Russia-Europe Energy Relationship

 

Context:

  • Russia’s invasion on Ukraine has invited unprecedented sanctions, in this context it is important to know the relationship between Russia and Europe.
  • Even though Europe is moving towards carbon neutral economy, it is still dependent on Natural Gas, so it is heavily dependent on Russia.

 

Background:

  • Europe is the world’s second largest market for natural gas, and hence the battleground between the superpowers of hydrocarbon energy, the U.S. and Russia.
  • Germany, despite a decade of “energiewende” (an ‘energy turnaround’ or the ‘ongoing transition to a low carbon, environmentally sound, reliable, and affordable energy supply’), is still one of the world’s largest importers of oil and gas.
  • It is again at the epicentre, as it has been in earlier energy pipeline disputes.
  • The post-war European security order under the North Atlantic Treaty Organization (NATO) and the Warsaw Pact was underpinned by an energy order in which oil was sold to West Europe from West Asian/Middle Eastern fields controlled by U.S. companies; and to East Europe from the giant oilfields of the Soviet Union.
  • West Germany (the Federal Republic of Germany or the FRG) and other European countries had “economic miracles” and were drawn into the dollar denominated oil trade cycle, which supports U.S. global dominance to this day.

 

NORD Stream:

  • In the early 2000s, the EU noted the stability of Russia’s gas deliveries. However in 2004, political instability in Ukraine began causing problems for gas flow, and thereafter, work on the direct Russia-Germany link via the undersea giant Nord Stream project was planned.
  • The two Nord Stream pipelines are gamechangers as they can meet nearly all of Germany’s import requirements, and are symbols of synergy with Russia.
  • However, they deprive Ukraine and East European transit countries of revenues and leave them dependent on Russia for continued supplies.

 

How important is it to Russia?
  • The Nord Stream project has larger capacity than all of Russia’s current and planned gas pipelines to China; so it remains of great importance for Moscow.
  • Nord Stream 1 survives, as Europe will suffer without it, but preserving market share in the EU requires Russia to keep gas also flowing through Ukraine.

Source: THE HINDU.

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