ENERGY SECURITYEurope Faces a Chilling Couple of Years, but Russia Will Lose the Energy Showdown
In the European Union this winter, fears of rolling blackouts triggered by Russian energy export cuts amid Moscow’s war in Ukraine have subsided thanks to good luck, good weather, and quick action. “In the long run, Russia simply can’t win this energy war,” says an expert.
In the European Union this winter, fears of rolling blackouts triggered by Russian energy export cuts amid Moscow’s war in Ukraine have subsided thanks to good luck, good weather, and quick action.
A warm start to the heating season in October and November enabled the EU to slash natural gas consumption and store more fuel for the winter months. Meanwhile, slumping Chinese demand due to COVID lockdowns allowed liquefied natural gas (LNG) tankers bound for Asia to be rerouted to the bloc.
EU officials also played a role, encouraging countries to cut consumption, improve efficiency, and boost alternative energy supplies to help offset the drop in supply.
But luck can run both ways. A reversal of this year’s fortunes, combined with further natural gas export cuts by Russia, could leave Europe with insufficient energy supplies and skyrocketing prices next winter, analysts say.
“If pipeline imports to the European Union from Russia drop to zero in 2023 and Chinese LNG demand rebounds to 2021 levels, then the European Union faces a serious supply-demand gap opening up in 2023,” the International Energy Agency (IEA) said in a December 12 report.
“In the short run, Europe is in a difficult predicament,” Agathe Demarais, the global forecasting director at the Economist Intelligence Unit, wrote in Politico in November, adding that the situation could worsen next winter.
“But in the long run, Russia simply can’t win this energy war,” she wrote.
The IEA estimated that the EU gas deficit in 2023 could be as high as 57 billion cubic meters (bcm), or nearly 15 percent of its forecast demand, though it said measures currently being implemented — such as new solar and wind projects — should cut the shortfall to 27 bcm.
The EU could cover the remaining gap if it immediately invests an additional 100 billion euros ($107 billion) to expand alternative energy projects and boost energy efficiency, the IEA estimated.
Natural gas is largely used to heat homes and buildings, fuel power plants, and run industrial processes, such as the production of fertilizers. A shortfall would lead to high and volatile energy prices in the EU, triggering industrial and household demand destruction and energy rationing.
Some nations have already put contingency plans in place should a crisis arise.
Much depends on what the Kremlin does — or doesn’t — do.
