(Let’s ignore for a second whether this is a good political weapon—as in, do you think Putin will pull rethink the war if Europe stops buying Russian gas? I doubt it).
Let’s just focus on numbers.
Europe imports around 400 bcm each year (using an expansive definition of “Europe”). Russia supplies around 175 to 200 bcm.
The basic question is: can Europe find another 175-200 bcm in alternative gas supplies and/or reduced gas use?
tl;dr: It's very tough.
European LNG import capacity is ~240 bcm. But a lot of that capacity is in Spain (disconnected from the rest of Europe). In some places, LNG capacity is enough to offset the Russian gas; in most places, it is not.
In Europe imported 108 bcm of LNG in 2021. Even if you ignore the Spain angle, you have about 130 bcm of spare LNG capacity. Not enough to offset ~175 bcm in Russian exports. And European LNG imports were already ~16 bcm in Jan (12 mmtons). The system is at near full speed.
Europe is a small part of the LNG market, but the LNG market is not very big. If you wanted, say, 100 bcm of extra LNG for Europe, that's hard to find. China could forgo *all* LNG imports for a year and that wouldn't be enough to cover what Europe needs to replace Russia.
Let's talk demand. Super rough, EU gas demand is 1/3 buildings, 1/3 industry, 1/3 power. Each sector has different response systems—alternative fuels, conservation, etc. Could you pay industry to shut down? Sure. Could people buckle up? Sure. Fire up coal? Yes. But it's not easy.
Now add seasonality. Being able to live without Russian gas in April or June says very little. That's not when you need gas. You need gas in January. Deliverability in January is what matters.
To meet demand in the winter you need storage. Lots of it. And you need it to be full (aka not a repeat of 2021). Annual averages are almost meaningless when it comes to European gas security. What really matters is winter demand. So that's the math.
Remember that revenues from gas are a small part of the Russian foreign balance. Even if you hit *all* energy exports, Russia has enough non-energy exports to cover most of their import needs—before dipping into reserves. You're not inflicting *that* much pain.
Final thought. We can sanction Russia up the wazoo. I doubt it will be enough to turn them around. For more on that, I recommend this piece by my former professor and colleague @EliotACohen: theatlantic.com/ideas/archive/…
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How do you ensure energy security against an enemy?
Europe bought energy from the Soviets during an era of managed rivalry. It bought energy from a weak Russia in the 1990s, and handled occasional flareups during Russia’s resurgence in the 2000s and 2010s. But this is new.
Few of the scenarios or strategies that Europe has used to secure its energy needs are designed for the world that we woke up to today. The European energy security toolkit is premised on a geopolitical balance that has been totally upended.
The war will reshape Europe’s tolerance for relying on Russian energy. No doubt. Eventually it will rewire the Eurasian energy system. But this is years away. How can Europe safeguard its energy system now?
Targeting NS2 is significant as a sign that Germany is fed up with Russia. That's why it matters. The energy implications are trivial—killing NS2 does little to improve European energy security. But the willingness to hit NS2 shows that Germany believes Russia crossed a line.
The idea that NS2 would rewrite the energy map of Europe was always far fetched—a talking point that gained potency through repetition, not truth. Let's not pretend that European energy security is stronger as a result of NS2 dying (if this is, in fact, death). It isn't.
Europe's energy security agenda remains the same with or without Nord Stream 2. Diversification of supply, ensuring infrastructure redundancy, stronger regulation of markets, a real strategy for seasonal balancing, faster decarbonization—none of those things rest on NS2.
The gas that transits Ukraine today mostly ends up in Italy. Here are some numbers I'm looking at when thinking about Italian energy security.
tl;dr: Italy's strategic stocks would be a lifesaver if gas flows through Ukraine were interrupted.
Italy meets winter demand through storage and pipeline imports. LNG is important but small relative to those other flows. Storage, in particular, is key. At times, storage has delivered almost as much as international pipelines.
Russia is Italy's largest supplier but Algeria is not far behind. In January 2022, in fact, Algeria delivered more gas than Russia (as flows from Russia declined). Other supply sources are important too, but no source, on its own, can match what Russia and Algeria deliver.
The idea that Europe didn’t do anything after 2006 and 2009 in terms of its dependence on Russian gas is rubbish. But this argument mostly fails to understand the basic contours of European gas policy over the past 15+ years. Let’s review.
Europe’s LNG import capacity grew by 3.4x between 2005 and 2021. Almost every country added more capacity after 2005 than it had in 2005. LNG imports have more than doubled. No one can look at that and say Europe has neglected LNG.
In terms of pipelines, Algeria launched a second route to Spain, the Southern Corridor opened up, and Norway is maxed out. There is no real supply out there waiting on Europe to drag it in. (Not realistically, at least—I say that for the “but the East Med” folks).
How do you punish / deter Russia? Most options on the table are either too big or too small. One option that isn’t talked about, but should be: targeting Russia’s participation in Europe’s energy transition. This could really hit Russia.
A thread.
Russia is too integrated into the European energy system to attack today. You cannot stop Russian gas exports. You can hit their growth prospects but who cares—they will adapt (or evade). Even NS2 is a poor target too—best case, it’s a reputational loss. Russian power is intact.
But the energy system is changing. Europe is changing. Russia knows this—even if it is sometimes in denial, or wants to taunt Europe. Russia understands that the European Green Deal is an existential threat. Without the European energy market, what is Russia?
Lots of discussions these past few days about what happens to European energy (gas) in the event of a conflict in Ukraine. I've been writing and tweeting about this in various places. Here is a thread consolidating those points.
Ukraine in 2022 is not the same as Ukraine in 2006 or 2009. Gas transit is down 70 percent versus 1998. At this moment, gas through Ukraine goes to only a few countries. The affected area is much smaller than in the past.
Can Europe access more LNG? Yes. But it has to bid it away from other markets since there is little production upside. Where? The U.S., Africa, some South America, but mostly Qatar. There are limits to this reshuffle. But in the past Qatar has sent ~3 mmt per month to Europe.