The European Union imported 155bn cubic metres of natural gas from Russia in 2021, accounting for around 45% of EU gas imports and close to 40% of its total gas consumption, according to the International Energy Agency.
With Russian troops advancing into Ukraine, EU governments are concerned that the energy supplies could either be interrupted in the fighting or by global sanctions to contain Russia.
With its vast Siberian fields, Russia has the world’s largest reserves of natural gas.
Russian gas is attractive to Europe because it’s usually cheaper, easy to transport and almost always available. Some European Union countries depend on it because they are shutting coal plants, and Germany is even planning for the end of nuclear power.
Russia’s dominance has also been enhanced by the depletion of North Sea fields controlled by the UK and the Netherlands.
Of all the EU members, Germany is particularly exposed, with half of its gas and coal coming from Russia.
Russia on Tuesday, warned it could stop the flow of gas through pipelines from Russia to Germany in response to Berlin’s decision last month to halt the opening of the controversial new Nord Stream 2 pipeline.
For sure, the war in Ukraine has shocked Berlin into the “dangerous” energy dependence on Russia, but the government is finding that changing course might be too late.
Europe’s largest economy is facing up to the prospect that the bulk of its natural gas and coal supplies could get choked off, ripping through its industrial base and sparking economic upheaval.
About a third of Russian gas flowing to Europe passes through Ukraine. In 2006 and 2009, disputes with Ukraine over pricing and siphoning of gas led to cutoffs of Russian supplies through the country.
Nord Stream 2, a new Russian pipeline under the Baltic Sea to Germany, was completed in late 2021. But it has become entangled in politics and a lengthy regulatory process.
Following the eruption of the Ukraine crisis, the process to grant the approval the link needs from German officials has been put on hold.
Even as the crisis in the region escalated into war, some analysts have said Russia, with a history of supply disruptions over price disputes, probably would strive to be seen as a reliable supplier.
But some others don’t think energy will escape the growing list of sanctions levied against Russia and are starting to look at the potential impact.
US Secretary of State Antony Blinken has said the Biden administration and its allies are discussing an embargo of Russian oil, a move that threatens to make an already heated oil market even more volatile.
Drawing more LNG would leave EU nations with a €70bn ($78bn) bill to refill gas storage facilities this summer. That’s almost six times the €10bn spent in previous years – a price too high for many industrial companies that were complaining about rising energy costs long before the Ukraine crisis.
In a wider sense, an embargo on Russian imports could push the energy markets into the worst chaos of our lifetimes, Vandana Hari, founder of Singapore-based Vanda Insights, said in an interview.
As for a worst-case scenario, Russian Deputy Prime Minister Alexander Novak has warned that oil prices could more than double to $300 a barrel if the US and its allies banned imports of Russian oil.