The Red Line
Episode 72. Can Europe Survive Without Russian Gas?
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Decades of interweaving between Europe and the Russian gas industry came crashing down upon Russia's recent invasion of Ukraine, and now Europe has been thrown into a no-win situation. The EU can stand with Ukraine, but it will mean tying an economic anchor around the continent's neck. Is the EU unified enough to travel down more challenging roads or will economic expediency win the day?
Energy Intelligence Research Analyst at Energy Intelligence.
His key focus areas include the energy transition, corporate strategy and competitor intelligence, oil and gas/LNG markets, and aboveground risk.
He previously worked as a Research Associate at the Arab Gulf States Institute in Washington, where he focused on the economies of the Gulf Cooperation Council region, with special attention to national oil companies and domestic energy markets
Professor of Eurasian Studies at the University of Glasgow.
He has a longstanding interest in locating discursively Central Asia’s energy mega projects in multidisciplinary debates on the domestic and international roles played by energy infrastructure.
He is regularly featured in the media as an expert on Central Asian affairs, including in The Economist, the Financial Times, The Guardian, and the Süddeutsche Zeitung.
Global Fellow at the Wilson Center.
He currently work with ProColombia, the Colombian government's trade and investment promotion agency, as the trade advisor for India & the Middle East
He has previously worked as a senior researcher with Gateway House, a Mumbai-based foreign policy think tank.
Part 1: Forming New Connections (7:05)
Colby Connelly provides useful background to the gas market pre-Ukraine invasion, noting the oversupply of the market in 2019 and 2020 stemming from the impacts of COVID-19, before the quicker than expected economic bounceback resulting in Europe drawing heavily from its stockpiles before the events of this year.
Connelly goes on to provide a comprehensive breakdown of why gas is a fundamentally more resource and capital intensive commodity to transport when compared to crude oil, in addition to significantly less gas importers globally, and how that translates into a cycle of supply-side lags that are difficult to respond to quickly and risky investments. These logistic realities anchor Europe to existing pipelines and supply arrangements with countries such as Russia.
We interrogate the possibility of the Middle East region, with major LNG investments both online now and coming soon, ever being able to feasibly compete with or replace Russia, with its pipelines providing significant structural advantages, in the European market.
Part 2: Paying the Piper (27:26)
Luca Anceschi picks up the thread and takes us through how the gas and energy markets across Eurasia have changed since February, including European nations seeking alternative gas suppliers in the medium term, and the strong and enduring demand for Russian oil and gas on the continent.
We explore the tension between the European Union's carbon emission transition targets and the importance of gas as the middle step between switching off dirtier fossil fuels such as coal and moving towards further renewable integration. We try to assess how deliberate Russia's manoeuvres were in creating this reliance on Russian gas for the foreseeable future.
Anceschi discusses the gas reserves of the Central Asian states being under utilised due to being landlocked, reducing the potential export opportunities, before speculating about the potential for China and East Asia replacing the demand lost from Europe in the longer term.
With the threat of winter approaching, we discuss how the resolve of gas reliant nations will be affected by the possibility of re-engaging Russia to deliver stable, cheaper gas to their citizens.
Part 3: Searching for Second Best (49:42)
Hari Seshasayee talks about the flow on effects of the crisis, including rising commodity and food prices, and the gap that Russia leaving the global market would have globally.
He discusses some of the alternative market suppliers for gas in the medium term and how the geopolitical landscape will steer states towards and away from these alternatives, before also noting that European Union harmony will be tested this winter and that we may see a splintering of the approach to Russian gas.
Seshasayee askes the question about how effective sanctions have been and will continue to be, if Russia is not suffering from reduced demand for gas but Europe and Asian markets are suffering with higher prices and less availability. We discuss the potential for a 'solution' being declared by buying Central Asian gas that in reality may be majority Russian in all but name.
We conclude with a discussion around the upcoming factors that will determine how Europe will navigate the coming months, including the higher prices of 2022.
The Red Line's Gas Diplomacy Reading List:
We’ve compiled a list of further reading to better understand the geopolitics of energy security.
The Quest: Energy, Security, and the Remaking of the Modern World
Natural Gas: An Instrument of Russian State Power
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This episode is dedicated to Patreon member Ward Brooks.