EU energy policy after the invasion of Ukraine: an opportunity during a crisis?

by Lorenzo Suppa

On the 24th of February 2022 the Russian president Vladimir Putin launched a military operation against Ukraine; from that day forward the diplomatic relations between Russia and the European Union “have cooled”. The European Union immediately condemned the aggression and implemented numerous sanctions against Russia to try to end the conflict as soon as possible. These sanctions showed the vulnerability of Europe for what concerns energy supply and have forced the European Union to redesign its energy policy. 

EU Dependency from Russian Supply

If we look at Eurostat tables  (the statistical office of the European Union) representing the European imports of natural gas by partner over the last 2 years, we will see a completely different scene due to the invasion of Ukraine that has forced the European Union to take countermeasures. In 2021 Russia was supplying about 40% of the total European consumption of gas and was at the same time the most relevant European partner in terms of share of gas supply. 

Looking at the aerogramme showing the European imports of natural gas in the third quarter of 2022, we observe a more balanced situation, with Norway holding the largest share of gas supply and Russia contributing only 15% to the supply of the total gas consumed. These data represent the European situation but there are countries more dependent on Russian supplies than others, especially the most vulnerable central and eastern European countries, like Czech Republic, Hungary or the three Baltic states. This is clearly shown in the analysis of the IEA (The International Energy Agency) that shows for each European Member States his dependency on Russian supply respect to the type of fossil fuel.

Source: Eurostat

For what concerns the European imports of petroleum oil – another fossil fuel – the image of the table below is different compared to that previously illustrated; firstly the share of crude oil imported from Russia is lower in terms of percentage values and, secondly, we observe that the partners of European Union related to crude oil are more numerous than the partners for the supply of natural gas. 

These results reflect the fact that the oil market is more flexible and that it is a globalized market since the crude oil can be transported by pipelines and tankers which permits consumers countries to diversify their oil suppliers. According to Nikos Tsafos analyst at the Center of Strategic and International Studies (CSIS) the natural gas market is by contrast more rigid and relies on costly infrastructure and often trades via long term contracts. This aspect results in greater difficulty in finding new gas suppliers; up to now the European Union has decided to impose only an import ban on Russian crude oil from December 2022

Despite all the differences listed observing the two Eurostat tables, a trend is clearly evident: the European Union is focusing on the reduction of its dependence on Russian supply in each type of fossil fuels.

Source: Eurostat

Is LNG a possible solution?

The reduction of imports of natural gas from Russia has been compensated by an increase of imports of LNG (Liquified Natural Gas) by the United States of America. LNG is a strategic resource because it guarantees the possibility to diversify the supply areas. The most important partners at the European level are Qatar and the USA. We need to remember that a regasification plant is necessary in order to have a supply of LNG because gas cannot be transported through tankers in a gaseous state and therefore it firstly needs to be liquified in order to be transported and then it can be regasified. Due to the political implications, it is not easy to construct a regasification plant because no one wants that kind of plant in front of their eyes; about 150 km away from Florence the inhabitants of Piombino objected to the construction of a regasification plant in front of the port. 

Energy Security

The energy dimension is clearly linked with the political one. Over the years the strategy of the European Union was to reduce the vulnerability of external supply because the EU imports more than half of the total energy needed. The increase of LNG imports goes in that direction and guarantees an increase of energy security because it permits to have several suppliers. 

The IEA defines energy security as the uninterrupted availability of energy sources at an affordable price. The EU energy strategy is based on five dimensions; the idea is to increase energy security via the construction of an integrated energy market that provides attention to aspects of sustainability. The objective of increasing the energy security and at the same time to protect our environment can be reached through a special component of European energy policy,  energy efficiency, that will reduce dependence on energy imports and it contributes to have lower emissions.

Source: Eurostat

 The Green Deal

The European will to reduce its energy dependence on Russian territory can be achieved on the one hand by seeking new suppliers of hydrocarbons or on the other hand by investing in the Green Transition; the strategy of the EU commission moves in the second direction, thanks to the approval of the Green Deal in 2022. 

The Green Deal is a strategy to completely change the growth model of Europe into a modern, resource-efficient and competitive economy. The main aim of the Green Deal is to transform Europe into the first climate-neutral continent by 2050, to reach this goal the European Commission has several intermediate targets like the reduction of 55% greenhouse gasses emissions in 2030 compared to the 1990 levels. The trend is clearly drawn, investing in sustainable resources must be the priority for European energy policies. 

The importance of sustainability within the energy dimension is also underlined at the international level; in the latest annual World Energy Outlook, the IEA executive director Fatih Birol said: “The energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system “ The road is clearly delineated: the energy policies of the future have the lowest possible environmental impact.