Russia declares gas war on EU

Russian President Vladimir Putin is playing hardball with the European Union — cutting off gas deliveries to some of Russia’s best customers in a howl of rage at the sanctions imposed after invading Ukraine.

It’s putting enormous political pressure on governments, threatens to leave Europeans freezing if this winter is a cold one, and potentially undermines the bloc’s climate goals as countries replace gas-fired power with coal. It could even tip the Continent into recession.

Simone Tagliapietra, an analyst with the Bruegel think tank, calls Russia’s policies “energy blackmail.”

Only 40 percent of the normal amount of gas is flowing along the undersea Russia-to-Germany Nord Stream pipeline, which is affecting deliveries to France, Italy and Austria as well as Germany. Russia’s gas export monopoly Gazprom has already halted all deliveries to Poland, Bulgaria, the Netherlands, Finland and Denmark after energy companies in those countries refused to kowtow to Kremlin demands to pay for deliveries in rubles.

In response, some countries are planning to fire up coal-fired power stations.

“It must be acknowledged that Putin is reducing the gas supply to Europe bit by bit, also to drive up the price, and we must respond with our measures,” German Economy and Climate Minister Robert Habeck said in a television interview late Sunday, adding that “it’s a tense, serious situation.”

Austria plans to covert a shuttered power plant to again burn coal.

Poland aims to subsidize coal used for home heating.

The Netherlands on Monday decided to scrap earlier plans to limit production from its four coal-fired power stations.

“If these were not special times, we would never do this,” said Climate Minister Rob Jetten.

Italy’s government is planning a crisis meeting on Tuesday and Prime Minister Mario Draghi has ordered two regasification units for liquefied natural gas and has been talking to countries including Qatar, Angola and Algeria to sign gas supply deals in a desperate bid to secure supplies in case of a Russian shut-off.

Brussels is keen to project confidence but the worry is clear.

“We take the situation we’re in very serious. But we are prepared,” European Commission President Ursula von der Leyen said in a meeting with reporters on Monday. “We are in difficult times. Times are not getting easier,” she added.

Dirty deals

The rush to burn coal to secure energy supply is symbolically awkward for climate conscious Europeans. But few expect it to blow the EU or its member states far off course in their efforts to cut greenhouse gas emissions.

In Germany, officials are adamant that the return of coal will be short-lived and does not jeopardize the country’s track to zero out coal power by 2030. Coal will act as a reserve supply for the power sector, allowing the country to build up its stores of gas ahead of winter. Meanwhile, the government is planning to rapidly increase clean power.   

Russia declares gas war on EU
The Neurath coal-fired power plant in Germany | Andreas Rentz/Getty Images

Russia’s invasion has hardened political support for renewables in Germany, said Simon Müller, director of the Agora Energiewende think tank.

“This additional layer of urgency that we now have in the face of this situation helps to provide the political momentum that we need for some very important accelerations in the renewable build out,” said Müller. The German parliament is considering 10 energy efficiency and renewable energy measures and Müller said the three-party coalition was broadly aligned on the importance of removing barriers to green power.

Green groups were also sanguine. “There is no plan at all in Germany at the moment to put the coal exit date in doubt,” said Christoph Bals, the policy director of NGO Germanwatch.

But the need to rapidly change tack on scrapping coal is ramping up political tensions.

In Berlin, the conservative opposition lambasted Habeck for allowing an increase in coal use while ruling out keeping Germany’s three remaining nuclear power plants operating past the end of this year.

“I don’t understand that the Green climate minister prefers to let more coal plants run longer, rather than carbon neutral nuclear power plants,” Jens Spahn, deputy head of the Christian Democrats in parliament, told German television on Monday. The nuclear shutdown policy was one adopted by his party’s former leader, Angela Merkel.

The policy is also causing stress within the governing coalition.

“What is necessary is to keep the three remaining nuclear power plants running longer,” said Bijan Djir-Sarai, general secretary of the liberal Free Democrats. “This is a fact that the economy minister cannot simply ignore.”

Admitting the step was “breaking a taboo,” Habeck said coal was still better than reviving atomic energy, arguing that a change in nuclear policy would only have an impact at the end of next year — too late to help this winter. He was backed up by Chancellor Olaf Scholz, who said in an interview published Monday that “nuclear power won’t help us now, not in the next two years, which is what matters.”

Political leaders are calling on their people to conserve energy and cut gas use, while governments work to boost storage levels to allow the Continent to weather a winter Russian gas cutoff. As a last resort, they’re mulling gas rationing.

A halt in gas supplies would almost certainly tip the bloc into a recession. The European Central Bank warned that the eurozone would contract by 1.7 percent next year should Russia close the tap entirely.

“The energy supply disruptions and the low possibilities for an immediate substitution of gas supplies from Russia would likely require some rationing and reallocation of resources, resulting in production cuts in the euro area, in particular in energy-intensive sectors,” the bank said, predicting if that happened, the bloc’s economy would recover next year.

But the ECB also had a word of warning for Putin.

“Regarding the Russian economy, the scenario features a severe recession with a contraction in output similar to the contraction experienced when the Soviet Union collapsed.”

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