With the invasion of Ukraine in February, Europe found itself in a geopolitical conundrum. Despite voicing great support for Ukraine and announcing a host of economic sanctions, it realised that it could not shut the tap on Russia’s fossil fuels overnight.
This is because European Union member states are greatly dependent on Russian fossil fuels. Until last year, European Commission figures show that Europe imported 45 per cent of its gas consumption, 25 per cent of its oil and 45 per cent of its coal from Russia. This high level of dependence on Russian energy means that Russia’s Vladimir Putin can literally switch off Europe’s economy.
However, continuing to buy fossil fuels from Russia indirectly finances Russia’s military machine. As long as Russia continues to wage death and destruction in Ukraine, this situation is unsustainable.
Some EU member states (especially those closer to Russia’s borders) advocated that the EU go cold turkey and turn off Russian fuel imports overnight. But there is no consensus for this move at EU level because of its impact on the EU economy.
EU member states have been preparing for a long-term shift away from fossil fuels, with the European Commission’s Green Deal and subsequent ‘Fit for 55’ package establishing proposals that, if implemented, would result in a significant drop of fossil gas use by 2030. But this timeline is too far away to mean anything to Ukraine as it continues to face the onslaught of the Russian military complex.
That is why, on March 8, the European Commission presented its REPowerEU plan to speed up its timeline of reducing dependence on Russia’s fuel supplies. The most notable result so far has been an agreement to completely ban Russia’s coal from being imported into the EU.
This will result in the obliteration of an €8 billion revenue stream for the Russian economy. However, leaving aside the fact that this ban will not come into force until August this year, Russian coal imports pale in scale when compared to the extent of Russian oil and gas imported by the European Union.
EU member states have already paid Russia more than €13 billion for oil since the Ukraine war began.
The EU’s ban on coal is a pebble in the ocean of fossil fuel imports. Discussions are under way on an embargo on oil and to reduce demand for Russian gas by two-thirds before the end of 2022. But negotiations to achieve these are lagging far behind the commission’s ambitions.
EU member states have already paid Russia more than €13 billion for oil since the Ukraine war began- Matthew Gatt
Ironically, the single factor that might speed up Europe’s shift away from Russian gas is Putin himself who, at the end of March, signed a decree forcing EU buyers to pay for gas in rubles. Since European energy companies are not allowed to do so due to EU sanctions against Russia, this could lead to a sudden stop in supplies.
Where does all of this leave Malta? Although Malta does not depend on Russian coal and gas we have been somewhat reliant on Russian oil. Moreover, part of our energy needs are satisfied through the interconnector, which, in turn, is connected to the European energy grid. This also indirectly exposes us to the effects of switching from Russian gas. As European energy providers scramble to switch away from Russian fossil fuels, energy prices are expected to continue increasing.
If Europe is to effectively respond to the Russian energy and security threat, keeping a united position is of paramount importance. The European Commission has been showing significant leadership in this regard. But Russia’s divide and conquer strategy still seems to be having some effect. Viktor Orban’s Hungary has already broken ranks by announcing that they will make payments for Russian gas in rubles. Other member states would do well to hold steady at this point and preserve the power of a united stance.
Secondly, Europe needs to urgently prioritise major infrastructural projects that would enhance EU-wide security of supply. This would entail ensuring multiple options to replace critical dependencies, such as in the case of gas. One major project in this regard could be to create a gas pipeline from Spain, allowing to leverage Spain’s significant LNG infrastructure to somewhat make up for shortfalls in Europe’s availability of gas.
Thirdly, the EU needs to cushion the short-term blow for businesses and consumers to limit the negative economic impact. The European Commission has already put forward a Temporary Crisis Framework in this regard.
This mechanism, already deployed during the 2008 financial crisis and the coronavirus pandemic, will allow member states to step in and cushion the blow for businesses. By providing liquidity support (such as through subsidised loans), direct aid (such as business grants) and compensation to energy intensive companies member states will reduce the immediate pain.
Cushioning the blow, however, is only a temporary measure and, in the long run, the European Union’s climate goals will mean a permanent switch away from coal, oil and gas. All of this might sound very painful and it will be. But there is a silver lining. Implementing the change and rapidly adapting will not only give us a better shot at saving our planet. It will also make Europe’s economies more resilient and more competitive in a future climate-conscious global economy.
And with an energy-resilient backbone, there will be fewer situations in which Europe can be held hostage to otherwise unfavourable terms, whether relating to international trade or Europe’s own security and defence.
Matthew Gatt has worked as a political and technical adviser at national and EU levels and currently operates in the private sector.