Is Russia Using Energy as a Weapon Again?

In Brief

Is Russia Using Energy as a Weapon Again?

Putin and Gazprom didn’t create Europe’s new gas crisis, but they are happy to exploit it.

What’s happening?

Europe is experiencing energy turmoil, with spot prices for natural gas surging in the past month to levels five times those of a year ago. Some analysts see Russia as the villain in this new crisis, but the tight market has several other explanations: declining gas production in Europe itself, strong growth in Asia’s energy demand, depletion of gas reserves during the winter of 2020–21, and lower output from renewable sources such as wind and hydropower.

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In recent years, European importers have expected to alleviate such shortages by boosting purchases of liquefied natural gas (LNG). However, cuts by many non-European LNG producers, including in the United States, have put that option at least temporarily out of reach.

Is Russia stoking the crisis?

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Yes and no. Because so many global, regional, and local factors are contributing to tight markets, Moscow alone can hardly be blamed for high prices and shortages. Many experts point out that Russia itself has struggled to increase output (and sustain its own storage levels). President Vladimir Putin has called claims that his country is weaponizing energy “politically motivated blather.”

Yet, the turmoil reconfirms Russia’s willingness to exploit its customers’ vulnerabilities—as seen in previous disputes with Ukraine and Estonia. Gazprom, Russia’s largest natural gas producer, has so far refused to increase deliveries to Europe beyond those covered by long-term contracts. At the same time, Russian leaders have not hesitated to tie higher exports to quick approval of the Nord Stream 2 pipeline, which is now virtually complete but awaiting a regulatory green light to begin pumping gas. Going still further, Gazprom has told Moldova that the price of future gas deliveries will depend on whether the former Soviet state puts aside a trade agreement with the European Union (EU). 

How could the European market respond?

The response of European governments is still taking shape. They will likely continue a step-by-step approach to accepting Nord Stream 2. Some countries might even quietly welcome the way shortages have pushed the approval process forward. But because the crisis has exposed so many other elements of Europe’s energy insecurity, it is forcing EU member states—and the Union itself—to consider an array of measures to limit future vulnerabilities.

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The turmoil reconfirms Russia’s willingness to exploit its customers’ vulnerabilities—as seen in previous disputes with Ukraine and Estonia.

The responses now under review range from small steps to ease the immediate impact of higher electricity costs on low-income households to a full reexamination of the regulations that govern Europe’s internal energy market. Also being considered are proposals to rebuild strategic reserves of gas (such as mandating minimum levels, as is already true of oil reserves), ease the technical obstacles to fuel transfers between countries, boost investment in renewable energies, and flesh out the so-called European Green Deal. Some EU officials also want to launch an investigation into Gazprom for violation of European anti-monopoly rules.

The breadth of these options reflects the multiple causes of the current turmoil. Few have an overtly anti-Russia dimension—the Gazprom investigation is an exception. Even so, other than green-lighting Nord Stream 2, they are not likely to grant what Putin has made his main objective: locking in future reliance on Russian gas through long-term contracts. 

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What’s the bottom line?

European governments—and consumers too—are rediscovering the risks and costs of dependence on Russian gas supplies. The debate over how to limit future reliance could include its share of anti-Putin rhetoric. Even if it does not, Putin’s handling of the crisis so far makes it less likely that the EU will accept the kind of energy relationship Russia seeks.

The current tightness in energy markets will also oblige European governments to consider one aspect of the transition away from hydrocarbon fuels that they have not fully addressed. The phaseout of investment in the EU’s own natural gas production risks increasing the market power (and troublemaking potential) of the continent’s largest supplier. European leaders will not be happy with this prospect now that they see where it could lead.  

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