EXPLAINER: Why is Europe reluctant to ban Russian energy?

Shocking images from the Ukrainian city of Bucha and accusations of Russian war crimes they are increasing the pressure for more sanctions to be imposed on Moscow. A key potential target: Russian oil and natural gas, and the $850 million European importers pay for those supplies every day.

But it’s not that easy, given Europe’s dependence on Russian energy..

Western sanctions have so far targeted Russian banks and companies but prevented oil and gas payments, a US concession to keep European allies on board and present a united front.

Here are key facts about Europe’s energy imports from Russia and if a boycott is possible:

WHAT SUPPLY IS AT STAKE?

The European Union gets 40% of its natural gas from Russia, which is used to heat homes, generate electricity and supply industry with both energy and a key raw material for products such as fertilizers.

For oil, it’s about 25%, most of which goes into gasoline and diesel for vehicles. Russia supplies about 14% of diesel, analysts at S&P Global said, and a cut could push prices already high. for trucks and tractors fuel through the roof.

WHY CAN’T EUROPE CUT OFF POWER TO RUSSIA LIKE THE US DID?

The United States imported little oil and no natural gas from Russia, as it has become a major producer and exporter of oil and gas thanks to fracking. Europe had some oil and gas deposits, but production has been declining, leaving the 27 EU countries dependent on imports..

Of the 155,000 million cubic meters of gas that Europe imports from Russia each year, 140,000 million arrive through gas pipelines that cross Ukraine, Poland and the Baltic Sea. Europe is striving to get additional supplies by ship in the form of liquefied natural gas, or LNG, but that cannot make up for the loss of pipeline gas.

LNG is also much more expensive and suppliers are maxed out. Although some European countries are well connected to LNG terminals, such as Spain, and new projects are being worked on in places like Greece and Poland, the infrastructure to get supplies to the rest of Europe does not exist. Building LNG import terminals and pipelines to connect the gas to places that need it can take years.

Because dependence on Russia varies, it is more difficult to agree on a boycott of the EU. Lithuania said on Saturday it had stopped Russian gas imports. and would rely only on an LNG terminal that opened in 2014. Poland, which has spent years searching for alternatives, says it will not renew a Russian gas contract at the end of the year, as well as taking steps to ban Russian coal and oil..

Germany, the continent’s largest economy, still gets 40% of its gas from Russia, even after reducing its dependence. It aims to end Russian coal imports this summer, oil imports by the end of the year and be largely independent of gas by 2024, German Economy Minister Robert Habeck has said.

WHERE ELSE COULD EUROPE GET ENERGY?

It is working to get out of Russian gas as quickly as possible by finding new sources, conserving and accelerating wind and solar power. The EU plan is to cut Russian gas use by two-thirds by the end of the year and exit well before 2030.

In addition to obtaining LNG from places like the United States and Qatar, Europe is pushing for more gas from non-Russian pipelines in Norway and Algeria.

oil is different in which he mostly comes by ship. Still, it would not be easy to replace the Russian supply with tight global markets. Taking the more than 2 million barrels a day from Russia to Europe off the market would push oil prices up around the world. And Russia could try to sell the oil to India and China, although it could earn less.

WHAT WOULD HAPPEN IF EUROPE BANNED RUSSIA ENERGY?

Estimates vary, but a cut implies a substantial blow to the European economy. A ban could mean that governments would have to ration gas among companies to protect homes and hospitals.

Manufacturers of metals, fertilizers, chemicals and glass would be hit hard. Even a partial cut off of gas supplies to the industry could cost “hundreds of thousands” of jobs, said Michael Vassiliadis, director of the German BCE union that represents workers in the chemical and mining industries.

“We are likely to continue to see resistance from Germany and some others as they simply rely much more heavily on Russian imports of oil, gas and coal,” said Craig Erlam, senior market analyst for the UK, Europe, Middle East. and the United States. Africa at Oanda forex broker. “Prognoses about the impact of an embargo vary, but it would almost certainly push the country into recession.”

A group of economists, including University of Notre Dame professor Ruediger Bachmann, say an embargo would mean substantial economic costs for Germany, but would be “clearly manageable.” The country “withstood deeper downturns in recent years and recovered quickly,” including the 2009 global financial crisis and pandemic recession, they said.

“Public fearmongering about the catastrophic consequences of an energy embargo by lobbyists and affiliated think tanks is not up to academic standards,” they said. an analysis on the policy portal of the Center for Economic Policy Research voxeu.org.

WHAT ELSE COULD EUROPE DO?

Economists Simone Tagliapietra and Guntram Wolff of the Bruegel think tank in Brussels have proposed an EU import tariff on Russian oil and gas. That would reduce Russia’s revenue and avoid a big hit to Europe’s growth, with the legal advantage of leaving the contracts intact. European leaders insisted last week that those very contracts protected them from Russia’s demand to pay for gas in rubles.. The fee money could be used to protect vulnerable households from higher energy prices.

While the army that invaded Ukraine is already paid for, the tariff would put the Kremlin in “a more difficult economic position, where they may start having a hard time buying things from the outside world, including weapons, and paying public salaries.” sector,” said Tagliapietra.

HOW DID EUROPE GET TO THIS POINT?

Germany relied on natural gas as it moved away from coal and after former Chancellor Angela Merkel shut down remaining nuclear plants after Japan’s Fukushima disaster in 2011. Merkel emphasized diplomatic dialogue with Russian President Vladimir Putin during her 16 years in office and emphasized that even during the Cold War, energy supplies continued to flow from Russia.

It also backed the Nord Stream 2 pipeline from Russia, despite criticism, would increase Germany’s dependence on Russia. Chancellor Olaf Scholz, who served as Merkel’s finance minister, froze the project after the invasion.

Italy, another big EU economy, increased its reliance on Russian gas over the years as it moved away from coal. Italian officials say Russia supplies 38% of the natural gas used for electricity and heavy industry.including steel and paper mills.

Foreign Minister Luigi Di Maio, who has been traveling to energy-producing countries in search of alternatives, told the ANSA news agency on Monday that “Italy would not be able to veto sanctions related to Russian gas.” But Prime Minister Mario Draghi, who said last week that gas payments were financing Russia’s war, was not referring to energy when he condemned the images of bodies on Ukraine’s streets.

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