Europe Moves Toward Cutting a Last Source of Russian Energy

"Steps to limit shipments of LNG from Russia could push up natural-gas prices."

"Losing all Russian LNG could more than double European natural-gas prices from their current 40 euros a megawatt hour, equivalent to around $44, to around 90 euros a megawatt hour."

Europe Moves Toward Cutting a Last Source of Russian Energy

Europe is taking steps to turn off one of the last significant supplies of Russian fossil fuels, seaborne shipments of liquefied natural gas.

The question is whether the move would hurt Europe more than Russia. 

Because of Russia’s invasion of Ukraine, European governments last year slashed their longtime reliance on Russian fossil fuels, banning imports of its crude and diesel and seeking out new suppliers to replace its copious flows of natural gas.

One notable carve-out to the sanctions was liquefied natural gas. Those shipments to Europe of Russian LNG—natural gas that has been cooled to liquid form and moved on giant tankers—boomed as shipments of crude halted and flows of piped natural gas slowed to a trickle.

Cutting off LNG would mark one of the final acts in Europe’s sharp pivot away from dependency on Russian energy. While relatively small in quantity, the LNG shipments have helped to undermine Western efforts to cut off Moscow’s sources of revenue and make up half of the gas Europe still imports from Russia. The rest comes via pipelines.

The EU’s energy policy chief, Kadri Simson, has told European companies to refrain from signing new contracts with Russian suppliers. The Netherlands, one of Europe’s largest importers, said that it had already banned the signing of new contracts to import Russian LNG and asked companies to phase out Russian LNG from their stores, but that existing contracts couldn’t be broken without EU-wide measures. 

The EU’s planned measures so far have stopped short of sanctions, which would require unanimous approval from the bloc’s 27 members. Proposals instead have focused on allowing individual member states to restrict flows and preventing Russian companies from booking spare capacity at LNG terminals.

While Russia’s crude tankers have been expelled from European ports, a tanker carrying Russian LNG docks at an EU port almost once a day on average, according to ship-tracking data from Kpler and MarineTraffic. 

Imports from the tankers, which are built to punch through sheets of Arctic ice on the voyage from Russia’s Siberian gas fields to Europe, rose over 38% in 2022 to more than 15 million metric tons, their highest-ever level, according to Kpler.

“Europe needed all the LNG it could get last year. Every cargo that was available on the market they would take it,” said Xi Nan, a senior vice president for gas and LNG research at Rystad Energy. 

European governments have entered spring with far larger stockpiles of natural gas than they expected. The region’s gas stockpiles began April at around 55% full, a record for the time of year that typically marks a low point, and almost 30 percentage points higher than a year earlier, according to data from Gas Infrastructure Europe, an industry body.

Russian flows of LNG, coupled with a far milder winter than expected, are part of the reason that stocks are so comfortable. Supplies of piped natural gas from Russia also helped fill those stockpiles before they were curtailed.

European governments could face another painful gas shortage in the event of uncooperative weather, such as summer heat waves or a frigid winter, or unforeseen supply disruptions.

“It is like we are in the calm before the storm but we don’t know for sure if the storm is really coming. There are many things that could still go wrong,” said Anne-Sophie Corbeau, a researcher at the Center on Global Energy Policy at Columbia University. 

Losing all Russian LNG could more than double European natural-gas prices from their current 40 euros a megawatt hour, equivalent to around $44, to around 90 euros a megawatt hour, if no other sources of gas are available to replace it, according to consulting firm Energy Aspects.

That is unlikely, given that the contracts that govern sales between Russia’s Yamal LNG and their European buyers tend to be multidecade deals with no expiration in sight. France’s TotalEnergies SE and Spain’s Naturgy Energy Group SA are among the top buyers, according to Kpler data.

Total and Naturgy didn’t respond to a request for comment. Total owns a stake in Yamal LNG and has said it would continue to import Russian LNG as long as there are no sanctions in place. 

Russia’s LNG exports to Europe could have been worth around $27 billion last year as natural-gas prices soared, according to an estimate from Rystad Energy.

Regardless, the amount is small compared with what Russia earns on its global oil sales, and cutting off the revenues wouldn’t deal a significant blow to the Kremlin, said Simone Tagliapietra, an energy-focused senior fellow at the Brussels-based Bruegel Institute.

Instead, the move would be about sending a political message even if it harmed the European economy, he said. 

“Politically it will be increasingly unsustainable to continue receiving Russian LNG and sooner or later we will just have to cut,” he said. “The political cost, the reputational cost is higher than the economic cost.”

Europe Moves Toward Cutting a Last Source of Russian Energy - WSJ

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The West Must Engage with Russia after the War in Ukraine

NATO allies, and Ukraine itself, need to find an acceptable blueprint for engaging with Russia after the war.

by Gerald F. Hyman - April 22, 2023

Asked at a recent event, when asked what possible plans his country had or would support for its relationship with Russia once the conflict between it and Ukraine ends, a senior member of a NATO-country parliament and political party official replied, “None at all. At least while Putin is still in charge.” That would be a serious mistake, not only because of Russia’s inherent, domestic attributes but also because of its relations with other countries, especially (but not only) with China. NATO allies, and Ukraine itself, need to find an acceptable blueprint for engaging with Russia after the war.

The palpable fury at the Kremlin by Ukraine and the NATO allies is driving their policies toward Russia. We have not seen such an intentional, deliberate, indiscriminate, barbaric assault turning entire regions and towns, hospitals, schools, nurseries, homes, and power plants into rubble and concrete graveyards since the Wehrmacht attack against Poland and the Soviet Union.

President Volodymyr Zelensky has established the unambiguous Ukrainian objective: "We will only stop when we bring our country back to the borders of 1991. We will return the Ukrainian flag to every corner of Ukraine." That understandable ambition is almost certainly beyond the grasp of the Ukrainian forces. Yet Russia is also unlikely to achieve Vladimir Putin’s goal of terminating Ukraine’s independence, decapitating its government, re-occupying all or almost all of the country, and absorbing it within a Greater Russia. It seems unlikely to even recapture all of the Donbas at this time. Short of resort to its tactical nuclear arsenal, it does not have the military resources—troops, hardware, munitions, leadership, strategy or elan—to do so. Still, neither side is (yet) willing to settle for a ceasefire in which, like World War I, the two forces are dug indefinitely into trenches running down half of the Donbas.

Zelensky has rightfully noted that 2023 is key to Ukraine’s goal. Ukrainian forces must be able within the year to turn the tide and make significant advances expelling Russian forces in the east and the south. If they cannot, the tide of the war will most probably turn against them and in favor of Russia or of a stalemate. The Ukrainian people cannot indefinitely withstand the desolation visited upon them. Their remarkable valor, endurance, and granite resistance cannot last indefinitely, nor will their own assets or the economic, political, and military support of allied countries. None of that portends a Russian victory—it means only that at least parts of the Donbas and probably most, if not all, of Crimea would remain in Russian hands, meaning that de jure borders would sooner or later adjust to the de facto realities. Ukraine’s allies will need to work with Kyiv to develop and support a realistic strategy through 2023 and, preferably, to some kind of victory acceptable to and achievable by Ukrainians.

Still, notwithstanding NATO outrage at Russian aggression and atrocities, international ostracism does not provide a judicious prescription for relations particularly for a country as large and important as Russia once the wanton carnage has ended or abated. True statecraft requires a sagacious perspective on long-term as well as immediate-term policies. Russia will not disappear, although Putin might.

If anger and hostility are to be the hallmarks of NATO-country policies toward Russia, the result would be a line of enmity from the Barents Sea, down the eastern frontiers of Norway, Finland, Estonia, Latvia, and Ukraine to the Black Sea and, depending on the disposition of Turkey, possibly to the Mediterranean—in effect, a recreation of the Cold War 450 miles to the east. It would mean a border of animosity between whole civilizations, each with huge armies and economies, and with nuclear armaments capable of turning one another into a pulverized (and now also radioactive) wreckage. The celebration of the end of the last Cold War three decades ago and its replacement by a peace, however stoney and contingent, would be reversed. Surely that cannot be the only or let alone the best option.

Justifiable anger toward toward Russia cannot blind policymakers to what it really is: an expansive county with extensive human and natural resources; a federation of republics, the largest country in the world spanning eleven time zones; really, a kind of empire in its own right. Moreover, it has a long history and a commensurate sense of itself as great power in Eurasia and an imperial chronicle three centuries old. It commands very substantial armed forces, however much now depleted, and it has nuclear weapons and systems of delivery that could obliterate an adversary even if Russia itself were also devastated in the process. In addition, even if Russia could be ostracized from the West, it cannot be sequestered from the rest of the world, and although it would pay an enormous price were it to be isolated by the West, so too would the countries attempting the isolation. Finally, it cannot be in the U.S. interest to see Russia pushed into the arms of China and thus find itself confronting two colossi rolled into one challenger. Russia is not some barely inhabited Pacific atoll, and it would be both foolhardy and arrogant, even self-defeating, to try treating it as one.

By far the better strategy is, if possible, to induce Putin (or his successor) with his enervated forces and economy to negotiate a tolerable resolution, and to provide clear benefits for doing so. Among those benefits would be a return to global commerce, an end to sanctions, and—unlike the end of the Cold War—treatment as the global power that it is rather than the humiliation it felt in the 1990s. Instead of “no relationship at all,” Russia—with or without Putin—should be integrated as far as practicable into the European family not as a supplicant seeking the forbearance of its superiors. None of that requires restraint in supporting Ukraine now or restraint in responding to Russia’s barbaric aggression. It requires only that carrots, not just sticks, be available in the process and that the NATO allies keep in mind that the objective is a better status quo not a worse one.

About: Gerald F. (“Jerry”) Hyman has been a senior advisor at the Center for Strategic and International Studies since 2007. He held several positions at USAID from 1990–2007, including director of its Office of Democracy and Governance from 2002–2007. He has published widely.

The West Must Engage with Russia after the War in Ukraine | The National Interest

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Great-Power Competition and Conflict in the 21st Century Outside the Indo-Pacific and Europe

During the Barack Obama, Donald Trump, and Joe Biden administrations, the United States made countering the rise of China in the Indo-Pacific and, to a lesser extent, checking Russian revanchism in Europe core priorities of its national security strategy. Historically, however, great-power competition and conflict have taken place outside the theaters of core concern to the competing powers. This report — the summary of a four-volume series — explores where and how the United States, China, and Russia may be competing for influence in these secondary theaters (Africa, the Middle East, and Latin America); where and why competition might turn into conflict; what form that conflict might take; and what implications the findings have for the U.S. government at large, the joint force, and the Department of the Air Force. This research was completed in September 2021, before the February 2022 Russian invasion of Ukraine. The report has not been subsequently revised.

Key Findings

• Competition in secondary theaters is most likely to focus on the historical power centers.
• China's influence and, to a lesser extent, Russia's influence are increasing in secondary theaters, although the United States remains the dominant military actor for the time being.
• Competition may be a necessary but not sufficient condition for conflict.
• Great-power involvement in conflicts in secondary theaters in the new era of competition may be less driven by zero-sum logic than during the Cold War.
• Future secondary-theater conflicts may involve distinct challenges of deconfliction and behind-the-scenes political contests.
• Conflicts in secondary theaters may not be a particularly useful force-sizing construct.
• Latin America offers several plausible scenarios for conflicts in which the United States could become involved on a side opposing Russia or China.

Recommendations

• Avoid strategic myopia and secondary-theater blind spots by maintaining a baseline degree of expertise in these theaters.
• Recognize the interconnection between counterterrorism and great-power competition and conflict.
• Strengthen ties to Latin America.
• Work with key allies to economize resources in secondary theaters.
• Maintain access agreements focused on secondary theaters.
• To the extent that the Department of Defense does prepare for conflicts in secondary theaters, invest in mobility and sustainment assets; intelligence, surveillance, and reconnaissance; and special operations forces.

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Great-Power Competition and Conflict in the 21st Century Outside the Indo-Pacific and Europe | RAND

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