Rising energy prices, coupled with high inflation, are causing social unrest across the continent

Russian gas shortage deepens Europe's energy crisis

AFP/ JOE KLAMAR - Russia, the main supplier of gas to many European countries, has decided to cut gas supplies to several nations in retaliation for supporting Ukraine and for not paying for gas in roubles

The closure of the Nord Stream 1 gas pipeline for maintenance has put Europe on alert. The energy crisis is worsening as experts warn that it could be one of the worst the continent has experienced.

Russia, the main gas supplier to many European countries, has decided to cut off gas supplies to several nations in retaliation for its support for Ukraine and for not paying for gas in roubles, a measure announced by President Vladimir Putin in March. In mid-June, Russian gas giant Gazprom decided to reduce gas supplies via Nord Stream, causing the value of the fuel to rise by 21%. Recently, Moscow has reduced gas shipments to countries such as Italy and Austria.

Logotipo del gigante energético ruso Gazprom aparece en una de sus gasolineras en Sofía AFP/NIKOLAY DOYCHINOV

"This is the most extreme energy crisis that has ever happened in Europe," says Alex Munton, a global markets expert at the Rapidan Energy Group consultancy, quoted by Foreign Policy. The picture is so bleak that Munton even speaks of "an energy war". "We're talking about rationing of gas supplies, and this is not something Europe has had to deal with at any time other than during the war," he explains.

Munton stresses the challenge for Europe to face the coming winter in this situation. "Europe is looking at the very real prospect of not having enough gas when it is most needed, during the coldest part of the year," he tells the US magazine. 

Gráfico que muestra los flujos de gas natural de Nord Stream 1 en millones de metros cúbicos por día desde el 1 de febrero hasta el 10 de julio de 2022 AFP/AFP

In this regard, Helima Croft, managing director of RBC Capital Markets, paints a bleak picture for the winter months. Croft tells Foreign Policy that Europe could face "rationing or industrial shutdowns". All this could lead to social unrest, something that is already being felt in several parts of the continent, including Norway, one of the main alternatives to Russian gas and the second largest supplier of gas to Europe after Russia.

At the beginning of July, the Norwegian company Equinor began to suspend supplies due to a strike called by the Lederne union, which demanded a wage increase to compensate for rising inflation, another of Europe's current major challenges.

Sede de la empresa Equinor en Fornebu, Noruega PHOTO/REUTERS

In addition to Norway, France, Spain and the UK are also experiencing strikes affecting the transport sector. But the demands are the same as Lederne's: a wage rise in line with the current high inflation. "Putin is using every means he has to create conflict in our societies, so we must prepare for difficult times," Frans Timmermans, vice-president of the European Commission, told the Guardian. 

El euro alcanzó el martes la paridad con el dólar por primera vez en casi 20 años, mientras un corte en el suministro de gas ruso a Europa aumentó los temores de una recesión en la eurozona AFP/DANIEL NUÑOZ

In Germany, the EU's largest economy, the situation is not much better. The country has started rationing hot water, closing swimming pools and dimming streetlights. "The situation is more than dramatic," Axel Gedaschko, head of the German housing companies' federation GdW, told the Financial Times. "Germany's social peace is in grave danger," he adds.

El presidente de Rusia, Vladímir Putin, asiste a la ceremonia de inauguración de la nueva unidad combinada de refinado de petróleo Euro+ en la refinería de Moscú de Gazprom Neft, a través de una videoconferencia en la residencia estatal de Novo-Ogaryovo, a las afueras de Moscú, Rusia, el 23 de julio de 2020 KREMLIN/ALEXEI DRUZHININ via REUTERS

The German government itself has warned citizens about the situation, warning that the outlook could become "critical". "The situation on the gas market is tense and unfortunately we cannot guarantee that it will not get worse," admitted German Economy Minister Robert Habeck.

Europe is trying in different ways to overcome its energy dependence on Russia, either with new markets or by resorting to other energy sources, such as coal, something that countries like Italy, Austria and the Netherlands are planning to do.

Central eléctrica de carbón de Boxberg, operada por la empresa Lausitz Energie Bergbau AG (LEAG), en Nochten, Alemania PHOTO/REUTERS

As for alternatives to Russian gas, Qatar and the United States are emerging as possible suppliers. However, liquefied gas from Qatar and the US requires new terminals and pipelines that may take time to build. James Henderson, an energy expert at the Oxford Institute for Energy Studies, points to three to five years to get rid of dependence on Russian gas. "Gas projects don't get built that fast," he tells Foreign Policy. 

Estación de recepción de gas del gasoducto Nord Stream 1 del Mar Báltico y la estación de transferencia del gasoducto OPAL, Baltic Sea Pipeline Link, en Lubmin, Alemania PHOTO/JENS BUETTTNER via AP
High energy prices benefit Russian economy 

Despite sanctions imposed by the US and the EU, Russia has experienced a surplus in the first half of the year. According to data from the Ministry of Finance reported by the Russian agency Interfax, the country has managed to achieve a surplus of 23 billion dollars in the first half of 2022. 

Sede del Banco Central de Rusia en Moscú PHOTO/REUTERS

Higher fuel prices have benefited Russia, which has surpassed $100 billion in oil sales revenues, according to Al Roeya. Although sanctions make it difficult for Moscow to import Western goods, Russia still continues to export its main raw materials to different parts of the world. Since the beginning of the war, Moscow has strengthened its trade ties with Asia, especially China and India.