Energy Central-News Article

EU countries are purchasing more gas from Russia than before the Ukrainian conflict, increasing their purchases by 40% between January and July compared to the same period in 2021, according to an analysis by Sputnik.

On August 30, the non-governmental organization Global Witness reported that in the first seven months of 2023, European Union countries spent almost E5.3 billion on buying LNG from Russia, accounting for more than half of total imports, according to the Chinese portal Sina.com.
In turn, Eurostat data also show that, in the first quarter of 2023, Russia became the second largest supplier of LNG to the Eurozone, only behind the United States and ahead of such gas exporters as Qatar, Algeria, Norway and Nigeria.

In March 2022, in the context of European sanctions against the Russian energy sector, the EU proposed a plan called REPowerEU, which aims to phase out dependence on Russian natural gas by 2027.

"But judging by the current situation, the European Union still has a long way to go to achieve this goal, as it is still heavily dependent on Moscow for fossil-based energy," Sina.com highlights.

Russian liquefied natural gas "is very popular in the region" and reaches Europe through the Yamal LNG pipeline, which has been in operation since 2018 and whose capacity could exceed 20 million tons of gas per year. In the EU it is sold to European consumers by two marketers, France's Total and Britain's Shell.
According to Alex Frawley, the senior LNG analyst at consultancy ICIS, "an EU import ban would cause some disruption to gas supply, as the whole structure of global trade would have to be reorganized."

"Long-term customers in Europe have indicated that they will continue to purchase contracted LNG volumes unless politicians ban it," he stressed, quoted by the Chinese media outlet.

Despite repeated calls to ban Russian LNG purchases made by, among others, Spanish Energy Minister Teresa Ribera, Spain happens to be the most dependent country on this fuel and is currently the second largest buyer of Russian LNG in the world, with Belgium in third place. Thus, in the first seven months of 2023, Madrid imported about 18% of all exports of this type of Russian gas, while Brussels acquired about 17%.

The two countries are surpassed only by mainland China, with 20%, while in the same period of 2021, Spain ranked fifth and Belgium seventh, Sina.com specifies, adding that the Spanish company Naturgy signed "an important contract" with Total for the supply of LNG from Russia.
The Chinese portal estimates that European natural gas reserves are already approaching 90% of capacity limits, but the storage limit of 100 billion cubic meters "is still too small" given annual consumption of 350-500 billion cubic meters.
Although at the beginning of this year 2023, the European natural gas market has been stable, starting in August, natural gas prices in the EU suddenly shot up. Industry officials warn that European LNG prices will remain volatile for the next one to two years.

European countries are experiencing an energy crisis due to high gas and electricity prices, after they skyrocketed due to sanctions imposed on Russia for its demilitarization and denazification operation in Ukraine, which, in particular, restrict the export of these energy products.

Europe is thirsty for cheap energy

Another analysis by CNN, which assures that for Europe, energy security has always been a trade-off: cheap imported energy carries with it the risk of dependence on the countries from which it originates.

In the case of Russia and its natural gas, officials initially speculated that a long, cold winter in 2022-2023 could force Europe to moderate its punishment of Moscow. After all, developed countries such as those in the European Union could not reasonably let their citizens get cold for the sake of Ukraine.
However, a combination of luck, planning, and the Europeans' support for Ukraine made the energy war-once considered Putin's ace in the hole-redundant. Europe had a particularly mild winter as governments and citizens made a concerted effort to use less gas.
That combination of a warm winter and lower gas consumption created a window for Europe to abandon its Wandel durch Handel (Change through trade) policy, which assumed that Russia would align itself with Western cash values.

The first step was to reduce imports from Russia. In 2021, the year before the full-scale invasion of Ukraine, 45% of all gas imported by the European Union came from Russia. In Germany, that figure stood at 52%. Since then, those figures have plummeted. According to European Union data, in the first quarter of 2023, Russia accounted for only 17.4% of all gas imported into the bloc.

The second step was to take advantage of the warm winter and fill up gas reserves in preparation for the cold season in 2023-2024.

Europe's gas reserves are already so full this year that there is a consensus that the Kremlin will not be able to weaponize energy in a way that alters European resolve against Moscow and support for Ukraine.
The European Union as a whole reached its target of 90% full stocks by mid-August, months ahead of the November 1 deadline.

What's more, Europe has significantly diversified its energy sources.

Now the bad news. Despite these efforts, officials and analysts fear that, impressive as these advances have been, Europe's energy is far from secure in the long term.
The most immediate point of concern is that, although Europe has diversified its gas imports, much of what is currently in reserves is liquefied natural gas (LNG).
"LNG is such an obvious solution that it became the priority, but because LNG is also so flexible and tradable, it's a bit more difficult to track where it comes from," says Milan Elkerbout, a researcher at the Center for European Policy Studies.

"That means that, indirectly, some of the LNG can come from Russia and still contribute to their revenues," he adds.

While the European Union says most of its LNG is bought from the US, Qatar and Nigeria, it is often sold on exchanges where contracts are for volumes without any reference to origin.

The second - and possibly the most important - area of concern is longer term.

Green Europe

While Europe may have partially abandoned the policy of Exchange Through Trade with Russia, it still relies on others for energy. And when it comes to energy security, dependence ultimately brings us back to that classic trade-off: economics versus risk.

One of the ways the European Union hopes to break free of energy dependence is through its Green Pact, an ambitious plan to make Europe the first climate-neutral continent by 2050.
The project, currently projected to cost more than E1 trillion (US$1.07 trillion), will be achieved through numerous means, from planting 3 billion new trees to renovating buildings to make them energy efficient.

Of course, massive investment in renewable energy and clean transportation will also play an important role.

The first major milestone of the Green Pact is for the European Union's greenhouse gas emissions to fall by 55% by 2030, compared to 1990 levels.
Critics are increasingly concerned that the slow progress in reaching this target, in addition to the huge costs to individual member states, will cause some to look to another foreign source to help with the energy transition - China.

Few in Brussels will tell you that the European Union's relationship with Beijing at present is satisfactory. EU Commission President Ursula von der Leyen has recently shifted her view of China toward a tougher stance, speaking at some length about the need to "de-risk" Europe's relationship with the country.

However, she also accepts that many of Europe's long-term plans would be best achieved by working in partnership with China, including its ambitions for a green Europe.

Von der Leyen's position reflects the divergent views among the 27 member states of the European Union. Some are extremely aggressive and see China as an authoritarian bully and an existential security threat; some see it as an obvious source of solar panels, wind turbines and cheap batteries. Others see no alternative but to work with China, but wish to proceed with caution.

The threat, as some see it, is that China has already strategically become a key player in many of the critical technologies and raw materials that are essential to a green transition.

"China initiated its green energy industrial strategy about 15 years ago. They've done very well, securing natural resources like lithium for batteries, steel for wind turbines, and they've already built the manufacturing capacity to make all this equipment," says Adam Bell, a former UK government energy official.

"Meanwhile, Europe dithered and it is now probably inevitable that China will play a major role in Europe's green future without radical action," he adds.