The date is November 8, 2011. After several years in the making, Nord Stream 1 — a new gas pipeline between Russia and Germany — finally begins operating to the delight of Angela Merkel. Her Russian counterpart, Dimitry Medvedev, and other European leaders beckon a new energy arrangement that will provide 59.2 billion cubic metres of natural gas in 2021 alone.
Rebel Without a Cause?
Since then, Russia has become uncontrollably belligerent — partly because it can be. Germany’s precarious dependence on Russian gas highlights a relationship, not of equals, but one of suppliant and supplier. Indeed, Russia provided 32 per cent of Germany’s total gas consumption in 2021 alone, despite geopolitical hazards emerging near Ukraine and the Arctic that loomed large over European stability. And though Putin has quite obviously been developing his anti-Western stance since 2014, Germany nonetheless recklessly pressed on with plans for Nord Stream 2. That is, until the invasion of Ukraine.
The invasion has changed the paradigm and exposed a dangerous scenario for those reliant on Russian energy exports. European Commission President, Ursula von der Leyen recently declared that Russia weaponizing its energy superiority was a ‘likely scenario’ this winter, calling on the EU to voluntarily ration consumption in a move reminiscent of post-WW2 European reconstruction rather than the 21st century. The problem is two-fold. Firstly, Russia wields great energy leverage over certain European countries and can decimate economies by intentionally cutting supplies. Secondly, Europe is fundamentally divided over how to tackle Russia’s energy monopoly, with some nations justifiably concerned that further sanctions will only rebound and worsen their cost of living crisis.
Russia Shows its Teeth
Despite arguments that Russia has failed drastically in its attempts to seize Kyiv and bend Ukraine to Moscow’s will, the Kremlin’s true source of power has been completely misunderstood. Boots on the ground in Ukraine do not reflect Russia’s indubitable energy superiority over Europe — which is precisely the essence of Russian geopolitical strategy. By concretizing its position as a key energy supplier since the 1990s, Russia now wields considerable clout to wage economic warfare and threaten economic stability at a time when inflation is already rife across Europe.
Whilst the EU has rushed through plans to diversify away from Russian gas as quickly as possible, Putin has been quick to act. Last month he authorised Nord Stream 1 exports to be cut by 60 per cent, exacerbating the inflationary pressure on European gas prices amidst resilient demand. Naturally, the cost of living rose too. Although Russia’s recent military and energy strategies have left it increasingly isolated on the global stage, it has tactically pivoted towards China and India with the aim of changing the existing power balance. The new block of counter-Western countries makes no secret of its economic and geopolitical ambitions. And so, though Russia has lost an important European market, it has found a new place on the power pyramid.
Germany Struggles to Lead a Divided Europe
Germany, Italy and the Netherlands have been hit particularly hard due to their energy reliance. Interestingly, smaller European states have so far shown little interest in trying to substitute Russian gas for alternatives. Amongst them, we have Bosnia and Herzegovina, North Macedonia, Moldova and Finland who regularly import 100 per cent of their natural gas from Russia alone. Predictably, discontent and disagreement have been rife not just over the ethics of the Ukrainian invasion but also the practicality of ongoing sanctions. The EU has become a focal point for stark disagreement. Although the bloc came to an agreement in May on cutting 90 per cent of Russian oil imports by the end of 2022, this did little to satisfy a sympathetic Hungary which abstained from the agreement.
The situation calls for the world’s leading countries to rally together. Germany, ever the leader driving Europe’s political and economic union, has drastically failed to garner consensus because of its vested energy interests. Since 2011, Merkel oversaw the closure of 14 nuclear power plants — leaving just three. Nuclear energy provides an efficient and generally safe way of satisfying energy needs. Despite this, Germany chose to relinquish its energy independence for Nord Stream projects that rely on Russian compliance. Resultantly, Germany has consistently been more lenient with Russia than the rest of Europe. It was Germany that quickly mended its relationship with Putin after the Crimean invasion in 2014 — essentially undermining Crimean energy sanctions put forward by the West. And it was Germany that turned a blind eye to Putin’s increased posturing in the name of Nord Stream 2.
France — by contrast — took a more prudent approach, setting a longer timeline for nuclear withdrawal before retaliating in February 2022 by announcing six new reactors. Whilst Germany has thrown away its keys, France has protected its energy security. Nuclear energy alone provides 70 per cent of the country’s electricity needs. The takeaway is that Putin does not wield much energy leverage where France is concerned.
Putin Fuels the Cost of Living
The Russian military operation in Ukraine has impacted everyone. Even countries with diverse energy sources cannot escape the indirect effect of wholesale market price hikes due to resilient demand but diminished supplies — including the UK. This represents another prong in Putin’s power fork. By cutting energy supplies, he encourages poverty and instability in the countries that challenge Russia’s decisions. In the United Kingdom, rising energy prices have triggered the worst inflationary pressure since the 1980s. In Germany, the IMF found that energy goods were the biggest driver of Germany’s inflation from January to May 2022, displaying the wide-reaching effects of Putin’s energy power play. With inflation eroding wages and savings, civil unrest through protests, strikes and direct action has already begun.
To combat energy inflation, the dominant response has gravitated towards green energy as a counterforce to dependence on Russia’s energy supplies. However, a lack of technological innovation and economic viability means that this future is still some way off. Putin knows that he can exploit this transitionary period and will likely do so, fostering divisions in Europe as countries struggle to manoeuvre in a world of sanctions and energy shortages. It is energy, rather than military might, that will cause the most destruction in the long term.
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