Why Europe Didn’t Reduce Its Dependence on Russian Gas

Western Europe refused to see the risks. Eastern Europe refused to invest in renewables.

Rotterdam Netherlands port
Liquified natural gas terminal in the port of Rotterdam, the Netherlands (Gasunie)

Australia, Canada, Europe, Japan and the United States have imposed unprecedented economic sanctions on Russia since it invaded Ukraine, banning Russian airlines and state media, cutting off Russian banks from the SWIFT financial system and freezing the assets of Russian oligarchs and the Russian Central Bank.

The one step European countries haven’t taken is blocking Russian oil and gas. They can’t.

Oil and gas account for 60 percent of Russia’s exports and 39 percent of its tax revenues. Cutting off either or both would seriously hamper Vladimir Putin’s ability to make war. But Europe is just as dependent on Russian imports as Russia is on exports.

This is not a new problem. After Russia annexed the Crimean Peninsula from Ukraine in 2014, the European Commission tried to get member states behind a common energy strategy that would make the EU more self-reliant. Member states prioritized their individual interests.

  1. Eastern Europeans understood the danger of relying on Russia, but refused to invest in green energy, because it was too expensive.
  2. Western Europeans invested more in renewables, but also chose to rely on Russian gas and ignored the risks.

Europe’s energy dependence

Oil is the lesser concern. European oil consumption is falling and Russia, although Europe’s largest, is one of many suppliers. In a crisis, Europe could buy more oil from Iraq, Nigeria, Norway and Saudi Arabia. It would be more expensive, because — with the exception of Norway — their oil is transported by ship, not through pipelines. But Europe has survived oil crises before.

Europe doesn’t have an alternative to Russian gas. European gas production fell 50 percent in the last decade. The Netherlands, formerly the EU’s largest producer, has wound down production in Groningen, where drilling for gas caused violent earthquakes.

83 percent of Europe’s gas is imported. Norway, which provides 21 percent, does not have significant spare capacity. Algeria, which provides another 12 percent, can raise production, but its gas is piped to Italy and Spain, and there are few, and only small, overland pipelines from Southern to Northern Europe. Former Soviet satellite states in Eastern Europe are almost entirely dependent on Russian gas, which accounts for half the EU’s total imports.

European gas use has been stable for two decades. Europeans use gas to generate electricity and heat their homes. Half the homes in Europe are heated by gas. Cutting Russia off would literally leave Europeans in the cold.

No green energy in the East

35 percent of Europe’s electricity and 22 percent of its energy (including heating and fuel) is generated sustainably: from geothermal, hydro, solar and wind power. But there are enormous differences between member states.

The Baltic countries, Croatia, Finland and Sweden get the bulk of their energy from hydroelectric and nuclear (which is not considered “renewable”) plants.

Hungary and Poland, which are taking in hundreds of thousands of Ukrainian refugees, have built few solar parks and wind farms. Just 14 to 16 percent of their energy mix is “green”, and most of that comes from biofuels and burning waste.

Hungary at least underwrites the EU’s ambition to become carbon-neutral by 2050 and has a nuclear power plant, which provides one fifth of its energy.

Poland gets the majority of its energy from burning coal. It has no nuclear power and no intention to give up fossil fuels.

Denial in the West

Germany, Europe’s largest energy importer, for years maintained that energy contracts with Russia were purely “commercial”. Like the Netherlands, which used to be self-sufficient but now imports gas, Germany insisted that Russia was a “reliable” supplier. After all, it never once cut supplies to the West.

Eastern Europe wasn’t so lucky. Russia cut gas supplies to Estonia in 1993, Georgia in 2006 and Ukraine in 2005-6, 2008-9, 2014 and 2015. When it didn’t cut supplies, Russia still charged Eastern Europeans a higher price for gas than Western Europe.

Gas was never just commercial for Russia. Gazprom, the Russian gas monopoly, is state-owned and answers directly to Putin. It proposed to build two pipelines — Nord Stream and South Stream — it didn’t need except to circumvent transit nations in Eastern Europe. The European Commission blocked South Stream, but Germany and the Netherlands helped build Nord Stream, which last year piped 60 billion cubic meters of gas to Germany. Germany’s total gas use was 100 bcm.

What can Europe do now?

In the short term, the only way to become less dependent on Russian gas is to import more liquified natural gas (LNG) from Qatar and the United States. Those countries accounted for 10 percent of European gas imports in the first half of 2021. The share is likely to have grown in the remainder of the year, when gas prices rose worldwide.

LNG is more expensive than piped gas, and imports are limited by the capacity of LNG terminals. Italy and Spain, which also import smaller quantities of LNG from Libya and Nigeria, have several ports, but because of the limited capacity of north-south pipelines that’s of little help to Northern and Eastern Europe. Belgium, France and the Netherlands have several North Sea-facing LNG terminals that could process more, but not enough to completely replace Russian supplies.

Germany has not built a single LNG terminal.

The Netherlands’ Financieele Dagblad revealed earlier this year that the Dutch companies Gasunie and Vopak, which operate the LNG terminal of Rotterdam, tried for five years to build a similar terminal in Hamburg, but were resisted by bureaucrats and environmental groups.

Chancellor Olaf Scholz told his parliament this week that Germany will build two LNG terminals, one in Brunsbüttel, near Hamburg, and another in Wilhelmshaven, near Bremen.

Nuclear taboo

Long term, European countries need to rethink their taboo on nuclear power.

26 percent of Europe’s electricity is nuclear, but half that share comes from one country: France.

On nuclear, too, Germany has been shortsighted. It used to be Europe’s second-largest producer but decided to become nuclear-free in 2011, when a nuclear power plant in Fukushima, Japan was hit by a tsunami. The least it could do is keep the three reactors (of the seventeen it had) that are due to shut down in December operational for a few more years.

The European Commission wisely overruled Germany to declare nuclear energy green, but few countries are building plants. 55 nuclear reactors are under construction around the world. Only two are in the EU: one in Finland, another in France.

The Netherlands has announced it will build two more nuclear power plants, but that could take a decade.

Hungary has plans to double the capacity of its one nuclear plant with two additional reactors. The reactors would be built by… Russia.