Published: 27/04/2022
Russian president Vladimir Putin’s invasion of Ukraine has been slammed with one sanction after another, particularly from allies in the North Atlantic Treaty Organization plus Australia and Japan. A growing list of corporates have also unilaterally self-imposed sanctions to either divest, suspend or completely terminate business dealings there. While there’s a unanimous call to end the violence in Ukraine, not all countries are against Russia. Many of these countries are either looking out for their own interests amid the geopolitical polarisation, while others are dependent on Russia for wheat, energy and military hardware.
The European Union has to-date released its fifth sanction package which includes the banning of Russian coal by mid-August and cutting gas by two-thirds by the end of the year. While the total bans will represent a sizeable portion of Russia’s revenue, it will also put many of EU’s member countries’ energy security at risk.
Despite the expansion of renewable energy over the past two decades, Europe is dependent on Russia for about 40% of natural gas supplies, and that dependency has been increasing as countries shift from coal to gas. Germany is particularly vulnerable, as it has shut down nearly all of its nuclear power stations and aims to eliminate coal by 2030. Other countries, such as Finland and Latvia, depend on Russia for nearly 100 per cent of their gas. Separately, the UK aims to phase out Russian oil by the end of the year, which the government believes is enough time for it to find alternative supplies. Meanwhile, the US has declared a complete ban on Russian oil and coal imports (it doesn’t import any Russian gas).
Europe’s leaders are now frantically working on strategies to pivot to other suppliers but also to switch from gas to electricity where possible, and to scale back gas consumption across key sectors. The European Union says it plans to triple its renewable energy capacity by 2030, which includes fast-tracked deployment of solar energy and renewable hydrogen, the quick implementation of far-reaching energy-efficiency measures, and the production of 35 billion cubic meters of biogas per year by 2030. European citizens will be called upon too, as they are being asked to turn down thermostats by 1 degree C, which could shave about 7 per cent off Europe’s gas consumption.
The crisis could indeed accelerate the transition to clean energy. However, countries sanctioning energy supply would need alternative sources to plug the supply gap in the interim or risk the temptation of increasing production of oil and gas, or worse, coal given it is now cheaper than gas (in fact, according to the International Energy Association, high gas prices meant coal-burning in 2021 reached its highest level ever with emissions jumping above pre-COVID levels). Switching from gas to electric heating, and the rollout of renewable energies takes time. It’s one thing to release existing gas reserves but it’s another to re-open coal mines or invest in more drilling, thereby locking in another three decades of fossil fuels.
The plea is for governments to make rapid investments in energy transition instead of subsidizing fossil fuels. In Australia, fossil fuel subsidies are expected to reach new heights this financial year at A$11.6 billion, with A$770 million directed towards the coal sector and A$976 million provided to the oil and gas sector.