing “breakdowns” or “repairs” when the Kremlin sought to halt or divert energy supplies from countries that were not compliant politically.
Germany’s poor energy planning only made things worse. Over the years, Berlin tried to diversify its energy supply away from fossil fuels with a policy dubbed Energiewende (energy transformation). But the poor execution for Energiewende, which also sought to eliminate dependence on nuclear power, made the country even more dependent on Russia. As Germany followed plans to close its last nuclear reactors by 2022 and phase out coal by 2038, it faced possible energy shortages and projected grid blackouts even before the war in Ukraine began. As a result, Germany continued with plans to launch an additional Russian pipeline—Nord Stream 2—in 2022.
But Russia’s war in Ukraine finally woke Berlin up. There is now reason to be cautiously optimistic that Europe will wean itself off Russian gas.
In the short term, plans are being made for this winter. Immediately following the invasion, Chancellor Olaf Scholz announced the postponement of Nord Stream 2. In its place, the government is rapidly developing import terminals to allow the transportation of liquefied natural gas (LNG) via ship. Of the five planned floating small-scale LNG import terminals, three should be built by the end of 2022, while two more will be completed in 2023, helping to alleviate the crunch in the coming months. Germany will also likely be able to rely on pipeline gas flows from neighboring countries such as France and Poland, and Scholz’s government has announced a $65 billion relief package for energy prices.
On the EU level, meanwhile, there are discussions about electricity subsidies. In preparation for the winter, the EU’s natural gas storage facilities are more than 80 percent full. Europe can still expect further price rises, while industries and households will face government-imposed restrictions on energy usage, but the worst-case scenario of devastating shortages will likely be avoided.
Beyond this winter, it’s also clear that Europe is freeing itself from Russian gas pipelines in the long term. Even before the war in Ukraine, the continent was projected to account for nearly 15% of global LNG demand by 2025, and the share of LNG in total EU gas imports has been continually growing. Many of the previously most dependent countries on Russia have built import terminals and succeeded in reducing their reliance on Gazprom. Lithuania and Poland have stopped imports of Russian fossil fuels altogether in the past months. In total, the EU’s reliance on Russian gas imports has dwindled from 40 percent to 9 percent since February.
A number of new and planned pipelines will help this transition. The completed Southern Gas Corridor pipeline is already bringing gas from the Caspian Sea near Azerbaijan to southeastern Europe. France has revived plans for a new pipeline from the Iberian Peninsula. The new Baltic pipeline from Norway via Denmark to Poland is set to open this month. An interconnecting pipeline between Poland and Slovakia was also completed in late August. With its large LNG import terminal Świnoujście and the Baltic pipeline, Poland stands to become a gas hub for central Europe—a position Germany previously sought with the planned Nord Stream 2.
In short, this crisis is spurring significant changes to Europe’s energy policy. Diversification away from Russian energy this winter, combined with diversification away from fossil fuels towards renewables over the coming years, will complete Europe’s long-awaited energy transformation. Despite the mistakes of the past, and the tough months ahead, it’s likely Europe will emerge from this crisis stronger, more resilient, and more united.
Dr. Agnia Grigas is a senior fellow at the Atlantic Council. Her recent books include The New Geopolitics of Natural Gas and Beyond Crimea: The New Russian Empire.
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It is barely mentioned that Germany is in this position due to single purpose dedication to a climate agenda. After an insane amount of subsidies for renewables Germany still helped finance Russia’s invasion of Ukraine while littering their landscape with endless wind farms.
Russia invaded Crimea in 2014. Germany and Europe should have begun weaning off Russia energy then. But no, when it was suggested that they do so, Germany snickered.
As an aside there is a big bill coming due on the wind farms as well as they age out and become toxic trash. Will they be replaced? Some say not all. This will require more fossil fuels
Germanys energy policy can only be described as an abject failure due to the lack of balance on national, economic and environmental security.
For example, how many businesses will declare bankruptcy over the winter due to energy costs? How will skyrocketing energy prices impact the cost of goods and services provided by those businesses that can survive? How deep will Germanys recession be due to their self inflicted energy crisis?
What is even more bizarre is that the US is now following in their footsteps. So shortsighted unless of course it’s purposeful.
Now if only the Biden Administration would admit the danger Europe’s in and stop kowtowing to Russian- and Emirati-back “environmental” groups, the U.S. could be helping to offset the shortfall. If the Dominion pipeline hadn’t been blocked by repeated fatuous injunctions filed by activists, we could already be exporting West Virginian natural gas from Norfolk, Virginia.