EU Commissioner for Economy, Paolo Gentiloni, told an interview to the Italian newspaper Il Messaggero that the European Union is planning on curbing its dependency on Russian oil and gas by two thirds by the end of the current year. Then, the EU official added, over the course of the next five years, until 2027, imports of oil and natural gas from Russia are expected to be fully eliminated. The European Union is thus preparing to cut the umbilical cord tying it to the Eurasian energy giant, and the decision was apparently taken in the wake of Russia’s aggression against Ukraine, an unprecedented military intervention since the end of World War II. What the European official failed to mention, however, was exactly how the disconnection will unfold, and how this strategy is expected to be adopted by member states, which over the years have developed various degrees of reliance on Russian gas and oil. Besides, it’s not just EU countries seeking to become energy independent, but also other powerful economies, such as the United States and the United Kingdom. How will Europeans fare on the new highly competitive market?
Germany: industries that are reliant on Russian gas and political links to the Kremlin
The issue takes on the most delicate ramifications in the very country that has the largest economy at EU level – Germany. It’s common knowledge that nearly a quarter of the German industry’s energy input is based on natural gas, and that over half of the country’s energy imports comes from Russia. Discarding Russia as an energy source poses a major risk to the smooth running of the economy. Jörg Hofmann, a representative of the IG-Metall trade union, warned that such a step could lead to “a recession that will be more severe than the recessions we have seen so far”, Der Spiegel writes. As a unionist, he is right to be wary: nearly two million jobs in Germany are tied to the chemical, metal processing and food industries alone, which are all gas-hungry sectors.
“Energy distancing” is no easy task in political terms either. To be fair, the Scholz government did take firm action ever since the outset of the conflict, suspending the Nord Stream 2 project. Still, the project is deeply rooted in German politics, making it hard to remove with a simple cut, to use oncological surgery terminology. Germans have boycotted their own nuclear power plants, as well as the country’s coal-based energy production. On the other hand, Germany’s first Russian gas imports go back to the 1970s, from the days of the Soviet Union. Even prior to 1990, Russia accounted for 50% of Germany’s total gas imports. The transformation of Gerhard Schröder from former chancellor to lobbyist of Russian gas is therefore not something unnatural in Germany, evidence of which can be found in the fact that other politicians with longer or shorter careers have followed in the former chancellor’s steps. These days, the German media is exploring every aspect of the relation between the governor of the Mecklenburg–Western Pomerania land, Manuela Schwesig, Gerhard Schröder, currently sitting on the board of Nord Stream AG as its chairman, and Matthias Warnig, CEO of Nord Stream 2, ex-officer of the Stasi secret police and a close associate of president Vladimir Putin. Now, after the start of the war in Ukraine, “the former beacon of hope for the German Socialists, Manuela Schwesig, has faded away”, Der Spiegel writes.
Who brings in the firewood?
Whenever a member of the club turns violent and starts attending meetings while being drunk, the others want to kick him out. The problem is that everyone pitched in to ensure the smooth functioning of the community, and it was the drunkard who brought the firewood. If we kicked him out, who then brings in the firewood in his stead? The same analogy applies to the question of whether to cast out Russia from the major global trade routes. It’s not a pleasant business, and overall it is a sign of regress. And all the great scholars from David Hume and Adam Smith onwards have taught us that trade is the engine of civilization. This time around, kicking out a rowdy member of the club could also be an act of self-awareness, when the civilized worlds realizes it has to live with some constraints in order to uphold its rules-based way of life. Yet the question remains: who brings in the firewood? And everyone’s now out looking for suppliers.
The USA, between “drill, baby, drill!” and a possible outreach to Maduro’s Venezuela
Russia is the world’s second-largest oil producer. The USA ranks first. When global markets went haywire, Washington decided to release 1 million barrels of oil from its strategic reserves. Additionally, the Biden administration has lifted the suspension on oil leasing on federal lands. The Economist writes that, despite gloriously rising the democratic flag after the Trump era, the republican slogan “Drill, baby, drill!” seems more topical today than ever before. Nevertheless, Diesel prices at the pump have gone up all across the USA as well.
The EU wants to gradually do away with imports of oil and gas from Russia. So does the United Kingdom, which also wants to completely eliminate its reliance by the end of the current year. Washington was even more firm: it cut off all imports shortly after the start of the invasion. But that doesn’t mean it isn’t looking for alternate sources. Last month, three US Department officials met in Caracas with Venezuelan dictator Nicolás Maduro. Three days later, president Joe Biden announced the ban on oil imports from Russia.
“The timing (of the meeting) suggests the administration’s real effort to get more oil”, says Elliot Abrams, a former special representative for Venezuela under Donald Trump, Joe Biden’s predecessor at the White House, quoted by The Economist. For now, oil imports from Venezuela are off the table in the United States, and Maduro himself faces charges of “narcoterrorism”, and there’s a $15 million reward for any information that might lead to his capture. But the context is highly volatile, and the events in Eastern Europe seem to have an impact on South America.
Alternate oil sources: Russian-friendly autocracies
Energy imports from Russia account for 8% of the UK’s total oil demand. London has reoriented towards two major oil producers, Saudi Arabia and the United Arab Emirates, which both have tense relations with the Biden administration. In mid-March, British Prime Minister, Boris Johnson, visited both Saudi Arabia as well as the United Arab Emirates, where he brought up the issue of diversifying his country’s energy sources. Both Arab countries promised they would contribute to stabilizing global energy markets and would implement a larger number of eco-friendly exploitation technologies. Another player in the big league of global oil producers is Iran, which this year expects the international community to lift sanctions targeting its economy (including oil exports), should it reach an agreement with the West regarding its nuclear program.
Yet a closer look reveals that all alternatives to Russia in terms of oil imports have one thing in common. Iran, Venezuela, but also Saudi Arabia and the United Arab Emirates, remain neutral, if not outright supportive, with regard to the Russian invasion of Ukraine. Moreover, the very accusations the West throws at Moscow in connection with the observance of human rights and the rule of law are also faced by the other global oil giants. In other words, should the West decide to take a major oil swap deal, its newfound partners will be different versions of Russia, smaller in size, but no less disinclined towards Western values.
Hence the criticism brought against all strategies to come up with “replacements”. In London, the House of Commons discussed Boris Johnson’s visit to the Middle East, some voices claiming the timing couldn’t have been worse, just days after Saudi Arabia had executed 81 activists, most of them Shia Muslims, who had taken part in the anti-establishment protests of 2011-2012. The same can be said of the United States, where every attempt of the Biden administration to lift the embargo on Venezuelan oil imports in the absence of significant domestic reforms is met with fierce bipartisan opposition. Similarly, Washington’s relations with Riyadh are the object of close scrutiny. So far, the White House has turned up the pressure regarding Saudi Arabia’s growing “rap sheet” in terms of human rights violations and its involvement in the civil war in Yemen.
Climate change, on standby
The consistent and concerted reaction from Western powers to Russia’s invasion of Ukraine has probably taken aback president Putin himself. Many believe the Kremlin leader had put his money on the frictions and tractions inside NATO and the EU, which are well-known to the world. Yet the response was a surprise to the West itself, who had long forgotten what it felt to make unanimous decisions, taken without hesitation and outside exhausting debates. What Western countries need to do know is act on their consensus. For the time being, alternatives to Russian oil and gas are very similar in nature: they come from countries with an arguable democratic framework. Besides, these are fossil fuels we’re talking about, at a time when the green transition might well make them obsolete. However, no clear-cut announcement has yet been made regarding investments in green energy. Eliminating the Russian oil and gas from the picture could present an opportunity, but no steps have been made so far. Have courage!