European leaders’ relief over last week’s resumption of natural gas flows from Russia’s Nord Stream 1 pipeline was short-lived, after the Kremlin announced on Monday that it would reduce supply to the E.U. From Wednesday.
Nord Stream 1 is a crucial undersea gas pipeline linking Russia to Europe through Germany. It was initially stopped for 10 days on July 11. Russia claims it had maintenance problems. At 40%, the pipeline operates at its maximum capacity. However, this number will fall to 20% starting next week. E.U. has previously accused Moscow of energy blackmail, and on Tuesday the bloc’s energy ministers struck a deal to reduce gas consumption by 15% from August to March amid fears of a total cut-off in the coming winter months.
Many European countries rely on Russia for their gas supplies. This is essential to heating homes and the power industry. The resource has become a focal point of E.U.-Russia tensions, with Moscow having already cut off gas to six countries and reducing supply to six more in response to the bloc’s sanctions over the war in Ukraine.
E.U. In order to avoid the worst, they have been seeking gas imports from other countries like Nigeria. TIME has been told by analysts that the EU will have to invest in green energy and reduce demand to ensure European energy security.
From where does Europe obtain its gas?
E.U. imports a huge amount of its natural gas—around 40% prior to the war in Ukraine—from Russia because it’s both cheap and convenient, with the Nord Stream 1 pipeline carrying the majority of it. Germany alone accounted for around 20% of Russia’s total gas exports in 2020—but Germany also distributes Russian gas to other European countries.
With the Nord Stream 2 parallel pipeline, an expansion of the import route was planned. Although construction was completed in September, Germany shelved the project in February in response to Russia’s aggression in Ukraine.
Europe’s dependency on Russian gas was no accident, explains Raphael Hanoteaux, senior policy adviser at climate change think tank E3G. This was done as part of an extensive, decades-long effort to link the two countries. “Germany’s theory was that by increasing dependency on Russia, they would be trading with them more,” Hanoteaux says. “And if Germany and Russia were co-dependent, it would be less likely that they’d become adversaries.”
John Lough is an associate fellow of Chatham House’s London-based thinktank Chatham House. For some time this theory appeared to be working. “Even [during the Cold War] after the Soviet Union invaded Afghanistan and through to the nuclear weapons crisis in the early 1980s, the gas flowed, because the Soviet Union needed hard currency, and Europe wanted Soviet gas.” Germany continued to back the construction of the Nord Stream 2 pipeline in 2015, even after Russia’s annexation of Ukraine’s Crimea region in 2014.
But the war in Ukraine exposed the flaws in Germany’s high-risk strategy, says Lough, as Russia is leveraging its control over gas exports to increase pressure on European leaders. “That was a gamble that [Germany] took—we’re now seeing that it hasn’t paid off.”
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How Europe prepares for the Russian gas disruption
Russia currently supplies around 15% of Europe’s natural gas, well below pre-war levels. This decline in energy supplies has caused prices to skyrocket and contributed to economic anxiety and a crisis of living standards across Europe. Moscow’s latest announcement has only stoked those concerns.
“Russia is blackmailing us. Russia is using energy as a weapon,” said European Commission President Ursula von der Leyen, ahead of Moscow’s announcement. “Therefore, in any event, whether it’s a partial, major cut-off of Russian gas or a total cut-off of Russian gas, Europe needs to be ready.”
E.U. The E.U. has previously pledged to reduce Russia’s gas imports by two-thirds in a year and seeks to diversify its supply with countries like Israel, Egypt, and Azerbaijan. Human rights groups have criticized the E.U.’s approach, arguing that repressive regimes in countries like Azerbaijan will use the deals to evade accountability for rights violations.
And after months of intermittent reductions in gas flows to Europe, storage facilities in Germany are at about 65% capacity, well short of the government’s 90% target.
How Europe intends to handle it
Massimo Di Odoardo (Vice President of Global Gas Research at Wood Mackenzie), says that Europe will be able to store more than 80% of its gas reserves by the start of winter if it combines additional supply and reduced demand. By Wood Mackenzie’s accounts, Europe-wide demand for gas is currently down by a fifth compared to the same period last year.
E.U. Although countries might be able avoid formal rationing, Di Odoardo says that continued rises in energy costs will encourage a natural decrease in consumption. Wood Mackenzie’s analysis found that European demand for gas was down by 10-11% in the first six months of the year compared to last year.
And it’s not just consumers who will have to reduce consumption. In Germany, industry accounts for about a third of the country’s gas use. Businesses in energy-intensive fields, such as metals and chemicals, warn of the knock-on effects to the economy.
The risk remains that Moscow will continue to “turn the screw” on European governments, especially if things don’t go in Russia’s favor in Ukraine, says Chatham House’s Lough. According to the Commission, an EU-wide winter cut could negatively impact member states’ economies and reduce GDP growth by as much as 1.5%. It could lead to countries falling into recession, according to the International Monetary Fund. Even worse, bad weather can make matters even more difficult.
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According to Di Odoardo however, Russia will continue to receive European payments as long as it continues to enjoy them. “Russia has been living in the best of both worlds—successfully reducing flows and putting pressure on Europe, while increasing prices and getting high revenues.”
Centre For Research on Energy and Clean Air’s June report found Russia had earned $97Billion in oil and gas exports revenue in the 100-day period of war in Ukraine. Most of that revenue was from the E.U. countries. The figure exceeds the estimated costs of Russia’s war in Ukraine, the report added.
In the long term, however, analysts say that Moscow’s manipulation of gas prices and supply will only accelerate Europe’s move away from Russian energy. Beyond the E.U.’s plans to reduce Russian gas imports by two-thirds within a year, the bloc has released a strategy to halt Russian oil imports via sea by the end of 2022.
In the end, this shift will also include renewed focus on renewable energy. “It’s never been cheaper and it’s never made more sense to actually invest in [green energy],” says E3G’s Hanoteaux. While countries like Germany are forced to meet their short-term climate targets by using coal and other fossil fuels for the moment, the importance of reducing demand can help to establish sustainable consumption habits for the future. “It’s not just a climate issue, but it’s also a security issue,” he says.
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