EU Is Split On How To Transition Away From Russian Energy

The European Union countries are divided on how quickly they should reduce their reliance on Russian energy supply. Despite the imposition of sanctions in other areas of commerce, the EU continues to rely substantially on Russian oil and gas.

Germany’s economic minister stated that the country will be ready to withstand a Russian oil embargo by the end of 2022, implying that he supports stronger sanctions. Hungary, on the other hand, has stated that it opposes such a move, stressing that it will not support moves that could jeopardise supplies.

Under increasing pressure to limit the funding stream backing President Vladimir Putin’s conflict in Ukraine, EU ministers met on Monday to debate how to handle the issue.

Members states face two major challenges: how to pay for Russian energy without violating or undermining EU sanctions, and how to seek and develop alternative supply to move away from reliance on Russia.

The EU’s energy policy leader, Kadri Simson, told a press conference on Monday that Russia’s decision to cut off gas supplies to Poland and Bulgaria had bolstered the bloc’s resolve to become independent of Russian fossil fuels.

The EU, on the other hand, has imported around £37 billion worth of fossil fuels since the conflict began, according to the Centre for Research on Energy and Clean Air (CREA). Germany and Italy were the world’s two largest importers.

Last week, Russian energy giant Gazprom halted gas exports to Poland and Bulgaria after those nations failed to comply with Russian requests to switch to rouble payment, and many other EU member countries are expected to face the same problem by mid-May.

Poland and Bulgaria had intended to cease using Russian gas this year and believe they will be able to adapt, but the move has sparked fears that other EU members, especially Germany, Europe’s gas-dependent economic powerhouse, could follow suit.

Simson reiterated on Monday the European Commission’s position that paying for gas in roubles would be a “violation” of sanctions and “cannot be accepted.”

She stated that member states were stockpiling gas storage supplies in preparation for the winter.

According to Nathan Piper, head of oil and gas research at Investec, the EU’s desire to “pivot away” from Russian oil and gas was “quite evident,” but the lack of unanimity was due to the “capacity to actually make that happen.”

 Russia supplies nearly 40 percent of Europe’s natural gas and is also the bloc’s largest oil supplier. However, some countries are more reliant on Russian fossil fuels than others, so supply disruptions might have a significant economic impact.

According to the International Energy Agency, Germany presently imports around 25 per cent of its oil and 40 per cent of its gas from Russia, while Slovakia and Hungary imported 96 per cent and 58 per cent of their oil respectively from Russia last year.

Robert Habeck, Germany’s economic minister, said his country had “managed to achieve a scenario where Germany can withstand an oil embargo” and was “on track to do the same for gas.”

“Other countries need a bit more time,” he added.

According to diplomatic sources, compromises to a complete bloc ban are being considered, particularly for countries like Hungary and Slovakia.

Compared to gas, which is most typically transported through pipelines, Piper said there were more choices for alternative supply with oil. Finding new supplies is also “trickier” for landlocked EU countries, he noted.

While Germany may move to ban oil, he warned that shutting down its Russian gas supplies, which account for 40% of the country’s overall imports, would take “years.”

“Russia could go ‘if you want to go after our oil, how about we reduce our gas’,” he added.

“They could push up the price, reduce the volumes. They have a lot of bargaining power.”

(Adapted from BBC.com)



Categories: Economy & Finance, Geopolitics, Regulations & Legal, Strategy, Sustainability

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