Russia’s Weaponization of Energy Must Not Be Allowed to Work
European leaders and citizens are bracing for a difficult winter with high fuel prices and shortages due to the war in Ukraine. The expected hardship has come into increased focus following Gazprom’s announcement in early September that it would close Nord Stream 1, the largest natural gas pipeline from Russia to Western Europe. The closure, which sparked a 30 percent increase in wholesale gas prices, has increased the risk of a recession in Europe and exacerbated the energy crisis.
The announcement by Gazprom, a Russian state-owned energy company, came hours after the G7 decision to impose a price cap on Russian oil. The price cap is the most recent of many sanctions that have been placed on Russia, and the Kremlin’s response appears to be a reaction to the escalation in sanctions. The goal of the price cap is to further reduce Russia’s income from oil exports, which have been a major source of funding for the war in Ukraine. While the countries that agreed to the price cap already had agreed to stop Russian oil imports, the goal is to reduce Russia’s revenue from those countries that continue to import Russian oil, particularly India, China, and Turkey. It is unlikely that those countries will agree to the price cap given Russia’s announcement that it will not sell oil to any country imposing the cap. However, the G7 hopes that the cap will have an impact on countries that are non-signatories because the proposed agreement would ban signatory countries from providing services, such as insurance, in support of shipping Russian oil to any country if the import price is above the cap. Although it is unlikely that this ban would prevent India, China, and Turkey from finding a way to ship Russian oil, the need to find alternative insurance and shipping will increase Russia’s costs and make exporting oil less profitable. Furthermore, the G7 agreement will give India, China, and Turkey bargaining power over Russia, leading to lower oil prices and decreased Russian revenue. According to U.S. Deputy Treasury Secretary Wally Adeyemo, this has already started to work, as “Russia is negotiating with some countries prices as low as with a 30% discount on the current price of oil.”
One could question whether the G7 agreement, where the benefits to Europe are uncertain, is worth the cost of Russia shutting down the Nord Stream 1 pipeline and jeopardizing European access to natural gas. But Russia had already reduced the output of the pipeline by 80 percent and has regularly suspended deliveries in an effort to weaponize energy. So long as Western European countries continue to impose meaningful economic sanctions on Russia, there is no reason to think that Russia would continue to supply natural gas through the winter, even without the G7 agreement.
So far there is no indication that Europe is going to back off any sanctions or support for Ukraine in response to this most recent threat. Instead, the European Commission (EC) is discussing ways, such as rationing, price controls, and excess profit taxes, to mitigate the effects of the energy shortage and resulting high prices. In addition, Europe has been preparing for a winter without Russian natural gas and has built up a substantial energy reserve. These and other measures will help offset the impact of the energy shortage, but it will still be an extremely difficult winter for Europeans.
Despite the long winter ahead, Europe does not have a true alternative. The West’s strategy for supporting Ukraine depends on both providing military equipment and imposing a financial cost on Russia for invading Ukraine. It is important to reduce the high oil prices Russia has profited on so that the oil exports do not offset the economic impact of sanctions. Perhaps more importantly, Western Europe is now forced to find alternative energy sources, which will further limit Russia’s power over Europe in the long term. Standing up to Russia despite economic pain will demonstrate commitment to meaningful sanctions and discourage a future Russian invasion of another Western ally.
The need to make economic sacrifices to protect an ally’s sovereignty against threats from aggressive totalitarian regimes is not new. While people may be tempted to question the importance of their resolve as the weather grows colder and their bank accounts get smaller, they should remember the words of Ukraine’s First Lady, Olena Zelenska, “[s]o when you start counting pennies on your bank account or in your pocket, we do the same and count our casualties.”
