Indian Council of World Affairs

Europe had been on the edge of an energy crisis with high price of energy resources, even before the beginning of the conflict in the Ukraine. The conflict, which began in February 2022, has further pushed the energy crisis with issues relating to the security and vulnerability of energy supplies becoming paramount. The initial concerns were related to the Kremlin using its dominance in the European energy market to restrict energy exports to the continent when faced with potential sanctions. However, debates in Europe have changed as the conflict has progressed, with the European Union (EU) member states putting an embargo on Russian oil as part of the sixth tranche of sanctions and also looking for alternatives to secure the supply of essential energy resources. This paper analyses the European energy dependency on Russian energy imports and looks at the steps taken by the Union for its energy security.

Europe’s Energy Dependence on Russia

In 2020-21, crude oil remained the largest imported energy product for the EU (70.9% of total EU energy imports in 2021) followed by natural gas (16.6%), with Russia being the leading supplier of both petroleum oil and natural gas to the Union. In 2021, the EU imported 24.8% of crude oil from Russia, followed by Norway (9.4%), the US (8.8%), Libya (8.2%) and Kazakhstan (8%)[i]. The majority of the crude oil from Russia is shipped to Europe via seaborne routes and the remaining crude oil is delivered through Druzhba pipeline in Central Europe. The Druzhba pipeline supplies to the refineries in Poland, Germany, Hungary, Slovakia and Czech Republic.[ii]

Image 1 – EU’s Crude Oil Imports, 2020 and 2021

Source: Eurostat, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=EU_imports_of_energy_products_-_recent_developments#Overview 

Image 2 – Oil and Gas Pipelines Between Europe and Russia

Source: ICIS, https://www.icis.com/explore/cn/resources/news/2022/02/01/10729759/insight-ukraine-tensions-ripple-through-oil-gas-chems-markets

In terms of imports of natural gas - EU imported 39.2% gas from Russia followed by Norway (25.1%), Algeria (8.2%) and the US (7.3%)[iii]. The Russian gas is largely imported through pipelines such as Yamal (which enters Europe through Belarus and into Poland), Nord Stream One (enters Europe through Germany) and, Brotherhood and Soyuz pipelines which transit gas to EU countries via Ukraine.

Image 3 – EU’s Natural Gas Imports, 2020 and 2021

Source: Eurostat, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=EU_imports_of_energy_products_-_recent_developments#Overview 

In terms of coal imports, in 2020 the EU imported 46% coal from Russia, followed by 17.7% from the United States, 13.7% from Australia, 8.2% from Columbia and 2.8% from South Africa[iv].

In short, energy resources (coal, crude oil and natural gas) represented “62% of EU imports from Russia in 2021 (€99 billion), indicating a significant drop of almost 15 percentage points compared with 2011, when energy represented almost 77% of EU imports from Russia (€148 billion)”.[v] These figures highlight that while the EU, over the period of time, has been reducing its import of energy resources from Russia, the crisis in Ukraine has exacerbated the need to reduce the dependency further.

Ukrainian Crisis and EU’s Quest for Energy Security

The Ukraine crisis has bought the question of EU’s dependency on Russian energy resources at the forefront. While the Union had been working towards reducing its reliance on the non-renewable resources and on Russian energy imports, the crisis has led the EU to re-evaluate its policies and responses. This was highlighted in the statement post the Versailles Summit in March 2022, where the member states announced that they have agreed to phase out their dependency on Russian gas, oil and coal by “accelerating the reduction of overall reliance on fossil fuels; diversifying supplies and routes including through the use of LNG and the development of biogas; further developing a hydrogen market for Europe; speeding development of renewables and their key components and streamlining authorisation procedures for energy projects; fully synchronising and interconnecting the EU’s power grids; reinforcing EU contingency planning for security of supply; and improving energy efficiency. The bloc is also going to prioritise gas storage and LNG investment infrastructure.”[vi] The following are some of the measures taken by the Union to reduce its reliance on Russian energy -

First, the Ukrainian crisis brought to the fore concerns over energy security and the Europe’s overdependence on Russia. EU Commission President Ursula van der Leyen said in March 2022 that “We must become independent from Russian oil, coal and gas. We simply cannot rely on a supplier who explicitly threatens us.”[vii] While there were discussions related to sanctioning of Russian energy resources, it was not until the fifth and sixth package that they were placed under sanctions. Under the fifth package of sanctions, the EU declared “import ban on all forms of Russian coal, which would amount to around €8 billion loss of revenue per year for Russia.”[viii]

Second, under the sixth package of sanction a complete import ban on all Russian seaborne crude oil and petroleum products has been made. This is critical as it covers almost “90% of EU’s crude oil imports from Russia”. This ban is subject to transition periods so as to allow various sectors and markets to adapt. These transition periods will also allow the EU to secure alternative supplies and minimise the impact on the global oil market and prices. While the seaborne crude oil is to be banned, this does not include the pipelines delivering the oil, which have been granted temporary exemption to ensure the phase-out of the Russian energy resources happens in orderly fashion.[ix] However, member states benefiting from this exemption will not be able to resell crude oil and petroleum products to other member states or third countries.

Third, the EU is stepping up efforts to diversify its sources of energy. The Union has reached out to countries like Qatar, US, Norway, Azerbaijan, Algeria, Turkey, Japan, Egypt, and South Korea to secure gas exports as alternatives to Russia.[x]

Several member states have also taken steps to decrease their dependency on Russia, for example a key step taken by Berlin was putting on hold the final approval of the Nord Stream 2 gas pipeline[xi].  It has also reduced its dependence on Russian crude oil from 35 to 12%; coal from Russia has also been reduced to 8% percent compared to 45%; and gas to 35% from 55% before Russia’s action in Ukraine[xii]. Berlin has replaced the Russian gas by increasing the LNG imports from Norway and the Netherlands. Germany also aims to establish LNG terminals in German ports by 2022-23. Germany also reached an agreement with Qatar[xiii] for LNG supplies.

Similarly, Poland is also expanding and establishing its LNG terminals to receive LNG from countries like US, Norway and Qatar. Moreover, the 580-kilometers Poland-Lithuania Gas Connector (GIPL) was formally commissioned in May 2022 to “boost energy security in the region by connecting the Baltic and Finnish with the Polish markets”[xiv]. The interconnector already allows Lithuanian LNG to flow into Poland.

Similarly, the Gas Interconnector Greece-Bulgaria Pipeline is expected to give Bulgaria access to ports in Greece that are importing LNG and also bring gas from Azerbaijan through Trans Adriatic Gas Pipeline (TAP)[xv] system that ends in Italy. In this regard, Rome has also taken several steps to reduce its dependency on Russian resources. Rome is second largest buyer of Russian gas and aims to end its dependency on Moscow by mid-2023. Italy, which imports about 40% of its gas from Russia, is planning to boost imports from countries like Algeria, Congo, Egypt etc. Italy signed an agreement with Algeria, its second-biggest gas supplier, gaining an extra 9 bcm of gas from Sonatrach in April 2022. Italian energy company Eni also signed a deal with Egypt’s EGPC for LNG imports in April 2022[xvi] – making North Africa critical for Italian energy security.

The importance of African energy resources was also highlighted during German Chancellor Olof Scholz’s visit to the region. Africa is home to large unexploited gas reserves in the world. South-eastern and western African region have large reserves of energy, while Egypt and, in near future Senegal have reserves and infrastructure to produce LNG[xvii] – making region lucrative for the European countries as they look towards diversification of energy away from Russia. Algeria is already connected to Spain via gas pipeline, however increasing political tensions between Spain, Algeria and Morocco over Western Sahara, and Algeria’s threat of halting supply to Madrid[xviii], has added to the energy security concerns of Spain.

Fourth, is RePowerEU Plan. On March 8, 2022, the European Commission announced ‘REPowerEU’[xix], so that EU can “reach independence from Russian gas well before the end of the decade…[and] focus can be extended to phasing out dependence on Russian oil and coal, for which the EU has a broader diversity of potential suppliers”. The member states declared their intent to reduce the supply from Russia by two-thirds by the end of 2022. This means that the countries will reduce the imports of Russian gas from 155 billion-cubic-metres (bcm) to 100 bcm per year[xx]. To achieve this the plan envisaged the increase in resilience of the EU-wide energy system which was based on two pillars – first, diversifying gas supplies by increasing pipeline and LNG imports from non-Russian suppliers. The emphasis is placed on diversification of pipelines resources, doubling the objective for biomethane production, promote a European market for hydrogen and support the development of integrated gas and hydrogen infrastructure and identifying new international partners. Second, is accelerating Europe’s move away from fossil fuels by doubling EU’s photovoltaic and wind capacities by 2025 and tripling by 2030. The emphasis is also laid on decarbonisation of industry by accelerating deployment of innovative hydrogen-based solutions and cost-competitive renewable electricity in industrial sector.

A detailed RePowerEU Plan was released in May 2022[xxi] which stated that “Russia’s unprovoked and unjustified military aggression against Ukraine… has heightened energy security concerns, bringing to the fore the EU’s over-dependence on gas, oil and coal imports from Russia. High amounts paid for Russia’s fossil fuels are helping Russia sustain its war against Ukraine.” While the emphasis in the March 2022 plan was on phasing out Europe’s dependency on Russian energy imports as soon as possible, this detailed plan is about “rapidly reducing our dependence on Russian fossil fuels by fast forwarding the clean transition and joining forces to achieve a more resilient energy system and a true Energy Union.” To reduce the dependency on Russian resources, the plan aims to – first, accelerate clean energy transition by speeding-up and scaling-up in renewable energy in power generation, industry, buildings and transport. The Commission proposed to increase the target in the Renewable Energy Directive to 45% by 2030, up from 40% in 2021. This would bring the total renewable energy generation capacities to 1236 GW by 2030, as compared to 1067 GW by 2030 envisaged under ‘Fit for 55’ framework. It also includes increasing capacities and infrastructures for hydrogen and biomethane. Second, increase smart investments and reforms. The plan entails additional investment of €210 billion between 2022 and 2027. It is expected that implementation of the “Fit for 55 framework and the REPowerEU plan will save the EU almost €80 billion in gas import expenditures, €12 billion in oil import expenditures and €1.7 billion in coal import expenditures per year by 2030”. Third, is diversifying energy imports. This requires working within the EU and with international partners to secure alternative sources of energy. And fourth, is energy savings. Savings are the quickest and cheapest way to address the current energy crisis. The idea is to reduce energy consumption through higher efficiency and to push for clean energy transition.

Conclusion

The debates around diversification of energy resources in Europe have been an ongoing process with the need to reduce dependence on Russian energy resources being debated since 2009, when the Russia-Ukraine gas crisis led to a two-week disruption of Russian gas to Europe. Nonetheless, the European countries did not stem the import of energy resources in the aftermath of Russia’s annexation of Crimea in 2014, rather there was a gradual increase in import of resources with Europe also starting LNG imports from Yamal in 2017[xxii].

The 2022 Russian ‘military action’ in Ukraine has again bought the debates on energy diversification to the forefront with the question of energy dependency gaining new urgency, due to the notion that the revenues from the exports of energy resources might be financing Russia’s actions[xxiii] in Ukraine. The focus became sharper as Russia stopped the gas flow to Poland and Bulgaria over issues related to payments to be made in rubles[xxiv] in April 2022. These actions led the Union, along with its allies, to put sanctions on Russian coal and crude oil.

However, placing sanctions on the import of crude oil has caused rift within the Union with certain member states expressing their inability to follow the timelines imposed by the Union. Four member states - Hungary, Slovakia, the Czech Republic and Bulgaria – resisted the initial timeline envisioned by the European Commission of a complete phase-out of all Russian crude oil in six months and all refined oil products by the end of 2022 arguing that given their higher dependencies on Russian oil, they cannot make the switch to other providers in such a short period of time, without jeopardising their national economies. As a result of these objections the sanctions that have been applied are relatively weaker than envisioned with the embargo only targeting sea-borne imports while excluding all pipeline supplies. This also highlights the divisions within the EU over its emerging Russia policy.

Second key issue that needs to be highlighted is the implementation of the RePowerEU goals. The policy aims to push towards clean energy transition of the Union by bolstering the renewable energy contribution in the larger energy matrix of the Union. This would require increased investments in infrastructure projects all over the Union with respect to new LNG terminals and pipelines, along with faster installations of wind and solar projects which are at a conceptual stage. As the timelines of the plans have shortened the timely delivery of the projects remains a key question.

Third critical issue is of the gas imports from Russia. While both coal and crude oil has been put under the sanctions package, the natural gas imports from Moscow have been kept out of the ambit of the sanctions. The EU imported approximately 155 bcm of natural gas from Russia in 2021, which accounts for 40% of the its total gas consumption. Although, the EU has declared its intentions to reduce its reliance on Russian gas by two-thirds by end of 2022, it remains to be seen how it will achieve this target in the shortest amount of time.

Since the beginning of the Ukrainian crisis in February 2022, Russia has exported €63bn worth of fossil fuels, with the EU buying 71% of those resources, and Germany, Italy and the Netherlands among Europe’s largest importers[xxv]. Europe, in terms of energy security, faces three critical questions – first, how to reduce energy dependency on Russia; second, to identify alternative partners who can fill in the gap left by Moscow; and third, to implement the energy plans and policies including ‘Fit for 55 agenda’ and RePowerEU. The plans put forward by the EU aim to cut its reliance on Russian gas by two-thirds by the end of 2022, fast-forwarding plans to make the Union independent of Russian fossil fuels by 2030 and finding alternative sources of energy with emphasis on boosting efficiency and transitioning to green alternatives. The urgency of implementing these plans was visible in a statement by Executive Vice-President for the European Green Deal, Frans Timmermans that - “It is time we tackle our vulnerabilities and rapidly become more independent in our energy choices…Putin’s war in Ukraine demonstrates the urgency of accelerating our clean energy transition”.[xxvi] However, the road for the EU to become truly independent of the Russian resources and to achieve energy security remains expensive and challenging.

*****

*Dr. Ankita Dutta, Research Fellow, Indian Council of World Affairs, New Delhi.
Disclaimer: Views expressed are personal.

Endnotes

[i] *EU imports of energy products, Eurostat, April 2022, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=EU_imports_of_energy_products_-_recent_developments#Overview, Accessed on 30 May 2022

[ii]‘How Russian oil flows to Europe - Imports, dependency, trade value, ports and pipelines’, Transport and Environment Briefing, 7 March 2022, https://www.transportenvironment.org/wp-content/uploads/2022/03/20220303_russian_oil_in_the_EU.pdf, Accessed on 30 May 2022

[iii] *EU imports of energy products, Eurostat, April 2022, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=EU_imports_of_energy_products_-_recent_developments#Overview, Accessed on 30 May 2022

[iv]EU’s hard Coal Imports by Origin, Statista, https://www.statista.com/statistics/1034930/eu-hard-coal-imports-by-origin/

[v] *From where do we import energy?, Eurostat, https://ec.europa.eu/eurostat/cache/infographs/energy/bloc-2c.html?lang=en, Accessed on 31 May 2022

[vi] *Versailles Declaration, European Council, March 2022, https://presidence-francaise.consilium.europa.eu/media/qphpn2e3/20220311-versailles-declaration-en.pdf, Accessed on 31 May 2022

[vii] *REPowerEU: Joint European action for more affordable, secure and sustainable energy, Press Corner, European Commission, 8 March 2022, https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1511, Accessed on 1 June 2022

[viii] *Ukraine: EU agrees fifth package of restrictive measures against Russia, Press Corner, European Commission, 8 April 2022, https://ec.europa.eu/commission/presscorner/detail/en/IP_22_2332, Accessed on 31 May 2022

[ix] *Russia's war on Ukraine: EU adopts sixth package of sanctions against Russia, Press Release, European Commission, 3 June 2022, https://ec.europa.eu/commission/presscorner/detail/en/IP_22_2802, , Accessed on 1 June 2022

[x] Euronews, 17 April 2022, https://www.euronews.com/green/2022/04/27/europe-scrambles-to-keep-the-lights-on-as-it-sidelines-russian-gas, Accessed on 2 June 2022

[xi] BBC, 22 February 2022, https://www.bbc.com/news/world-europe-60131520, Accessed on 2 June 2022

[xii] Clean Energy Wire, 2 May 20222, https://www.cleanenergywire.org/news/germany-ready-agree-oil-embargo-can-lower-russian-gas-dependence-30-year-end, Accessed on 2 June 2022; *Zweiter Fortschrittsbericht

Energiesicherheit, 1 May 2022, Federal Ministry of Economics and technology, Berlin, https://www.bmwk.de/Redaktion/DE/Downloads/Energie/0501_fortschrittsbericht_energiesicherheit.pdf?__blob=publicationFile&v=4, Accessed on 2 June 2022

[xiii] The Guardian, 20 March 2022, https://www.theguardian.com/world/2022/mar/20/germany-gas-deal-qatar-end-energy-dependency-on-russia, Accessed on 3 June 2022

[xiv] *Inauguration of gas interconnection between Poland and Lithuania, News, European Commission, 5 May 2022, https://ec.europa.eu/info/news/inauguration-gas-interconnection-between-poland-and-lithuania-2022-may-05_en, Accessed on 3 June 2022

[xv] The Hindu, 29 April 2022, https://www.thehindu.com/news/international/new-pipeline-gas-interconnector-greece-bulgaria-boosts-europes-bid-to-ease-russian-supply/article65366241.ece, Accessed on 3 June 2022

[xvi] Euractiv, 20 April 2022, https://www.euractiv.com/section/politics/short_news/italy-looks-to-congo-and-angola-in-mission-to-cut-gas-dependency-on-moscow/, Accessed on 6 June 2022

[xvii] Theodore Murphy, ‘Partnership through crisis: The real meaning of Scholz’s Africa trip’, 25 May 2022, European Council on Foreign Relations

[xviii] Al Jazeera, 28 April 2022, https://www.aljazeera.com/economy/2022/4/28/algeria-threatens-to-halt-gas-exports-to-spain, Accessed on 10 June 2022

[xix] *REPowerEU: Joint European Action for more affordable, secure and sustainable energy, European Commission, 8 March 2022, Strasbourg, https://eur-lex.europa.eu/resource.html?uri=cellar:71767319-9f0a-11ec-83e1-01aa75ed71a1.0001.02/DOC_1&format=PDF, Accessed on 6 June 2022

[xx] Euronews, 8 March 2022, https://www.euronews.com/my-europe/2022/03/08/eu-will-slash-imports-of-russian-gas-by-two-thirds-by-2023, Accessed on 1 June 2022

[xxi] *REPowerEU Plan, European Commission, 18 May 2022, Brussels, https://eur-lex.europa.eu/resource.html?uri=cellar:fc930f14-d7ae-11ec-a95f-01aa75ed71a1.0001.02/DOC_1&format=PDF, Accessed on 6 June 2022

[xxii] *Quarterly Report on European Gas Markets, European Commission, 2018, https://ec.europa.eu/energy/sites/ener/files/documents/quarterly_report_on_european_gas_markets_q4_2017_final_20180323.pdf, Accessed on 7 June 2022

[xxiii] *REPowerEU Plan, European Commission, 18 May 2022, Brussels, https://eur-lex.europa.eu/resource.html?uri=cellar:fc930f14-d7ae-11ec-a95f-01aa75ed71a1.0001.02/DOC_1&format=PDF, Accessed on 7 June 2022

[xxiv]Bloomberg, 27 April 2022, https://www.bloomberg.com/news/articles/2022-04-27/gazprom-says-it-cuts-gas-to-poland-bulgaria-on-non-payment, Accessed on 7 June 2022

[xxv]‘Financing Putin’s war on Europe: Fossil fuel imports from Russia in the first two months of the invasion’, Centre for Research on Energy and Clean Air, April 2022, Finland, https://energyandcleanair.org/publication/russian-fossil-exports-first-two-months/, Accessed on 8 June 2022

[xxvi] *REPowerEU: Joint European action for more affordable, secure and sustainable energy, Press Release, European Commission, 8 March 2022, https://ec.europa.eu/commission/presscorner/detail/%5Beuropa_tokens:europa_interface_language%5D/ip_22_1511, Accessed on 7 June 2022