THE INFLUENCE OF THE RUSSIAN MILITARY INVASION
IN UKRAINE ON THE ENERGY INDEPENDENCE
OF EUROPEAN COUNTRIES
Abstract. In view of the high level of dependence of the European Union on the import of energy resources from the Russian Federation and the aggravation of their energy supply problems with the beginning of a full-scale Russian invasion of Ukraine, there were analyzed programs, directions and measures to achieve energy independence of European countries. There were determined problems and prospects of practical implementation of the formed measures. Opportunities and place of Ukraine as a participant of the European energy market were outlined.
Keywords: energy independence, gas, European Union, Ukraine, Russia.
The European Union imports 90% of its gas consumption, of which the Russian Federation until recently provided about 45% (Fig. 1). Russia also accounted for about 25% of oil and oil products imports and 45% of coal imports.
In 2021, the EU imported about 140 billion cubic meters of natural gas from Russia. Another 15 billion cubic meters was supplied in liquefied form.
In 2021, the European Commission formulated a program of gradual abandonment of Russian gas imports “Fit for 55”. It presented a set of legislative proposals and initiatives to ensure that EU policies are in line with climate goals, but was rather slow, with a deadline of 2050.
The full-scale Russian invasion of Ukraine on February 24, 2024, exacerbated the problems in the energy market and necessitated an immediate review of the energy independence of the European Union.
On March 7, 2022, the price of gas in Europe set a new high and exceeded 3,800 US dollars per thousand cubic meters. On March 8, 2022, the European Commission presented a preliminary plan to eliminate dependence on Russian fossil fuels by 2030 REPowerEU2. According to the plan, by the end of 2022 it is expected to reduce EU demand for Russian gas by 100 billion cubic meters or two-thirds of the total.
A more detailed plan “A 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas” was presented in March 2022 by the International Energy Agency3. In order to ensure security and protect the EU from possible changes in energy supply, the European Parliament has also adopted regulations on measures to ensure security of gas supply (№ 2017/1938) and on conditions for access to natural gas transmission networks (№ 715/2009) 4.
In support of Ukraine and opposition to Russian armed aggression, the leaders of the European Union held an informal meeting in Versailles on March 1011, 2022, which resulted in the signing of the Versailles Declaration. It also agreed to stop the import of Russian gas, oil and coal as soon as possible.
In general, the updated energy supply strategy of the EU countries envisaged by the above-mentioned acts is based on two main directions: diversification of supplies and accelerated transition to clean energy.
In the context of the last-mentioned direction, the second act of the “green” taxonomy of the European Union was adopted, which defines a number of provisions for changing the structure of energy supply, in particular, the most effective way to decarbonize the economy is direct electrification of end use. 66% of European electricity has already been decarbonized, of which 50% – due to nuclear energy5. Increasing the use of nuclear energy by EU countries is impossible. The planned construction of 14 new nuclear reactors in Europe, in particular in France, is not enough to prevent a gradual decline in the total installed capacity of existing reactors, which are nearing the end of their technical life. The new reactors will keep the share of nuclear energy in the structure of total energy production at 50% in 2035-2050.
Taking into account the climatic characteristics of the European region it is also impossible to use renewable energy for a full maximum. However, as an additional source, it is planned to increase the use of biomass, wind or solar energy from 32% to 40% of final energy consumption by 2030.
Thus, the main direction of increasing the level of energy independence of European countries from Russia is the diversification of gas supplies. With technical support from the EU, European countries are already taking steps to reduce or stop gas and oil imports from Russia, but most of the measures are planned for five years, as their rapid implementation is problematic. Given the different volumes of Russian gas consumption and the different capacity of LNG infrastructure, countries have different options for its replacement (Fig. 2).
The Baltic states were the first countries in Europe to completely stop importing Russian gas. From April 1, 2022, Russian natural gas will no longer flow to Latvia, Estonia and Lithuania. By the end of 2022, the Netherlands plans to abandon Russian oil, gas and coal.
The most difficult thing is to refuse to import Russian gas to its largest consumers – Germany, Italy and France. However, France has said it is ready to support an embargo on Russian oil and gas imports. Other countries, including Germany, are not ready to give up supplies from Russia. In case of a full embargo on imports from Russia, Germany will be able to replace only 20% of gas consumed by increasing coal combustion. At the same time, the German government has assured that it will not allow the Nord Stream 2 gas pipeline to start operating. Austria, which is 80% dependent on Russian natural gas, cannot abandon Russian natural gas in the nearest future, but the country has completely abandoned Russian oil.
Europe’s efforts to gradually reduce gas imports from Russia are expanding the geography of supply. Already this year, the EU plans to increase liquefied gas supplies from the United States and Qatar by 50 billion cubic meters7. The EU relies on Caspian producers to supply natural gas, which can supply up to 10 billion cubic meters for several months. This requires enhanced cooperation with Turkey, which is becoming a central link in alternative supply routes from Azerbaijan, Turkmenistan and Israel8.
As of the end of April 2022, the EU’s fifth package of sanctions has decided to impose an embargo only on Russian coal, which will take effect only in August. The European Union is currently developing a sixth package of sanctions that could affect oil and gas exports. In order to impose an oil embargo, the consent of the world’s largest exporters is required. The UAE, Saudi Arabia, Iran, Venezuela and others should increase oil production by a total of 10 million barrels per day. At the moment, there is the consent of some countries, but the full consent of all exporters is not yet.
The current European energy strategy envisages the elimination of dependence on fossil fuels from Russia by at least 2030, which makes it impossible to impose a full embargo on energy imports from this country until then. An alternative to a full embargo could be a sharp reduction in energy imports, imposing a 40% tariff on it, which would reduce imports by about 80%. This will reduce economic losses for the countries, most dependent on Russian supplies. But the economic impact of changing energy supply strategies for European countries will depend on the replacement and redistribution of energy between sectors.
Russia’s energy resources have become an important geopolitical factor. According to the Bruegel think tank, the EU pays 450 million and 400 million euros a day for oil and natural gas imports, respectively. This amount is equivalent to the estimated cost of 160 Caliber cruise missiles launched in Ukraine. In just two months of war, the EU has paid Russia more than 40 billion euros for oil and gas. This money has softened the impact of Western sanctions on Russia’s commodity economy. The oil and gas sector brings in up to half of its budget revenues and more than half of its exports, and it sells 70% of its gas and 60% of its oil and petroleum products to Europe. In 2021, revenues from oil and gas exports in the federal budget of Russia amounted to 38.1% of total revenues, and profits – 119 billion dollars9.
In response to the imposition of sanctions by European countries, on March 31, 2022, the President of Russia signed a decree defining new rules for the sale of natural gas to “unfriendly countries” from April 1. Buying countries must open special accounts with Gazprombank. The bank will accept payments in foreign currency and will convert it into rubles. Most EU and G7 countries have rejected this requirement, but about 10 countries, including Hungary and Italy, have already opened such accounts10.
Due to the rejection of this requirement, Russia has already stopped supplying gas to Bulgaria and Poland. These countries have declared their readiness to abandon Russian gas supplies. But if the same situation happens with other, more vulnerable countries, it will require a partial revision of their energy strategy and structure.
Strict sanctions on Nord Stream 2 could be a significant blow to Russia’s energy sector. According to Reuters, it is currently a probable bankruptcy of the project11. The current sanctions against Russia, according to World Bank forecasts, will reduce its GDP in 2022 by 11.2%12.
At the same time, these losses are incomparable with the losses of Ukraine. If the war continues for several more months, GDP is expected to shrink by 45%.
The energy sector has already suffered significant losses, including physical damage to its energy infrastructure. According to the Ministry of Energy, the total losses in the energy sector are estimated at several billion euros, of which more than a billion euros have already been borne by the national nuclear power company Energoatom13.
However, there are positive developments in this area. Thus, NNEGC Energo-atom and all its stations were transferred to the Paris Center of the World Association of Nuclear Operators (until now, Ukrainian nuclear power plants were part of the Moscow center WANO). Ukraine has refused to purchase Russian nuclear fuel. Currently, fuel reserves for WWER-1000 reactors will be enough for two years. During this period, it is planned to equip one of the Ukrainian enterprises with a production line for assembling Westinghouse fuel assemblies.
The Ukrainian power system has finally disconnected from the power systems of Russia and Belarus and joined the European Network of Transmission System Operators for Electricity (ENTSO-E). Accession provides a bilateral advantage: on the one hand, it is an opportunity for European business to work in the energy market of Ukraine, on the other – the development of the European energy market by domestic companies. Mechanisms are currently being developed with Western partners to increase the commercial flow of electricity.
The implementation of the strategy of ensuring the energy independence of European countries from the Russian Federation focuses on two basic areas – diver-sification of supplies and accelerated transition to clean energy. Both directions have significant limitations and could lead to a complete abandonment of Russian energy at best in 2030. Direct end-use electrification has been identified as one of the most effective ways to change the structure of energy supply in the EU. In this context, as well as taking into account the final accession to ENTSO-E, Ukraine has new opportunities to be present in the European energy market as an exporter of electricity. At present, the issue of preservation and restoration of energy infrastructure, modernization and development of new capacities is acute.
Statistical Office of the European Communities, „General and regional statistics”, Eurostat, 2021, available at: https://ec.europa.eu/eurostat.
European Commission “REPowerEU: Joint European action for more affordable, secure and sustainable energy”, Official website of European Union, March 08, 2022, available at: https:// ec.europa.eu/commission/presscorner/detail/en/ip_22_1511.
International Energy Agency, „A 10-point plan to reduce the European Union’s reliance on Russian natural gas”, Official website of IEA, March6 20226 available at: https://www.iea.org/ reports/a-10-point-plan-to-reduce-the-european-unions-reliance-onrussian-natural-gas.
European Parliament, „MEPs back plans to restock gas reserves before next winter”, Official website of European Parliament, April 07, 2022, available at: https://www.europarl.europa.eu /news/es/press-room/20220401IPR26536/el-pe-apoya-elplan-para-almacenar-gas-de-cara-al-proximo-invierno.
J. Buzek et al., „An exchange of views on the second EU Taxonomy Delegated Act”, European Energy Forum, March 03, 2022, available at: http://www.europeanenergyforum.eu/ events/ exchange-views-second-eu-taxonomy-delegated-act.
L. Boehm, „Russia’s war on Ukraine: Implications for EU energy supply”, European parliamentary research service (EPRS), March 01, 2022, available at: https://epthinktank.eu/ 2022/03/01/ russias-war-on-ukraine-implications-for-eu-energy-supply.
Ukrinform, „Austria has given up Russian oil”, Ukrainian multimedia platform for broad-casting, April 21, 2022, available at: https://www.ukrinform.ua/rubric-world/3463443avstria-vidmovilasa-vid-rosijskoi-nafti.html.
I. Surwillo & V. Slakaityte, „With energy at play in the Ukraine war, everybody pays”, Danish Institute for International Studies (DIIS), March 17, 2022, available at: https://www.diis.dk/ en/research/with-energy-play-in-the-ukraine-war-everybody-pays.
M. Saglam, „Can Turkey benefit from Europe’s quest to reduce Russian gas?”, Al-Monitor, March 09, 2022, available at: https://www.al-monitor.com/originals/2022/03/can-turkeybenefit-europes-quest-reduce-russian-gas.
J. Liboreiro, „After coal, the EU faces an uphill battle to ban Russian oil and gas”, Euronews, April 12, 2022, available at: https://www.euronews.com/my-europe/2022/04/12/after-coalthe-eu-faces-an-uphill-battle-to-ban-russian-oil-and-gas.
E. Fomina, „The European Union will increase LNG purchases from the United States to replace Russian gas”, Deutsche Welle (DW), April 01, 2022, available at: https://www.dw.com/ ru/es-uvelichit-zakupki-spg-iz-ssha-dlya-zameny-rossijskogo-gaza/a61324346 (in Russian).
A. El Yaakoubi & Sh. Khan, „Exclusive: Nord Stream 2 owner considers insolvency after sanctions”, March 01, 2022, available at: https://www.reuters.com/markets/europe/exclusive nord-stream-2-owner-considers-insolvency-after-pipeline-halt-sanctions-2022-03-01.
World Bank, „Europe and Central Asia Economic Update, Spring 2022: War in the Region. Europe and Central Asia Economic Update”, World Bank, April 04, 2022, available at: https://open knowledge.worldbank.org/handle/10986/37268.
„The country’s energy system has suffered losses, but plans to increase exports to the EU. How is this possible?”, Ekonomichna Pravda, April 16, 2022, available at: https://www.epravda. com.ua/publications/2022/04/16/685837 (in Ukrainian).
WEC CENTRAL & EASTERN EUROPE REGIONAL ENERGY FORUM – FOREN 2022
12-15 June 2022, Vox Maris Grand Resort, Costinesti, Romania
* National Technical University of Ukraine “Igor Sikorsky Kyiv Polytechnic Institute”, Ukraine
** National Technical University of Ukraine “Igor Sikorsky Kyiv Polytechnic Institute”, Ukraine
1 Statistical Office Of The European Communities, „General and regional statistics”, Eurostat, 2021, available at: https://ec.europa.eu/eurostat.
2 European Commission “REPowerEU: Joint European action for more affordable, secure and sustainable energy”, Official website of European Union, March 08, 2022, available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1511.
3 International Energy Agency, „A 10-point plan to reduce the European Union’s reliance on Russian natural gas”, Official website of IEA, March 6, 2022 available at: https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-onrussian-natural-gas.
4 European Parliament, „MEPs back plans to restock gas reserves before next winter”, Official website of European Parliament, April 07, 2022, available at: https://www.europarl.europa.eu/news/es/press-room/20220401IPR26536/el-pe-apoya-elplan-para-almacenar-gas-de-cara-al-proximo-invierno.
5 J. Buzek et al., „An exchange of views on the second EU Taxonomy Delegated Act”, European Energy Forum, March 03, 2022, available at: http://www.europeanenergyforum.eu/ events/exchange-views-second-eu-taxonomy-delegated-act.
6 L. Boehm, „Russia’s war on Ukraine: Implications for EU energy supply”, European parliamentary research service (EPRS), March 01, 2022, available at: https://epthinktank.eu/ 2022/03/01/russias-war-on-ukraine-implications-for-eu-energy-supply.
7 I. Surwillo & V. Slakaityte, „With energy at play in the Ukraine war, everybody pays”, Danish Institute for International Studies (DIIS), March 17, 2022, available at: https://www.diis.dk/en/research/with-energy-play-in-the-ukraine-war-everybody-pays.
8 M. Saglam, „Can Turkey benefit from Europe’s quest to reduce Russian gas?”, Al-Monitor, March 09, 2022, available at: https://www.al-monitor.com/originals/2022/03/can-turkeybenefit-europes-quest-reduce-russian-gas.
9 J. Liboreiro, „After coal, the EU faces an uphill battle to ban Russian oil and gas”, Euronews, April 12, 2022, available at: https://www.euronews.com/my-europe/2022/04/12/after-coalthe-eu-faces-an-uphill-battle-to-ban-russian-oil-and-gas.
10 E. Fomina, „The European Union will increase LNG purchases from the United States to replace Russian gas”, Deutsche Welle (DW), April 01, 2022, available at: https://www.dw.com/ ru/es-uvelichit-zakupki-spg-iz-ssha-dlya-zameny-rossijskogo-gaza/a61324346 (in Russian).
11 A. El Yaakoubi & Sh. Khan, „Exclusive: Nord Stream 2 owner considers insolvency after sanctions”, March 01, 2022, available at: https://www.reuters.com/markets/europe/exclusivenord-stream-2-owner-considers-insolvency-after-pipeline-halt-sanctions-2022-03-01.
12 World Bank, „Europe and Central Asia Economic Update, Spring 2022: War in the Region. Europe and Central Asia Economic Update”, World Bank, April 04, 2022, available at: https://openknowledge.worldbank.org/handle/10986/37268.
13 „The country’s energy system has suffered losses, but plans to increase exports to the EU. How is this possible?”, Ekonomichna Pravda, April 16, 2022, available at: https://www.epravda.com.ua/publications/2022/04/16/685837 (in Ukrainian).