The Tricky Balancing Act of Phasing out Russian Gas

Introduction

The war in Ukraine exposed how interconnected and interdependent global supply chains and energy value chains have become. The EU imports over 40% of its crude oil and natural gas from Russia and the European Commission’s decision to impose sanctions on Russian energy products has caused reverberations across the EU. Inflation has risen to unprecedented levels, rising to 8% in May 2022 and EU countries have imposed energy caps to protect vulnerable consumers that are exposed to higher energy prices and a risk of a protracted energy shortage.

The fragmentation of the EU has increased the challenge of imposing sanctions against Russia but the realism that has met the decision is illustrated in inflation outcomes that have been excessively high. Countries like Germany are hooked on Russian natural gas and distillates, while countries like Malta are equally heavily linked to Russian production.

This article will look at the extent of EU dependence on Russian energy products, with a breakdown of the various states. Section one will equally focus on Sweden and Swiss imports of Russian energy products. Section two will focus on EU and U.S.A energy-related sanctions. Section three looks at how the EU can substitute Russian energy products.

Section 1: EU imports of Russian Energy

The EU imported approximately 155 billion cubic meters (bcm) of natural gas from Russia in 2021. That amounts to around 40% of the EU’s total gas consumption, with dependency rising to 65% in Germany. Unlike the U.S., the EU is not energy sufficient and therefore relies on Russian gas exports to heat its homes and power its industry.

Since the start of the war, Russia has exported €63bn worth of fossil fuels, with the EU responsible for buying 71% of that, revealed the Centre for Research on Energy and Clean Air in a report on 27 April. Germany, Italy, and the Netherlands are among Europe’s largest importers in absolute terms Europe is clearly dependent on Russian crude imports.

Dependence of various EU states

Several EU states are dependent on Russian energy products. As illustrated in Figure 1, Eastern European countries and more advanced economies such as Finaln are increasingly dependent on Russian energy imports. In the case of Findland which choose to join NATO recently, Russia’s natural gas exports to Finland represent less than 10% of the…