Europe is wrestling—still—with a ban on imports of Russian oil over the weekend.
While such a deal is far from certain, the European Union could approve a phased embargo on Russian oil as soon as this week, the New York Times has reported .
In April, after reports of atrocities in Ukraine, the union said it would ban Russian coal imports from August onward and was considering cutting imports of oil and natural gas as well. Last week, Russia cut Poland and Bulgaria off from natural gas for refusing to pay in rubles and threatened to do the same to others.
Weaning Europe off Russian energy won’t be an easy task. Each EU nation is different when it comes to dependence on Russian fossil fuels.
The charts below explain why it’s difficult for Europe to say no to Russian energy, which countries would be impacted the most, and what they’re doing to seek alternatives and achieve energy independence from Moscow.
Running on Fuels
Despite decades of effort to develop renewable and alternative energy sources, Europe today still runs heavily on fossil fuels. In 2020, about one third of EU’s total energy use came from oil and petroleum, nearly a quarter from natural gas, and 10% from coal, according to Eurostat, EU’s official statistical office. Data for 2021 isn’t available yet.
Europe has been buying a lot of those fossil fuels from its neighbor Russia—an energy giant that is the world’s largest exporter of natural gas, third-largest exporter of crude oil and condensates after the U.S. and Saudi Arabia, and third-largest exporter of coal behind Indonesia and Australia.
If Europe cut ties with Moscow, it won’t have many alternatives to power its factories, businesses, and households. That’s why—despite broad disapproval in the West of the war and alleged atrocities in Ukraine—it has been challenging for the economic bloc to sanction Russian energy and cripple the Kremlin’s war machine.
Coal was the first target of EU’s imports ban since it mattered less. While coal made up about 10% of the EU’s total energy use in 2020, only one third was imported, of which half was Russian. That means pulling the pug would only affect less than 2% of the continent’s total energy use.
Ditching Russian oil and gas would be much more difficult. Europe is heavily reliant on imports when it comes to the two major fossil fuels: In 2020, about 97% of EU’s total oil and petroleum usage came from abroad, and for natural gas, 84%, according to Eurostat. Much of those imports were from Russia.
Oil and Petroleum
In 2020, Russia pumped out about 10 million barrels of crude oil a day and exported nearly three-quarters of them—about 11% of the world’s total oil exports, according to BP’s statistical review of world energy released last year.
The exports included both crude oil and refined products, such as the gasoline pumped into cars and the diesel fuels used in trucks, trains, and boats. While China was the single largest buyer on a country level, more than half of Russia’s oil and petroleum exports went to Europe.
In 2020, nearly 23% of the EU’s entire oil and petroleum import came from Russia, according to Eurostat. Germany, Netherlands, and Poland were the biggest importers of Russian oil within Europe, but they weren’t the most reliant ones.
One way to calculate a country’s dependency on Russian oil is to look at its net import and measure it against the total energy use. Doing this with Eurostat’s data, Barron’s found that in Lithuania, a small country in the Baltics, the net oil imports from Russia represented nearly 80% of the nation’s total energy use in 2020. Other countries that topped the list include Greece, Slovakia, and Finland.
Not all of Lithuania’s oil imports stayed within the country. After buying crude oil from Russia, Lithuania processed them onshore and then exported the refined products.
It’s important to note that the data is from 2020, and many of these countries have already been taking steps to reduce their reliance on Russian energy since the invasion of Ukraine. But the path won’t be easy and meaningful progress will take time. German Chancellor Olaf Scholz has warned that a sudden cutoff would plunge all of Europe into a recession, with hundreds of thousands of jobs at risk.
Russia produced 639 billion cubic meters of natural gas in 2020, and exported 37% the volume to foreign countries, representing more than a quarter of global natural-gas exports, according to the BP report.
More than 80% of those natural gas were transported through pipelines like the Nord Stream I, and 20% via cargo ships in the liquefied form, or so-called LNG. Europe is a big buyer of both, taking in nearly 85% of Russia’s pipeline exports in 2020 and half of the LNG it sold.
Combined, nearly 40% of EU’s natural-gas imports came from Russia in 2020, according to Eurostat. Even if the EU itself doesn’t impose any sanctions on Russian natural gas, the situation is perilous given the high tension between the importers and the exporter.
Moscow has asked the EU to pay for its natural-gas imports with rubles—in a move to support its domestic currency—and threatens to cut supplies if they don’t comply. Europe would be struggling with an unprecedented energy shortage if that happens.
With other fossil fuels—like oil and coal—that are moved around by ships, importing countries can switch trade partners with less trouble. It is much harder to do the same with natural gas since the pipeline infrastructure cannot be easily moved from one place to another.
That means European countries that that rely on gas pipelines would be hit harder if Russia were to turn off the taps. For example, Germany and Italy–two largest buyers of Russian natural gas in Europe—imported everything via pipelines. Netherlands and France, on the other hand, received 21% and 46% of their Russian imports as LNG, respectively, in 2020.
Still, when compared with the relative sizes of different economies, some smaller countries might have more at stake. Barron’s analysis shows that Russia’s natural-gas imports accounted for about 37% of Hungary’s total energy usage in 2020 and 32% of Moldova’s—all of which are transported via pipelines.
What Are The Alternatives?
Many EU countries have been scrambling to reduce their reliance on Russian fossil fuels—through energy-saving campaigns, expanding renewable and nuclear capacities, and seeking alternative energy suppliers. There has been some progress, but huge challenge still lies ahead.
Other than Russia, the world’s major oil exporters include the U.S., Saudi Arabia, Canada, and other Organization of the Petroleum Exporting Countries in the Middle East.
U.S. President Joe Biden has announced earlier this month that the U.S. would release more than 180 million barrels of oil from its strategic petroleum reserve over the next six months. U.S. producers have been reluctant to drill more despite the skyrocketing oil prices, citing pressure from investors and lenders to stay disciplined with their capital deployment. But recent data suggest they might be changing their minds. In the first week of April, the rig count in the U.S.—a key indicator of oil-drilling activities—showed a large jump, a signal that an increase in production might be coming in the second half of the year and 2023.
Meanwhile,the Saudi-led OPEC has signaled that it wouldn’t pump more to fill the gap. As a member of the larger partnership dubbed OPEC+, Russia has been a key ally of the oil-exporting bloc in safeguarding their energy revenues.
When it comes to natural gas, Norway, Netherlands, Algeria, and Azerbaijan also pipe large volumes to Europe besides Russia. EU countries have been busy securing deals and building new pipelines to shift their natural-gas imports.
- The Danish section of the Baltic Sea pipeline is currently under construction. It will connect Poland to the gas fields in Norway and allow Warsaw to stop importing Russian gas later this year.
- Italy has secured a deal with Algeria, its second-biggest supplier, for more natural-gas imports through the Trans-Mediterranean undersea pipeline.
- Bulgaria is building a pipeline that will connect to the Trans-Adriatic pipeline, which transports natural gas from Azerbaijan via Greece to Italy and southeastern Europe. The country has struck a deal to receive more gas from Azerbaijan.
To be more nimble and less limited by the pipelines, Europe also needs to import more LNG from other leading suppliers such as Australia, Qatar, the U.S., Malaysia, and Nigeria.
Many countries were already doing so even before the Russia-Ukraine war. In 2020, more than 90% of Portugal’s natural-gas imports were LNG, and more than half came from Nigeria, according to Eurostat. Poland, Belgium, Greece, and, Italy each received more than 10% of their imports as LNG from Qatar, while Greece, Lithuania, Portugal, Malta, and Spain were big buyers of U.S. LNG.
Qatar said it would stand in solidarity with Europe and keep providing natural gas there, even if other customers are willing to pay more. Germany, France, Belgium and Italy are all in talks with the tiny Persian Gulf kingdom to buy LNG on a long-term basis. The U.S. has also committed to supply an additional 15 billion cubic meters of LNG to Europe through the remainder of 2022.
LNG shipping terminals are being built or expanded across Europe, which would allow the continent to be less reliant on the pipeline gas from Russia.
- Germany, which imported all its natural gas via pipelines in 2020, is planning to build two LNG terminals on the country’s northern shore.
- Poland is expanding its LNG terminal in port city Swinoujscie on the Baltic Sea, and signing new contracts with more LNG suppliers.
- Croatia is considering increasing the capacity of its LNG terminal on the island of Krk, and Slovenia has expressed interests in obtaining gas from there.
Some EU countries are already making quick progresses, setting example for their neighbors.
At the beginning of April, Lithuania and Latvia announced that they have completely stopped importing Russian gas—the first European countries to do so. Poland and Estonia are planning to do the same before year-end. Still, for Lithuania, finding alternative sources of oil might be equally challenging. In 2020, nearly 70% of the country’s oil imports came from Russia. Lithuania president Gitanas Nauseda said the number has since dropped and the country was prepared for a complete cut from Russian energy resources.
For others, the decoupling might need to come more gradually.
Since the invasion of Ukraine, Germany has reduced Russia’s share in its total oil imports to 25% from 35%, natural gas’ share to 40% from 55%, and halved the imports of Russian coal, said economy minister Robert Habeck. The imports of Russian oil and coal should fall to zero by the end of the year, said Habeck, and the country is aiming to end Russian gas imports by 2024.
Not all European countries are on board with the sanctions. Hungary recently said it was prepared to pay rubles for Russian gas if Moscow asked it to. Austria, which is militarily neutral and not a member of NATO, has also been resistant to sanctions on Russian energy.
“A reasonable replacement for Europe simply does not exist,” Putin recently said in a televised speech, “There are simply no spare volumes in the global market, and deliveries from other countries, primarily the U.S., which may be sent to Europe, will cost the consumers many times more.”
Write to Evie Liu at [email protected]