Chat with us, powered by LiveChat
Menu

Will The European Union Cut Off Imports Of Russian Oil And Gas?

cut off important of russian oil and gas
Print Friendly, PDF & Email

EDITOR'S NOTE: In a globalized economy, it’s difficult for any nation, or a coalition of nations, to wage economic warfare against another without sustaining economic casualties. Yet given Russia’s atrocities in Ukraine, heinous acts that seem to be mounting by the day, the EU has finally had it. Short of taking offensive action that would risk real casualties in a military engagement against a nuclear power (aka, WWIII), it has decided instead to fully cut off Russian oil and gas imports; energy imports the EU had relied upon for years and still needs. Nobody knows what this means for the EU. It was never factored into any crisis mitigation models simply because it was never considered an option. So will the outcome bring a mere compromise in the EU’s capacity to function or will it generate a full-blown crisis? Read on.

Pressure is mounting for the European Union to do the unthinkable — cut off imports of Russian oil and gas, which have been flowing to the West through all manner of crises for decades, Emily writes.

Why it matters: No one quite knows what happens economically if the EU is cut off from its supply.

  • "It's not something that's been in the models because it was never considered an option," said Antoine Halff, a senior research scholar at the Center on Global Energy Policy at Columbia University.
  • While specific predictions are hard to nail down, there is consensus that a full energy embargo would throw the EU into recession and have ramifications geopolitically, as well.
  • "Regionally devastating and globally impactful," write the authors of one February paper that lays out options for handling an energy cut-off.

Germany, which is deeply dependent on Russian energy, would likely take it the hardest.

  • German GDP could decline somewhere between 0.5% and 3%, according to an estimate from a paper published last year by German economists. (The pandemic caused a 4.5% GDP decline in the country).
  • Without Russian energy, European companies — from makers of chocolates and candies to chemical manufacturers — could be forced to shutter production, according to a recent NYT report.
  • Citizens could also be forced to ration heat and electricity.

The big picture: The EU said yesterday that it would ban imports of coal, and that's fueling chatter about the prospects of a total energy ban. Some countries are pushing for oil to be next, Bloomberg reported.

State of play: "Each day, roughly, we are paying €1 billion to import Russian energy, and that's, obviously, a source of income that's used to finance the war,” the EU's top diplomat, Josep Borrell, said earlier this week.

  • It was the first time he'd spoken "candidly" about the issue, noted energy columnist Javier Blas at Bloomberg.
  • Cutting off coal and oil, experts said, is relatively doable. Those can be imported from elsewhere. Natural gas, however, requires a level of infrastructure — pipeline, transport and storage — that can't easily be replicated.

Flashback: Germany and the EU were warned for years that their reliance on Russian energy would be a liability, said Anna Mikulska, a nonresident fellow in Energy Studies at Rice University's Baker Institute for Public Policy.

  • They could have diversified away from Russian energy sources, as some neighboring countries have — Poland and Lithuania both built terminals to import liquified natural gas. Germany has no LNG terminal, and only now is in process of building them.

What's next: Lithuania announced a total ban on Russian energy this week. Other countries may fall in line — eventually. The EU has said it will ween itself off Russian gas "well before 2030."

  • That sure feels like a long time from now.

Go deeper.

Originally published on Axios.

2022 Info Kit

GET YOUR FREE

GOLD SILVER INFO KIT

Precious Metals and Currency Data Powered by nFusion Solutions