The Ukrainian crisis of the last months has called Europe’s strategic dependency on Russian energy imports into question. According to Matthias Ruchser, there can be only one future-proof answer to the current dilemma, which will decarbonise Europe while also increasing energy independency: A European energy transition.
After Russia annexed Crimea, a peninsula in the Ukraine, contrary to international law in mid-March 2014, the West imposed sanctions on the Russian banking sector as well as on Russian and Ukrainian individuals with close contacts to the Putin regime. But Europe was first reluctant to impose economic sanctions, in particular against the Russian energy sector. After the downing of Malaysia Airlines Flight MH-17 in July 2014 the mood has changed however, and the first economic sanctions have been deployed. And despite the withdrawal of pro-Russian separatists from the occupied eastern Ukrainian cities at the beginning of July, the Ukraine-Russia crisis will not be over as long as Russia continues to support the separatists and disregard the territorial integrity of the Ukraine.
But how close are the economic interrelations between Russia and Germany, and with Europe? Russia was Germany’s eleventh most important trade partner in 2013: German exports to Russia, especially in technological and consumer goods, amounted to €36.1 billion. Exports from Russia amounted to €40.4 billion, but were largely limited to the supply of raw materials. Russia was therefore Germany’s biggest supplier of fossil fuels in 2013 and covered 38 per cent of the natural gas volume, just under 35 per cent of crude oil imports, and 27 per cent of coal imports.
The situation is similar for all of Europe: 42 per cent of the natural gas volume and 33 per cent of crude oil imports came from Russia in 2013. The countries of the European Union (EU) imported 53 per cent of its energy needs from non-EU countries, at costs of well over €1 billion per day! However, the energy import dependencies of the EU countries vary widely, from Denmark’s energy independence to Malta’s 100 per cent import dependency – despite excellent climatic conditions for wind and solar energy. Eastern Europeans in particular are dependent on crude oil and natural gas supply from Russia. Within this context, Polish Prime Minister Tusk initiated a discussion on the formation of a European energy union that would compensate for future suspensions of Russian supplies with European energy supplies.
If Europe imposes economic sanctions, Putin will inevitably take countermeasures. Both sides will sustain economic damages. Are European economic sanctions against Russia at all possible within this context? Yes, because Russia has more to fear from economic sanctions than Europe, since the Russian export economy is based on its wealth of raw materials. These include not only primary energy carriers such as crude oil, natural gas and coal, but also a high percentage of the world’s stores of lead, iron, gold, cobalt, copper, nickel, zinc, tin and platinum group metals. This list reveals the dilemma of the Russian export economy. The high dependency on the raw materials sector brings about losses very quickly. This occurred previously starting in 2008 as a result of the financial and economic crisis, when global raw material prices suffered a major collapse due to the lower demand. Russia cannot afford to suspend energy exports to the European Union. A huge energy demand is developing in China, but Russia still lacks the infrastructure that would allow it to redirect its energy exports towards the emerging Asian economies. It will take years for the gas deliveries agreed between Russia and China in May 2014 to reach China via a pipeline that has yet to be built. Even during the most critical phases of the cold war, the Soviet Union never stopped delivering energy to the West. And neither will Putin.
Does this mean that Europe can let its guard down? No, because despite the European Union’s ‘20/20/20 targets’ to be achieved by 2020, referring to the decrease in greenhouse gas emissions by at least 20 per cent, the increase in renewable energy sources to 20 per cent of the total energy consumption, and a 20 per cent increase in energy efficiency, Europe‘s energy import dependency has steadily risen since the 1990s. What is the reaction of the EU Commission with regard to the reformulation of the European climate protection and energy goals for 2030? German EU Commissioner for Energy Günther Oettinger has in mind an energy savings target of not more than 27 or 28 per cent. Instead, he recommends that Europe diversify its source of supply of fossil primary energy carriers and rely on fracking, a controversial natural gas production technology. In this regard, Oettinger remains true to himself in that he has always been an opponent of renewable energy sources and a proponent of traditional energy sources during his five-year term as Commissioner for Energy.
The German energy transition, or in German, the Energiewende – away from nuclear energy and towards renewable energies and energy efficiency – demonstrates that there is an alternative. In the past months, however, the discussion has focused on the capping of electricity prices, and there is therefore a tendency to forget that the Energiewende is not an ‘electricity transition’ but also includes the heat and transport sectors. Heating accounts for around half of the end-use energy consumption in Germany; in the EU, the figure is 40 per cent. Heating, industrial process heat and transport in Germany and Europe still depend on the fossil energy carriers of crude oil and natural gas. With a 34 per cent share of consumption, crude oil is still the most important source of energy in the EU, followed by natural gas with a 23 per cent share of consumption. This is why there are major potentials, as yet unexploited, for increasing energy efficiency and expanding renewable energy sources in the heat and transport sectors.
As an initial reaction to the Ukraine-Russia crisis, the EU Commission released a ‘European Energy Security Strategy’ in May 2014 that prescribed energy stress tests in the short term that would evaluate the impact on the member countries should the natural gas supply be suspended next winter. Switching to alternative energies and increasing energy efficiency are also part of the Commission’s recommendations; however, priority has been given to increasing natural gas stores, expanding energy production and new sources of energy supply.
But instead of diversifying the supply sources of fossil primary energy carriers by becoming dependent on no less authoritarian or autocratic countries such as Iran, Qatar, the Caucasus, Oman or the United Arab Emirates, we need a European energy transition.
The Energiewende does not imply becoming independent of energy imports, or replacing fossil energy imports by expanding domestic fossil energy production. The Energiewende is about the decarbonisation of our economic framework and the necessary transformation of the energy systems as called for by the German Advisory Council on Global Change (WBGU).
The lesson taken from the Germany Energiewende is that to focus on electricity prices would be taking a too narrow view. This is why the amendment of the Renewable Energy Sources Act (EEG) that was passed in June 2014 – the most successful model in the world for expanding renewable electricity production – will slow down the development of renewable energy in Germany. We are continuing to learn that, if we want to reduce import dependencies on Russian coal, crude oil and natural gas, we need to hasten the Energiewende above all in the heating and transport sectors.
This article was first published on 1 August 2014 in Diplomatisches Magazin.
Matthias Ruchser is Head of Communications at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) and he works as a consultant in the energy industry. He regularly publishes on topics related to the German “Energiewende”, renewable energy sources, power from the deserts, sustainable energy for all, the renaissance of coal and climate change.
The German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) is one of the leading global research institutions and think tanks on global development issues and international development policy. DIE uses independent research to advise public institutions in Germany and around the world on current issues relating to cooperation between industrial and development countries.
Germany shows that there’s an alternative… …if you have money for it. Since many countries can’t afford substituting power plants because of financial problems an energy union that helps with this kind of investment would make that alternative possible everywhere across the EU.
Or at least a very large investment fund that focuses on these key projects that make the european project sustainable.