Possible Alternatives to Russian Energy in Europe

Russia is the European continent’s largest gas supplier; the European Union (EU) depends on Russia for almost 38% of its gas imports. Given the current geopolitical situation, the EU commission must re-evaluate its dependence on Russian gas, as the current energy security situation within the EU has many weaknesses that can be exploited. The EU energy security situation changes every day, with the invasion of Ukraine the energy market is extremely volatile with record shortages. Even before the invasion, questions were being raised as to the potential consequences of European dependence on Russian gas. In Germany, the creation of Nord Stream 2 engendered concerns that it would “leave the entire continent more exposed than ever to energy blackmail and supply insecurity”. As the European Union shifts away from coal to more renewable energy, it will require even more gas to achieve this transition. Increasing the EU’s reliance on Russian gas will only increase the EU’s energy insecurity.

One of the primary ways the EU can increase its energy security is through the diversification of companies/sources of energy as well as countries that supply this energy. A potential way to initiate this process is through U.S.-funded investments and projects that allow for the increase in EU energy infrastructure. With the United States itself as the leader in both private and public investments into the EU network, this would help bridge the gap between the occasional conflicting solutions posed by private companies and their respective governmental authorities. The investment from other countries and entities can and should expand beyond the U.S. as well, since “action to uphold energy security is inherently multilateral”. Involving other actors with a vested interest in EU markets and politics will increase the buy-in and support for an increase in EU energy security. Not only through increasing the diversity of players in European energy can the EU increase its security, but also through the range of energy sources. The EU should continue to work on increasing its access and production of renewable and nuclear energy as well.

Another way that the EU can increase its energy security is through market liberalization. Particularly in Central and Eastern Europe, there are high levels of state control within the energy sector, in justification for energy security. Liberalizing the energy market would allow for quick responses to changes in demand, access to a plethora of suppliers, and improve the adaptivity of the sector. Furthermore, market liberalization would increase integration and standardization across Member State markets, particularly if the European traded gas hubs were included and incorporated into the liberalization, allowing for a more equal price distribution across countries and regions. Market liberalization would also provide consumers increased access to both the fungible and liquid LNG markets which would decrease Europe’s reliance on any one supplier.

Directly correlated to the increase in outside investment and cooperation as well as market liberalization is the increase of gas import channels throughout the European Union. The increase of channels would “boost European gas supplies and connectivity and would further shield European consumers from the potential use of Russian gas as an ‘energy weapon’”. This measure would be consistent with the current EU energy laws, be financially sound, and add even more market forces to the supply chain. Some key areas in which this investment could begin to take place for pipelines and LNG regasification are the Iberian Peninsula, the Baltic Sea, and the Adriatic Sea.

Increasing European energy security is vital, especially given the current state of our world. To increase this security as well as maintain political support and harmony, the EU should allow and encourage investments from a diverse set of nations and interested actors, expand supply diversification, progress towards market liberalization, and augment gas import channels.

DISCLAIMER: All views expressed are those of the writers and do not necessarily represent that of the IWAB platform.