If Europe Reduces Imports, Russia Will Look For Business Elsewhere

International Energy Agency Executive Director Fatih Birol speaks during a news conference, in a file photo. [AP]

Europe could adopt a three-point plan to cut dependence on Russian natural gas by a third by the end of 2022, International Energy Agency Executive Director Fatih Birol said in a statement. interview with Kathimerini, pointing out that Europe has “a difficult few weeks or months ahead”. in the field of energy security.

If the continent stops relying on Russian energy, according to the Turkish economist and energy expert, Moscow will struggle to find other buyers because its export structure depends on a constraining pipeline infrastructure. Asked if the repercussions of the Ukraine crisis are creating momentum for investment proposals such as the EastMed gas pipeline, Birol says the involvement in the project of countries unlikely to use natural gas as a political instrument is an advantage. However, he adds, any decision must be made taking into account the green transition as well.

Birol has some bad news about the global campaign against the climate crisis, saying there are signs the issue is “falling off the agenda of governments”.

Addressing the factors that would allow a return to lower international energy prices, the IEA chief singles out the United States, Qatar and Australia as states that should increase their level of production. Birol said the European Union should have ensured a basic level of policy harmonization on energy storage, adding that Europe should learn from its mistakes this time. After all, he says, “everyone should know that energy and geopolitics are closely linked.”

You have proposed a package of measures that would halve Europe’s dependence on Russian natural gas by the end of the year. How realistic is this goal in such a short time?

First of all, it should be emphasized that we are not living in normal conditions, but rather in a state of emergency. The reason is that the country that invaded Ukraine, Russia, is the world’s largest exporter of oil and natural gas. Europe is mainly exposed to this crisis because it imports considerable quantities of natural gas and oil from Russia. Europe uses natural gas for heating and electricity production. We are now entering spring. Demand for natural gas in Europe in March was already 20% lower than in January. The question is to know what will be the situation of Europe next winter when its reserves are already very low. Europe will have to take emergency measures by next winter in order to reduce its dependence on Russian energy as much as possible.

In this context, we propose action at three levels: First, Europe should not renew gas supply contracts with Russia. Several contracts expire at the end of 2022 and the beginning of 2023. They do not have to be renewed; rather, Europe should use as many alternative sources as possible. This could mean importing liquefied natural gas (LNG) or reserves from Qatar, or even Algeria and Norway. Europe must use all the support it can get from other sources. Second, it must improve energy efficiency, especially in private homes. It must provide incentives for renovations, for people to replace gas furnaces with heat pumps. Third, it must remove bureaucracy and increase renewable energy sources. By taking these steps, Europe could soon reduce imports from Russia by more than a third. Otherwise, he will indirectly sponsor the Russian military campaign in Ukraine.

Would such a reduction in imports from Russia hamper European green transition projects?

This is a crucial question. Talking to different governments during this period, I realize that climate change and the green transition, which used to be high on the agenda, are now losing their importance on the agenda of governments, both both in Europe and outside. This is not good news. Let us remember the oil crisis of the 1970s. On the one hand, this led to recession and high inflation. On the other hand, it has accelerated innovation in the energy sector, drastically improving the energy efficiency of automobile engines and contributing to the development of nuclear energy. I hope that this crisis will eventually lead to a real leap forward in clean energy in areas such as electric vehicles, hydrogen and other renewable sources. However, I want to be realistic. Europe has a few difficult weeks or months ahead of it in the field of energy security. Everyone should know that energy and geopolitics are closely linked.

If Europe manages to significantly reduce its imports, will Russia be able to find alternative markets? Or will its economy suffer even more?

It’s an interesting question. With natural gas, that would be a huge problem. Because its export potential is mainly based on pipelines and it is difficult to build alternative pipeline routes overnight. With oil, it would be relatively easier to find new customers. But Russia is currently facing great difficulties in selling its petroleum products due to financial sanctions imposed by the United States and the EU.

Were there mistakes in Europe’s strategy before the Ukrainian crisis? Should Europe have secured larger reserves, even with Russian gas, to be able to regulate prices in times of uncertainty?

It’s true, Europe could have done better. For example, EU countries should have achieved a certain basic level of harmonization in their energy storage systems. I should note that Germany’s energy reserves are at a historic low. However, it is important to learn from mistakes and that is what Europe is doing today.

The need to diversify energy sources is greater than ever in Europe. Do you think projects like the EastMed pipeline should be put back on the table?

The first thing to do is to immediately commission all the energy projects already launched. Procedures must be accelerated. Furthermore, it is very important to import gas and oil from regions and countries less likely to use energy as a political weapon. So I think having energy coming from the Eastern Mediterranean, the Caspian Sea or the North Sea is something that will help the markets. However, we must bear in mind that three parallel crises are currently unfolding: the humanitarian crisis in Ukraine, an energy crisis in the global economy, and the climate crisis. So the actions we take now must certainly prioritize energy security in Europe, in the most cost-effective way possible, but they must also be in line with our clean energy strategy, everywhere in the world. My biggest concern is that growing energy security concerns could boost lignite, especially in Asia, stalling the green transition process.

What are the factors that will determine the return of gasoline prices to normal levels?

Prices are unlikely to return quickly to 2019 levels. Two things must precede: first, a substantial increase in energy production by the United States, Qatar, Australia, perhaps a little by the Norway and Algeria; second, a reduction in demand in response to high prices. Some of the measures we have suggested can also help, like lowering our thermostats by just 1 degree. Of course, a peaceful resolution to the Ukraine crisis would help a lot, but – although I’m no expert – I don’t see that happening anytime soon. In the meantime, Russia’s reputation as an energy partner has been compromised, which I believe will impact its partners and customers for many years to come.