A little more than a week has passed, but so far Russia has turned on the gas. But this presents another problem.
Russia makes hundreds of millions of dollars a day exporting oil and gas, undermining the financial sanctions Western powers have imposed to cut off funding for Putin’s war effort. The European Union, Russia’s biggest gas consumer, is now facing the reality that its energy spending has helped Putin wage a bloody war on its borders.
With record high prices, the value of Russian natural gas exports to the European Union rises to around 500 million euros ($545 million) daily, according to a European expert, thanks to Brueghel. This is up from about 200 million euros ($220 million) in February. Before the invasion, Russia also exported hundreds of millions of dollars worth of oil a day to Europe.
EU leaders have been talking about reducing dependence on Russian gas for years. Polish Prime Minister Mateusz Morawiecki made this explicit last week. “We buy like [the] The European Union, a lot of Russian gas, a lot of Russian oil. And President Putin takes money from us, the Europeans. And he turns it into an aggression, an invasion,” he said at an EU summit, according to reports.
In terms of gas alone, the 27-country bloc relies on Russia for 40% of its needs. Germany is Russia’s biggest buyer, relying on the country for more than half of its gas, Brueghel said.
In turn, Russia needs Europe’s money. Russia’s oil and gas revenues in 2021 amounted to 9.1 trillion rubles, which were converted into $119 billion in January this year, according to Reuters. This amounted to 36% of the country’s budget.
Moscow’s international reserves now stand at $630 billion, the highest ever, making for a huge military fund. But its financial firepower has been severely curtailed by Western sanctions, which analysts estimate have frozen about half of those assets.
These sanctions are hitting the Russian economy, but they are not yet directly targeting fossil fuel exports, so Western governments are worried about rising energy prices and rising costs of living. Ultimately, they want Russian gas to at least keep flowing.
Oil is a different story. While the price of benchmark Brent oil rose sharply this week, trading at around $115 a barrel on Friday, Russia’s flagship Urals oil was offered at a discount of $18 a barrel, a sign that some buyers avoid it.
Banks and traders are afraid of financial sanctions, while shipping companies and insurers are concerned about the risk to tankers in the Black Sea.
In addition, Europe can buy oil anywhere. Replacing Russian natural gas is more difficult.
Turning off heat can save huge amounts of gas
Advocates of climate action have for years pushed for a plan to wean the world off natural gas, a powerful fossil fuel that warms the planet. It took an energy crisis and bloodshed in Ukraine to finally put EU institutions into action.
EU energy chief Kadri Simson said on Thursday that the bloc will publish its plan next week to reduce its dependence on Russian gas and speed up the transition to renewable energy.
“Beyond the short term, ultimately… the only long-term solution is the Green Deal, boosting renewable energy and energy efficiency as fast as it is technically possible. So we are still too dependent on fossil fuel imports,” she said at a press conference. International Energy Agency.
Germany, which aimed to switch to 100% renewable energy by 2040, has already moved its goal five years forward since Russia invaded Ukraine last week.
The crisis in Ukraine has also given new urgency to talk about whether the world can continue to consume as much energy as it does now. Europe should be able to replace some of the gas supplies from Russia, but shutting it down completely is simply not an option for this heating season, experts previously told CNN. Even in the future, it will be difficult to completely replace Russian gas.
IEA chief executive Fatih Birol suggested that the Europeans could turn off their thermostats as part of the solution.
Under a 10-point plan to reduce dependence on Russian gas, the IEA says that if all buildings in the European Union turned off their heating by just 1 degree Celsius, the block would save 10 billion cubic meters of gas. That’s about the same amount of natural gas that New York consumes in three months., or what Hungary consumes during the year.
In fact, asking people to do so would be something of a last resort, said Ben McWilliams, climate and energy analyst at Bruegel.
“But who knows? This is an unprecedented situation. I can imagine a sort of political campaign, a real push from European leaders saying: look, if you can help us by lowering the temperature by 1 degree on your thermostat, it will help. you can see people unite behind this, against Russian gas,” he told CNN. “But you will end up needing a lot more than that in return.”
One approach could be to replace about half of the gas from other sources, McWilliams said. The United States is already supplying liquefied natural gas (LNG) to Europe, and EU officials are also considering supplies to countries such as Azerbaijan and Qatar.
The other half must come from reduced demand, McWilliams said, especially as Europe prepares for next winter.
Heavy industries such as steel and chemicals will have to scale back their operations. Homeowners investing in solar panels and heat pumps can help reduce the load on heating systems.
Tara Connolly, a campaigner for the international gas NGO Global Witness, says Europe should launch an emergency program to insulate homes, replace gas boilers with heat pumps and accelerate the transition to renewable energy.
“It is clear that Europe’s dependence on gas provided Putin with the resources to engage in his bloody adventure in Ukraine, while hindering Europe’s response,” she said. “This moment showed that fossil fuels are not only destroying the climate, but also making the world more volatile and dangerous.”
Charles Riley and Julia Horowitz of CNN contributed to this report.