ENERGY
THE Berlin Wall may have been brought down more than three decades ago, but the grim politics of the Cold War are in danger of returning to Europe.
With characteristic ruthlessness, Russian president Vladimir Putin is exploiting the energy crisis to bully his neighbours, strengthen his autocracy and intimidate the West.
His chosen weapon in this renewed campaign of hostility is Russia’s control of gas supplies: the vast gas-fields and the export pipelines that bring them directly to market.
This infrastructure, often legacy assets from the Soviet empire, give the Russian president enormous political and economic leverage in his quest for ever-greater domination of the region.
Russia’s capacity to manipulate the British and European energy markets for geopolitical ends has been dramatically illustrated during the turmoil of recent days and weeks. As the price of gas contracts soared by 40 per cent in just 24 hours last week, Gazprom, Russia’s state-backed monopoly exporter of pipeline gas, was accused of flexing its muscles by both restricting supplies to Europe and keeping its European underground storage facilities at deliberately low levels.
The sense of Russian control was further reinforced when it took just a few words from Putin himself to bring an immediate fall in gas prices.
Revelling in his position as the ultimate ringmaster and wire-puller, he said with a hint of blackmail that supplies could be increased. “This speculative craze doesn’t do us any good,” he said, adding that Europe’s leaders should “settle with Gazprom and talk it over”.
RELIANCE
PUTIN might be behaving like a mafia boss in charge of a protection racket, but British and European governments have for years disastrously played into his hands with misguided, short-term policy decisions.
To be fair, the EU has taken some steps to break the Russian stranglehold, by building new international pipelines, breaking the Kremlin’s east-west transit monopoly, and by introducing drastic reforms of the energy market that have unravelled the corrupt, exploitative business model.
Europe has also pioneered the import of liquified natural gas (LNG) from destinations such as Qatar.
Yet Europe has been increasing its reliance on supplies from outside the continent by running down its own domestic energy industries. So far, renewables have not made up the gap, especially in recent months when the wind has not been blowing.
In Britain, the problem is particularly acute because we are one of Europe’s largest gas users, while we have massively reduced gas production from the rich fields of the North Sea and Irish Sea over the past 20 years.
Nor have we made use of the vast reserves of shale gas that exist across the country, even though such resources have recently made America “energy independent” once more.
Instead, Britain has exacerbated its energy vulnerability by depending on just-in-time imports from pipelines and seaborne cargoes.
In a particular act of folly, the Tory Government in 2017 decided to close the huge storage facility on the Yorkshire coast connected to the Rough gas field, believing both that supplies of LNG would always be plentiful and also because the energy companies believed that limiting storage would boost prices and thereby profits.
Some four years later, the step has backfired catastrophically, leaving us at the mercy of Putin.
Indeed, our entire energy strategy has been marked by stinginess, wishful thinking and downright complacency.
By manipulating energy markets, Putin’s immediate objective could not be clearer: he wants to pressurise Europe into approving immediately the operation of Gazprom’s controversial £8.1 billion Nord Stream 2 pipeline.
Now completed, this runs into Germany along the seabed of the Baltic Sea and bypasses Ukraine, in whose eastern regions Russia has been fighting a proxy war since 2014.
Critics say Nord Stream 2 will give too much influence to Russia over regional supplies and their prices.
But crucially, the project is backed by Germany, which puts cheap reliable supplies of Russian gas ahead of the security interests of its east European neighbours. US President Joe Biden’s administration, desperate to repair the damage done to relations with Europe under Donald Trump, has dropped American objections to the scheme.
The result is that Russia can now hold Ukraine and other Eastern European states to ransom. The Kremlin could shut down their gas without having to cut off the rest of Europe. In effect, one group of nations will be played off against the other in a fearful system of divide and rule, with Russia in command.
As Yuriy Vitrenko, the chief executive of Ukrainian energy giant Naftogaz, put it last week: “Moscow is withholding gas supplies in order to coerce Europe into accepting Nord Stream 2. Russia’s actions are the epitome of gas weaponisation. Anyone who refuses to acknowledge what Moscow is doing, especially when it does this so blatantly, is sending a dangerous message to the Russians that they can use gas to blackmail Europe and get away with it.”
TRAGEDY
GIVEN all this, it is almost inevitable that Ukraine will soon be plunged into another security crisis, perhaps even greater than the one that led to the annexation of Crimea in 2014. The fallout would be disastrous, especially in view of the fragility of Europe’s post-Covid economies.
The implications of Russia’s energy strength are brutal, leaving us relentlessly on the defensive. If, for example, Russia invaded Estonia, would NATO respond if Putin threatened to cut off Europe’s gas? The only way to break free from the shackles of energy dependency is to develop our own resources and means of storage.
In the 1970s, Western reliance on Middle Eastern oil created an era of regional conflict and economic crisis.
If today, the same were to happen because of our reliance on Russian gas, that too would be a tragedy.
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