Why is Europe reluctant to ban the import of Russian energy during the war in Ukraine?

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World leaders signal on Monday that new sanctions should be imposed on Russia after the massacre in the Ukrainian city of Bucha, but when it comes to targeting one of Moscow’s largest exports – oil and natural gas – European countries are hesitant because of their dependence on Russian energy. .

European importers pay $ 850 million for these supplies every day, according to the Associated Press. Western sanctions have so far been directed against Russian banks and companies, but have regretted oil and gas payments.

RUSSIA CONSIDERS UKRAINE: UPDATES

As international resonance grows against alleged atrocities committed by the Russian military in Ukraine, let’s see why Europe does not want to sharply raise economic rates against the government of Russian President Vladimir Putin – and whether it can:

Steam comes out of the cooling tower of the Lichterfelde gas power plant in Berlin, Germany, last Wednesday.
(AP / Michael Son)

WHAT ARE THE POWER SUPPLIES?

Europe gets 40% of its natural gas from Russia, which is used to heat homes, generate electricity and provide industry with both energy and key raw materials for products such as fertilizers.

As for oil, it is about 25%, most of which goes to petrol and diesel for cars. According to S&P Global analysts, Russia supplies about 14% of diesel fuel, and the shutdown could cause already high fuel prices for trucks and tractors.

WHY CAN’T EUROPE REJECT RUSSIAN ENERGY LIKE THE US?

The United States imported little oil and did not import natural gas from Russia because it became a major producer and exporter of oil and gas because of fracking. Europe had oil and gas fields, but production was declining, leaving 27 European Union countries dependent on imports to fuel their developed industrial economies.

Of the 155 billion cubic meters of gas that Europe imports annually from Russia, 140 billion comes through pipelines crossing Ukraine, Poland and the Baltic Sea. Europe is seeking additional supplies on ships in the form of liquefied natural gas or LNG, but this still cannot fully compensate for Russian gas losses through the pipeline.

LNG is also much more expensive and suppliers are required. And while some European countries are well connected to LNG terminals, such as Spain, and new projects are in the works or will soon open in places like Greece and Poland, there is no infrastructure to deliver these supplies to a place with more resources. depend on gas, from Germany to Eastern Europe. It may take years to build new LNG import terminals and pipelines to connect gas to the places that need it most.

On March 9, in Marseille in the south of France, a car stops at a gas station, where prices reach $ 3.04 per liter.

On March 9, in Marseille in the south of France, a car stops at a gas station, where prices reach $ 3.04 per liter.

As dependence on Russia varies, it is harder to reach an agreement to boycott the EU. Lithuania has said it has stopped importing Russian gas following the construction of an LNG import terminal, which was launched in 2014, and Poland, which has been looking for alternatives for many years, says it will not renew its Russian gas contract later this year in addition to ban measures. Russian coal and oil.

Germany, the continent’s largest economy, still gets 40% of its gas from Russia, even after it has reduced its dependence. German Economy Minister Robert Habeck said it aims to stop Russian coal imports this summer, oil imports by the end of the year and become largely gas-independent by 2024.

WHERE ELSE CAN EUROPE GET ENERGY, IF NOT FROM RUSSIA?

Europe is working to move away from Russian gas as soon as possible in the next few years, finding new sources, conserving and accelerating wind and solar energy. The European Union plans to reduce the use of Russian gas by two-thirds by this year and withdraw from it long before 2030.

In addition to producing LNG from places such as the United States and Qatar, Europe is seeking more gas from non-Russian pipelines from Norway and Algeria.

Oil is different in that it mostly comes by ship. However, it would be difficult to replace Russian supplies with limited world markets. Withdrawing more than 2 million barrels a day from the market to Europe would push oil prices around the world. And Russia could try to sell oil to India and China, though earn less.

WHAT WILL HAPPEN IF EUROPE BANS RUSSIAN ENERGY?

Estimates vary, but the cut-off means a significant blow to the economy. According to Oxford Economics, a six-month suspension of Russian gas supplies will reduce the production of economies in 19 countries that use the euro by 1.5%.

Operators work at the Enagas regasification plant, the largest LNG plant in Europe, in Barcelona, ​​Spain, on March 29th.

Operators work at the Enagas regasification plant, the largest LNG plant in Europe, in Barcelona, ​​Spain, on March 29th.

The ban could mean that governments will have to standardize gas among companies to protect homes and hospitals. Manufacturers of metals, fertilizers, chemicals and glass have been hit hard. Even a partial gas cut-off for industry could cost “hundreds of thousands” of jobs, said Michael Vasiliadis, head of Germany’s BCE union, which represents workers in the chemical and mining industries.

“We will probably continue to see resistance from Germany and some others, as they are simply much more dependent on Russian imports of oil, gas and coal,” said Craig Earlam, senior market analyst in the UK, Europe, Middle East and Africa. currency broker Oanda. “Forecasts of the impact of the embargo vary, but it will almost certainly lead the country to a recession.”

However, a group of economists, including University of Notre Dame professor Rudiger Bachmann, argue that the embargo will keep Germany’s economic costs below 3% of production, probably closer to 2%. Although “these are significant economic costs,” economists said, they are “clearly driven in the sense that the German economy has experienced deeper recessions in recent years and recovered quickly” – following the 2009 global financial crisis and pandemic coronavirus.

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“Incitement of public fears of the catastrophic consequences of the energy embargo by lobby groups and affiliated think tanks does not meet academic standards,” the report said on the Economic Policy Research Center’s website.

WHAT ELSE COULD EUROPE DO OTHER THAN THE CUTTING?

Economists Simone Tagliapietro and Guntram Wolf of the Bruegel think tank in Brussels are proposing to introduce a tariff on Russian oil and gas imports into the EU. This will reduce Russia’s income, avoiding a serious blow to European growth, with a legal advantage if the contracts are intact. Last week, European leaders insisted that the same contracts protect them from demanding that Russia pay for gas in rubles. Tariff money can be used to protect vulnerable households from rising energy prices.

While the army that invaded Ukraine has already been paid, the tariff will put the Kremlin in a “more difficult economic situation, in which they may have difficulty purchasing things from the outside world, including weapons, and paying salaries to the sector,” Taliap said. “All this will happen in a few months, but could have a strong impact on the stability of Russia’s domestic policy.”

The Associated Press contributed to this report.

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