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Barely six months ago, Russian media released a propaganda film showing freezing Europeans huddling together for warmth and cooking their pets, in a dystopian future without fossil fuels supplied by Russia.
More than a year on since the start of the war in Ukraine, the Continent has more or less kicked its addiction to Moscow’s gas — and nobody’s had to eat a hamster.
European wholesale natural gas prices have reached a two-year low, ending last week at €24.84 per megawatt hour, according to analytics firm ICIS.
That’s close to the 2010s average of €20.11 — and a major drop compared with April 2022, when gas price benchmarks hit the colossal €200 mark after Russia indefinitely slashed and then shut off much of its usual flows of gas to Europe in retaliation against economic sanctions.
“Our storages are at very high levels, demand has been reduced significantly, and new infrastructure has been developed to support the diversification efforts,” European Commissioner for Energy Kadri Simson told POLITICO. “We have managed to get rid of our dependence on Russian fossil fuels mainly by diversifying to reliable partners.”
In 2021, supplies from Russia made up around half of all of the EU’s natural gas imports at 150 billion cubic meters a year. By November 2022, it accounted for just under 13 percent — and that number has continued to fall.
Gas-rich countries like Norway and Azerbaijan have stepped up exports, and the Commission has signed memorandums of understanding with Egypt and Israel to diversify energy sources. Growth in renewables, demand reduction and increased imports from the U.S. have also helped.
None of that was a given. Early on, many feared disagreements between the bloc’s 27 countries — some of which were keen to continue importing Russian gas — could derail Brussels’ efforts. “I, and my colleagues, did extensive outreach with our member states and stakeholder representatives explaining what we were set out to do,” said Simson, describing how a consensus was reached.
Nor did it come without tradeoffs and side effects. Despite the bloc’s move to diversify supplies, its energy networks remain vulnerable to shocks and price spikes.
On Wednesday, Norway’s state energy giant Equinor announced a gas leak had stopped production at Europe’s only large-scale LNG plant, which makes up to 18.4 million cubic meters of liquefied gas every day. Gas futures surged around 15 percent on the back of the news before Equinor confirmed it had stopped the leak and was working to resume production.
“Substituting a large portion of Russian pipeline supply into Europe with seaborne LNG has bought some comfort in terms of energy security,” said Tom Haddon, an energy analyst at engineering consultancy Arcadis. “But it brings substantial price volatility as it’s a globally competitive market for energy.”
Even though the Continent is entering the next winter without a huge shortfall and with healthy reserves, a prolonged cold spell — or even large demand for air conditioning over the summer — could see prices rise again.
What ‘energy weapon’?
Still, Europe’s shift away from Russian fuels means Putin has lost his best leverage over Europe, experts say.
“There’ll be no political mandate to buy bucket loads of Russian gas even if the political situation changes. Nobody out there is going to go and sign a new contract with Gazprom in any significant volume,” said Tom Marzec-Manser, head of global gas analytics at ICIS.
Moscow’s expectation that an energy crisis in Europe would sap support for Ukraine also didn’t materialize, according to Andras Toth-Czifra, a fellow at the Foreign Policy Research Institute.
Putin’s “‘energy weapon’ certainly failed in the sense that the breakdown of Russian energy exports to Europe has not caused significant social or political upheaval in the key countries backing Ukraine,” he said.
Now, Moscow is stuck with a glut of natural gas that it is struggling to get to market, just as sanctions bite and the Kremlin scrabbles around for cash to continue to fund its war.
Despite a high-profile agreement to send more supplies to China through a new pipeline named Power of Siberia, “it is very unlikely that Russia will be able to build infrastructure in a couple of months or years that it had not been able to build pre-2022,” said Toth-Czifra.
Yuri Shafranik, a former Russian energy minister under President Boris Yeltsin who now serves as chairman of the country’s Union of Oil and Gas Producers, agreed that the “loss of the European gas market for Russia is a serious problem.”
But he added that Europe’s shift away from Russia has not been painless for the bloc: Some of the bloc’s most energy-intensive industries have seen a decline in productivity in response to volatile gas prices.
Energy Commissioner Simson insisted that there’s no future in which Europe restores energy ties with Russia to pre-war levels. “What is clear is that we will not go back to the status quo with Russia as our main gas supplier,” she said. “We need to protect our security of supply.”