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E.U. will unveil a strategy to break free from Russian gas, after decades of dependence

Ukraine crisis has pushed Europe toward renewables — but will the change come quickly enough?

Compressor complexes at the starting point of the Nord Stream 2 gas pipeline in Ust-Luga, Russia, on Jan. 28, 2021. (Audrey Rudakov/Bloomberg News)
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For years, Europe’s dependence on Russian energy has held it back from taking powerful action against Kremlin mischief. But now, the Russia-Ukraine conflict is forcing a change unlike any before, driving the European Union to make plans for a permanent, far-reaching break from Russian oil and gas, European policymakers said.

The strategy to split from Russian energy — in the works before the invasion of Ukraine and expected to be announced by the European Commission next week — would give Europe a freer political hand against Russia than it has had in the past. It would take years and come with a hefty bill for European taxpayers. And it comes with the crucial backing of Germany, a nation so entangled with Russia that one of its former chancellors, Gerhard Schröder, is the chairman of Rosneft, Russia’s biggest oil company.

For years, Germany had built ever-closer energy ties to the Kremlin. The most significant turnabout came Tuesday, when German Chancellor Olaf Scholz shelved the Nord Stream 2 gas pipeline that linked his country to Russia. A day later, President Biden imposed U.S. sanctions on the project. Now it may never move forward. The European Commission’s planned strategy next week aims to accelerate the transition to renewable energy so that Europe never again is so dependent on the Kremlin to keep households warm and factories humming.

German Chancellor Olaf Scholz said on Feb. 22 that he would halt authorization of Nord Stream 2 for the time being. (Video: Reuters)

“A strong European Union cannot be so reliant on an energy supplier that threatens to start a war on our continent,” European Commission President Ursula von der Leyen told a conference of security-focused European policymakers Saturday.

She complained that Russia’s state-owned gas company, Gazprom, was delivering the bare minimum of gas this winter even though price and demand are through the roof — “a strange behavior for a company,” she said.

“We are doubling down on renewables. This will increase Europe’s strategic independence on energy,” she said.

Uncertainty over what Putin will do next shakes up oil and natural gas markets

Europe’s attachment to Russian gas remains a significant liability, playing a role in the apparently joint U.S.-E.U. decision Thursday to hold off from excluding Russia from a global banking network known as SWIFT. The move could have dealt a major blow to Russia’s financial system, but it would have also raised the risk of a total Russian cutoff of energy to Europe. For now, policymakers aren’t willing to take that step. The European efforts to free themselves from Russian energy will take years.

A top Russian policymaker embraced the role of energy threat-maker Tuesday, underlining Russia’s view of itself as a spoiler in Europe.

“German Chancellor Olaf Scholz has issued an order to halt the process of certifying the Nord Stream 2 gas pipeline,” tweeted Dmitry Medvedev, the deputy chairman of the Russian Security Council and a former prime minister. “Well. Welcome to the brave new world where Europeans are very soon going to pay €2,000 for 1,000 cubic meters of natural gas!” — a figure that would be about double the price at the time of his tweet. A similar German-language tweet appeared to offer a different, errantly high price. European gas prices surged as much as 62 percent on Thursday.

A new E.U. energy strategy

The sharp-toothed new E.U. strategy is expected to be unveiled March 2. It calls for a 40 percent reduction in fossil fuel use by 2030 and requires European energy companies to fill their storage tanks with natural gas this summer so that the continent is less dependent on Russian gas next winter than it has been in the past, according to an official involved in drafting the strategy, who spoke on the condition of anonymity to discuss the proposal before it is officially released. This season, Europe is poised to eke by with just enough gas after Russia cut exports roughly by half compared to a year ago. About 40 percent of the European Union’s natural gas currently comes from Russia. Elements of the plan were reported by Reuters last week.

The goal is “not being vulnerable to potential disruptions from one supplier,” the policymaker said.

“We are trying to wean ourselves off Russian gas,” the policymaker said. “When the time comes in 2028, 2029, 2030, and Russia decides to close us out, we can be like, ‘Fine.’”

The E.U. effort — which would still need to be approved by the 27 member states — would make it easier for individual governments to offer subsidies to consumers and companies that are struggling with high energy bills. And it would speed permitting for renewable energy projects, which in 2020 accounted for 22.1 percent of energy consumed in the European Union — around 2 percentage points above the 2020 target, according to the E.U. statistics office.

European policymakers acknowledge they would be in a better spot if they had started more concerted work on building robust energy independence years ago, but they say that in some ways skeptics have needed this crisis to be kicked into action. The planning has been underway for months, after Russia started scaling back gas deliveries last year.

“Russia carefully calibrated this energy crisis to precede the circumstances around the current invasion,” Sarah Ladislaw, a managing director at RMI, an organization devoted to the clean energy transition, said in an email.

Even ahead of the new strategy, a constellation of efforts has been underway. Italian consumers are being urged to swap out their gas-fired water heaters in favor of electric ones. French President Emmanuel Macron declared ambitious plans to build more than a dozen nuclear power plants that — if actually built — would limit Russian natural gas sales to French utilities. Germany approved $68 billion in December to accelerate its climate and green infrastructure spending.

“It’s been a seismic shift over the last six months,” said Henning Gloystein, an energy analyst at the Eurasia Group.

The sharpest turnabout may have come Tuesday, with Scholz’s decision to freeze the Nord Stream 2 pipeline.

“The situation today is fundamentally different,” Scholz told reporters in Berlin as he announced the move against the pipeline. “These are very difficult days and hours for Europe. Almost 80 years after the end of World War II, war is looming in Eastern Europe. It is our duty to avert such a catastrophe.”

A complex shift to renewables

Policymakers acknowledge that the shift can’t happen overnight, meaning that Europe will still rely on Russia for its energy needs throughout the current geopolitical crisis. If Russia cuts off gas entirely ahead of next winter, it would force a series of painful choices across the continent.

“In the short and medium term, there are no good options,” said Nathalie Tocci, the head of the Italian Institute of International Affairs and an adviser to E.U. policymakers in Brussels. “The problem is not now, but next fall. And by next fall, we will not have found the silver bullet.”

Any fix to a total, immediate split from Russia would require sacrifice across the continent — something that would be painful for European politicians who are wary of infuriating their voters.

“There’s a list of torture that you can think of,” said Georg Zachmann, an energy expert at Bruegel, a Brussels-based policy think tank, who said Europe could have a 20 percent gas shortfall even if all of its alternatives to Russia-delivered gas are at full capacity until next winter.

“It would require the member states to come together. Nuclear, cutting off Belgian industrial consumers, increasing household tariffs in Bulgaria,” Zachmann said.

What you need to know about the Russia-Ukraine crisis

A decision at the top to make a break from Russia “doesn’t change the fact that Europe needs Russian gas. Nothing is going to make a difference in the medium scenario,” said Jason Bordoff, the founding head of Columbia University’s Center on Global Energy Policy, who worked on energy and climate issues in the Obama administration.

“It takes time to build out renewables and to electrify heating and diversify fuels for heavy industry,” Bordoff said. “And it takes time to build infrastructure needed to pull natural gas from world markets. Russia is still the cheapest gas into Europe. So you have to be willing to pay a premium” for more expensive liquefied natural gas.

For Russia, a strategy of escalation carries risks of its own. The Russian economy depends heavily on fossil fuel revenue, and Europe has been its main market for decades. Cutting off the continent could bring economic pain. But the country’s cash reserves are at record levels, giving it a buffer.

Longer term, Russian energy officials have already been trying to sell more gas to China, since they acknowledged that Europe’s climate plans have set it on a path toward buying less Russian fossil fuel.

A long history

Controversy over the natural gas pipelines has raged for four decades, when dozens of companies from 12 nations scrambled for contracts for steel, compressors and tens of billions of dollars of concessionary financing extracted by the Soviet Union.

In late 1981, President Ronald Reagan opposed the construction of an early gas pipeline and imposed an embargo on sales by U.S. firms, arguing that the gas pipeline would make Western Europe too dependent on the Soviet Union. Reagan even approved a covert CIA effort to blow up part of the pipeline, which ended in only a modest construction delay.

But Germany and other nations argued that the pipeline and all the associated contracts for gas delivery and financial payments would weave the Soviet Union more closely together with Western Europe and its rules and laws. Reagan lifted the sanctions in late 1982.

“It will be an irony if it turned out that Ronald Reagan was right,” said Angela Stent, a nonresident fellow at the Brookings Institution who advised Presidents Bill Clinton and George W. Bush on Russia.

“At first, [stronger ties] were seen as way to improve relations with Soviet Union,” said Stent. “This belief that the Germans had then, and many still have, is that if you increase the economic relationship with Russia … that would have a beneficial effect on the entire relationship.”

In maps, videos and photos, how Russia’s military push into Ukraine is unfolding on the ground

But Putin’s attack on Ukraine’s eastern provinces has undermined that argument.

“Putin has done what no one else could: Get Germany to face up to the nightmare that is Russian natural gas reliance,” said Paul Bledsoe, a strategic adviser at the Progressive Policy Institute.

Germany’s failure to act more vigorously, especially after the 2014 annexation of Crimea, revealed “an incredible blind spot on their actions, and it’s finally been exposed,” Bledsoe said.

The alternatives to Russian gas are complicated and will take time. Even facilities for liquefied natural gas exports to Europe need several years to expand. Gas suppliers need to build more capacity to cool it to the ultralow temperatures that allow it to be transported by specialized seagoing tankers. Europe needs to build more plants to warm the gas so that it can be sent through pipelines. Another alternative, nuclear, also has a complicated future in Europe, with long building times and some countries opposed.

In France, where nuclear energy provides about 70 percent of the country’s electricity, Macron is facing the possible retirement of a dozen reactors by 2035, which would reduce nuclear energy’s share of France’s electricity to just 50 percent. Although he proposed building a new fleet of nuclear plants to replace the aging ones, he also said that France needed to turn to renewable energy and energy efficiency, since it can take up to 15 years to build new reactors.

“If everything goes smoothly, the first reactor could start operating in 2039-40,” Mycle Schneider, founding board member of the International Energy Advisory Council and member of the International Panel on Fissile Materials, said in an email.

Ultimately, analysts say, a partial transition from Russian energy may be all that is necessary — and a goal that is in reach.

“Europe doesn’t have to completely eliminate its dependence on Russian gas. It just has to neutralize its potency as a point of leverage,” Ladislaw said. “It takes a lot of work to back out a fuel like gas, and Europe has been well on its way to doing this over the last five years. It just needs to do more now.”

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