The war in Ukraine has shifted the focus of European governments and created a new urgency for European Union energy policy. While EU leaders are focusing on meeting immediate fuel needs to replace uncertain Russian imports, any EU response to its fossil energy dependency must also involve investment in green energy and energy efficiency to improve energy independence long term.

Russian oil and gas will be replaced sooner or later

Sanctions on Russian energy firms have stopped huge volumes of fossil fuel trade, with up to 70% of Russian oil without buyers due to sanctions, refusal to deal with Russian energy companies and increased risk to Black Sea shipping. But many EU countries are still buying up Russian fossil fuels. Natural gas flows from Russia to Europe have actually increased since the war began.

And while the US announced a stop to Russian fuel imports—a largely symbolic move by the world’s top oil and natural gas producer—the EU did not have a majority agree to join as of last week’s Versailles Summit. Boycotting Russian fossil fuels will not be easy since the EU relies on Russia for 40% of its total natural gas, 27% of its oil imports, and 46% of its coal imports.

map: EU natural gas import routes

Still, refusing Russian oil and gas remains one of the more powerful options for EU leaders to make the war in Ukraine more costly for Vladimir Putin and potentially bring him to the negotiating table, but EU leaders have only proposed a gradual phasing out so far, reducing at first two-thirds of Russian fuel imports by the end of 2022.

Assuming that the EU’s strategy on gradually phasing out will not see a reversal as the war escalates further, Russian energy imports to Europe could still be halted in the short-term by other factors. First, Russia could shut the taps voluntarily if the EU moves forward on energy import reductions, or second, gas flows through major pipelines, like the ones traversing Ukraine to Europe, could be disrupted by the damage caused by the Russian invasion.

Irrespective of the short-term situation, Russia has proven that it will use energy supply as a lever to pressure the EU and has no qualms jeopardizing huge gas and oil trade with EU partners over its own geopolitical goals. This and Russia’s unprovoked invasion of Ukraine has pushed the remaining EU members still heavily depending on Russian fuels to finally accept that this makes them vulnerable, and there is mounting political will to hasten energy independence and the green transition.

While there was no majority in favor of an immediate stop of Russian gas imports in last week’s Versailles Summit (the move is opposed by Germany, Hungary, Bulgaria, and Finland, with Italy, Portugal, Czechia, Greece, Slovenia, and Romania undecided), the Commission is set to announce plans to end dependence on Russian gas by 2027 instead of 2030 and have 100% renewable electricity by 2035. Russian gas and oil will be replaced at some point. The question now is how soon and how to prepare.

EU replacing Russian oil possible but painful…

To replace the 27% of imported oil the EU gets from Russia, EU members will need to reduce fuel use and find other sellers. Russia exports around 2.5 million barrels of oil a day to the EU, and emergency measures, like the US and its allies did in releasing 60 million barrels from their oil reserves to stabilize rising prices, are just temporary solutions to a major shift in oil trade.

OPEC countries (Organization of the Petroleum Exporting Countries, whose + version includes Russia), if they wish, could start to replace Russia oil in Europe, since top producers like Saudi Arabia could increase output by 1-2 million barrels a day.

With uncertainty in fuel markets since Russia’s invasion, crude oil prices climbed to their highest in over 14 years. However, in the first week of March, OPEC+ countries declined to increase production, preferring instead to stick to a plan adopted last year to increase production by 400,000 barrels per day.

Even if OPEC+ countries agree to increase production, replacing Russian oil that currently flows through pipelines, like the Druzhba pipeline bringing oil to Germany, Poland, Slovakia, the Czech Republic, and Hungary, among other destinations, will require shipping oil by sea, which will be more expensive and will take longer.

OPEC+’s acquiescence to increased production is essential to the EU’s plan to reduce reliance on Russian oil. But ultimately, the EU finding replacements for Russian oil will be painful for European consumers.

…replacing natural gas even harder 

When it comes to natural gas, dependence is even higher in certain EU members compared to oil and coal, and Russian gas travels through pipelines straight to EU markets. Replacing this will require liquified natural gas bought from other major producers like the United States, Qatar, and Australia. Germany gets 55% of its natural gas from Russia. To prepare for a future without Russian natural gas, German Chancellor Olaf Scholz announced on February 27 plans for two LNG Terminals, which would be Germany’s first.

This is a huge shift, since the now canceled Nord Stream 2 pipeline had meant that LNG terminals were not on Germany’s list of priorities. While this would help Germany diversify its natural gas sources, the organization Environmental Action Germany called the investment in new LNG ports irrational, saying it will only contribute to dependence on gas imports in the future and won’t help in the current situation, needing at minimum two years to get up and running.

Short-term woes and long-term plans 

Europe needs energy now, and any short-term solution to decreasing energy dependence comes with a huge price. Caught between the need to dump Russian energy and supply European energy consumers – both households and industry—the EU needs to phase out fossil fuels and build up green energy. But none of this will happen quickly. At least, the EU can solidify medium- and long-term plans to speed up the green transition.

On March 3, 2022, the International Energy Agency proposed a 10-point plan to reduce European reliance on Russian gas, namely finding alternative sources, ramping up renewables, converting home heating to heat pumps instead of gas boilers, and potentially introducing minimum gas reserve requirements—proposals both contributing to and contradicting plans for a zero-emission EU.

And last week, the EU heads of state and government met in Versailles, informally adopting a new energy independence plan that includes much of these recommendations, like drawdowns on imports from Russia, gas reserve quotas, and green energy support.

This all-encompassing approach that includes fossil fuel-related aspects like sourcing oil and gas from other countries and increasing LNG capacity, but also green goals like increasing biogas use and futher developing the European hydrogen market, will likely be greeting with more criticism from proponents of a swift green transition.

However, as European Commission President Ursula von der Leyen emphasized, EU leaders first priority is “to continue ensuring reliable, secure and affordable supply of energy to European consumers,” meaning first replacing quickly Russian imports, then bringing forward green transition deadlines. The EU has nominally adopted the Versaille Declaration recommendations on renewables under the “RePowerEU” plan, and the European Commission will present by May more concrete proposals.

The option the EU has gone with for now is to balance pressure on Russia with EU energy needs. EU members will gradually draw down oil and gas imports from Russia, slowly putting the squeeze on a huge source of income for Russia and giving EU leaders time to find green and fossil fuel alternatives.

Putting a plan in place to secure Europe’s energy that satisfies all EU members would give the EU the ability to consider following through with an import stop of Russian oil and gas, which Ukraine, the US, and the UK are urging. On March 13, former NATO Secretary-General Anders Fogh Rasmussen echoed these calls for the EU to stop importing Russian oil, arguing that the EU needed to accept the cost of doing so considering the damage it would do to Russia.

Green energy goals for the EU

In contrast to the rapid response on sanctions and aid to Ukraine from the EU and US, the energy crisis presents a challenge EU members cannot address through a 180-degree policy shift, but rather a ramping up of existing goals, which were already ambitious.

Energy dependence on Russia in countries like Germany and Italy presents challenges too significant to brush aside, but medium- and long-term change starts now. EU members must take the urgency of the current situation to heart and step-up measures to enable the green transition.

This current crisis, however, is placing so much stress on EU energy policy that it could bifurcate into a “buy fuel now” and “build up green later” split, jeopardizing green investment through urgent attention to replacing fossile fuels. Natural gas still amounts to one-third of the energy used by households in the EU, meaning that even a buildup in green energy cannot replace domestic gas dependence.

If leaders adopt new LNG terminal construction and quotas to fill gas reserves, then these measures should be matched with green measures like adopting heat pumps and improving energy efficiency in buildings, increased investment in wind and solar energy, and further research and development into hydrogen as an alternative to natural gas.

Check back here for our upcoming post, on EU energy options.  Christian Hanelt and Vasileios Chronas take a closer look at the MENA and Gulf region’s potential as a source for EU to become more independent from Russian energy imports.

BIO NOTE

Nathan Crist is Project Manager in the Europe’s Future Program at the Bertelsmann Stiftung working on the Europe’s Economy Project.

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