Russia Is Still Winning the Energy War

RAs a tool to terrorize and influence its neighbours and other perceived Western enemies, Soufica has used energy for centuries. Putin now finds himself in a tight spot, but he is not yet crippled because of the European sanctions which initially didn’t include energy exports.

Of course energy is an arsenal of war. Putin’s army is targeting Ukrainian fuel depots, supply chains, and refineries in its brutal assault. Cutting off the other side’s access to gasoline, diesel, and oil is a tried and true tactic to gain a military upper hand. According to Russian reports, Ukraine could have also targeted fuel storage facilities in Russia, following a strike at an oil depot located in Belgorod.

Putin’s energy warfare is now spilling outside Ukraine. The late April 26 decision by Russian state-owned gas giant Gazprom to cut off natural gas supply to Poland and Bulgaria is “blackmail,” as European Commission President Ursula von der Leyen said. For anyone familiar with Russian history, this move is not unusual.

Russia understands the value of energy as an instrument for foreign policy. However, it still uses it as more of a proverbial carrot than a stick. One of several such episodes was in 2009 when Russia cut off all gas supplies to Ukraine and other European countries. This attempt was made to make Ukraine fall in the middle of an extremely cold winter. This worked. The deal was a highly unfavorable ten-year, gas transit contract with Moscow that Kyiv accepted. Russia again did the same to Ukraine in 2014, over a payment dispute.

The Russia-Europe-U.S. fight over Putin’s Nord Stream 2 natural gas pipeline, which Germany forswore only after Putin invaded Ukraine, is another of many examples. For gas transit, the 1,224km, 55 billion cubesm (bcm), submarine natural gas pipe that runs from Ust-Luga (Russia) (near Estonian borders) to Greifswald (Germany) was not necessary. Europe has already 245 bcm of pipeline capacity that connects it to Russia. There are over 100 bcm left unused. Rather, Russia wanted to bypass Ukraine as a gas transit country, and to deepen Germany’s dependency on Russian gas so that Europe would be too paralyzed by energy fears to oppose its invasion of Ukraine.

Russia has been winning this game so far. The war he started may not be going Putin’s way, but his gamble that Europe and much of the developing world would be too insecure about energy to mount a meaningful reaction when he moved into Ukraine has arguably proved true thus far. Despite Germany’s April 28 announcement that it would drop its opposition to imposing an E.U. energy embargo—at least on oil and natural gas—against Russia, there remains a difficult negotiation among member states as to what form such a ban would take, and its timeline. It is therefore true that so far the E.U. The E.U. has not followed the U.S.’s lead (mostly symbolic because it imports very few fuel from Russia) in impositioning an energy embargo on Russia.

In 2021, 60% of Russia’s revenues were from energy exports. While, as of April 7, Europe had given Kyiv over €1 billion to support Ukraine’s fight against the Russian invasion, it paid Russia €35 billion for energy imports during that same period. In other words, Europe has been paying for Russia’s attack on its smaller, democratic neighbor with one hand because it is still buying Russian energy exports, while sanctioning other Russian activities with the other. E.U. continues to support other Russian activities, even as they pour weapons and aid into Ukraine. While the E.U. has sent arms and support to Ukraine, it is not clear that they are ready to confront the Russian bear.

It is not only Europe’s failing, however. Despite the fact that it has an oil and gas embargo placed on Russia by the White House, the United States is unable to stop Russian uranium imports. The US still imports more than 16% from Russia, a country over 70% of Americans regard as an enemy. India continues to purchase Russian Urals crude oil, which most people around the globe have shunned. Perhaps worst of all, Bloomberg reported that ten European countries have opened bank accounts at Gazprombank through which to comply with Russia’s demand to be paid in rubles, even though such payments may violate existing sanctions on financial transfers.

Russia is an energy- and commodities superpower that has led to this advantage. The largest oil exporter on earth and the runner up on crude exports, it also supplies the European Union with about 40-45% of its natural gas—and as much as 80% of Austria’s, 55% of Germany’s, and 40% of Italy’s, among others. It also boasts 40% of the world’s uranium enrichment capacity, 20% of class 1 nickel, 30% of global palladium, and so on.

These energy muscles were used by Russia against Poland and Bulgaria on April 26th. The following is an excerpt from a Tweet, it announced that “Gazprom fully halts gas supplies to Bulgaria’s Bulgargaz and Poland’s PGNiG due to their failure to pay in rubles.” Nominally, the justification as claimed is that these E.U. countries refused to acquiesce to Gazprom’s demands that its existing contracts now be paid, in violation of those contracts’ terms, in Russian rubles instead of U.S. dollars. Russia made the switch to protect its currency and expand its economy.

Bulgaria and Poland are not dependent on Russian gas, but they have refused to give in. Poland imports 55%, and Bulgaria imports 90%. Both countries are at high risk for freezing this winter if they lose these imports. Regardless, they have been defiant since Gazprom’s announcement. Given both countries’ calls for stronger sanctions against Russia and more robust military support for Ukraine, Putin cannot reasonably have believed they would make the switch to rubles.

The more likely goal was scaring Europe sufficiently that the Union’s current inability—now at least six weeks deep—to agree on an embargo against Russian oil and gas would persist. Every country in Europe that is vulnerable may be afraid it will follow. Even though reports suggest that Germany, Italy and possibly even Hungary have begun to soften their opposition to an outright ban on Russian energy, there has yet been a decision. Germany’s April 28 agreement to an embargo remains theoretical until the details are hammered out with its fellow E.U. This promises to prove difficult negotiations. As gas prices continued to rise 28%, it makes Russia’s fears about provoking them into creating a major energy crisis all the more plausible. Of course, such is Putin’s calculus.

European energy security is an example of how countries can be left vulnerable by their dependence on Russian oil and gas. This lesson was learned in the European fight to eliminate its dependency on Russian coal, oil, and gas. The greatest diplomatic tool is weaponized energy. If war means diplomacy using other methods (a mistaken quote from Carl von Clausewitz that is great nonetheless), Russia continues to be the best at using it, until the rest of the world points out otherwise.

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