The second edition of 2022 from The Economist covers how Europe is going through a severe energy crisis and how the Ukraine-Russia tensions are affecting it. Europe has entered this winter with low stocks of natural gas, forcing an increase in imports. However, Europe’s prime supplier, Russia, is reluctant to increase supply (The Economist, 2022). Russia, which accounted for 41% of natural gas imports in 2021, is seeking to speed up the approval of Nord Stream 2, a pipeline connecting Germany to Russia in an investment of over 9,5 billion euros by Gazprom (Eurostat, 2020; The Economist, 2019).
Expected to begin operating this year (currently pending regulatory approval), the pipeline will ship 55 billion cubic meters of gas to Germany every year, doubling current capacity. Its output will be equivalent to 15 percent of the European Union’s annual gas imports (Astrasheuskaya, N for Financial Times, 2021).
The project is immensely beneficial for Germany from a purely economic perspective. By cutting out transit countries and fees, the cost of natural gas will decrease considerably, keeping over 26 million homes warm during the winter (The Economist, 2019). Said benefits pushed the former Chancellor Angela Merkel to support the project. However, the new coalition government led by Olaf Scholz is deeply concerned with the rise of Russia’s influence and German dependence on this power. For example, the new Foreign Minister and co-head of the Green Party, Annalena Baerbock, is a strong opposer of the project, stating it is illegal under EU Law (The Economist, 2021).
Also concerned are some of Germany’s closest allies, namely the US, strongly opposing any increase in Russia’s power. Furthermore, some European partners are also worried. For instance, Ukraine fears the project will endanger its economy and political independence.
These concerns have ignited yet again with the rising tensions in Eastern Europe. As Russia builds up its military presence on Ukraine’s border, the US is actively seeking to find ways to sanction Russia in case of an invasion. As the Financial Times recalled in December 2021, one of the prime targets will be the Nord Stream pipeline, forcing the German government to stop the project.
With tensions rising, Europe is in a dangerous position. If America sanctions Russia, Europe will suffer immensely from an energy crisis. For instance, the latter will further dampen the effects the Covid-19 pandemic had in various industries. However, Germany, one of Europe’s most powerful and influential states, may also need to quickly approve Nord Stream 2 to lower gas prices due to inflation fears.
In sum, the consequences the Ukraine-Russia tensions can have on the current natural gas crisis may significantly affect the independence of Europe, both on a political and economic level, as well as its stability and foreign relations with allies. It is a developing topic at the international level worth following.
The Economist. (2022, January 13). Europe’s energy crisis will trigger its worst neuroses. https://www.economist.com/europe/2022/01/15/europes-energy-crisis-will-trigger-its-worst-neuroses
Eurostat. Shedding light on energy on the EU: From where do we import energy? (2020). Shedding Light on Energy on the EU. https://ec.europa.eu/eurostat/cache/infographs/energy/bloc-2c.html
The Economist. (2019, February 15). The Nord Stream 2 gas pipeline is a Russian trap. https://www.economist.com/leaders/2019/02/16/the-nord-stream-2-gas-pipeline-is-a-russian-trap
Astrasheuskaya, N. (2021, December 9). Why Nord Stream 2 is at heart of US warnings to Putin over Ukraine. Financial Times. https://www.ft.com/content/650963c2-3e45-4ad0-bc87-0f0b59851a5a
The Economist. (2021, December 2). Nord Stream 2 could still sabotage German-American relations. https://www.economist.com/europe/2021/12/04/nord-stream-2-could-still-sabotage-german-american-relations
Recommended readings on the topic:
How does Europe get its gas? (2021, November 4). Financial Times. https://ig.ft.com/europes-gas-crisis-pipelines-explainer/
Student of the Bachelor’s Degree in Management
Nova School of Business and Economics