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Current Affairs

Europe’s energy and Russia

Date: 08 February 2022 Tags: Miscellaneous

Issue

There are fears about energy security of Europe if Russia invades Ukraine and shuts off natural gas exports in response to US sanctions.

 

Background

Russia is a major source for natural gas to Europe. Many countries rely on cheap Russian gas to power homes and industries.

 

Details

  • Currently, Russia supplies a third of the continent’s natural gas. The stockpile of gas is already low and reliance on Russia makes it extremely dangerous.

  • Prices of LNG have skyrocketed owing to shortages and less delivery by Russia. Lower production of renewable energy has further aggravated the situation.

 

Implications of sanctions

  • Russian officials have refused to signal if they will cutoff gas supply if US imposes sanctions. Cutoff will be mutually destructive.

  • Western sanctions would clearly avoid targeting Russian energy firms. Russia has signaled to diverse its supplies by signing deal with China.

 

Russian move

  • Officials say that Russia is most likely to halt gases passing through Ukraine. In response it would ask Germany to approve the Nord Stream 2 pipeline.

  • However, western sanctions are likely to be directed towards Nord Stream even though a recent vote to that effect failed.

 

US move

  • The US could send LNG supplies to Europe via ships but it could not possibly fill the large hole in Europe’s shortage.

  • The US has also been looking for alternative suppliers in Africa, middle-east and Asia to boost supplies to Europe.

 

Implications

  • The supply has already been low, causing LNG prices to jump by eight times. Governments are rolling out subsidies and tax breaks to ease the financial stress.

  • If US tries to export more natural gas to Europe, the domestic costs would increase and put additional pressure on American families.