Putin exploits Europe's energy crisis

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  • Vladimir Putin
    Vladimir Putin
    President of Russia

Russia didn’t cause Europe’s current energy crisis, which has seen natural gas prices spike 5x over last year, but Vladimir Putin seems intent on using it to his advantage.

Why it matters: Gas prices fluctuate with Putin's every word (they fell Thursday after he signaled supply would increase next month), and the supply crunch has been an uncomfortable reminder of Europe's reliance on Russian fuel. At least one country, Moldova, is in danger of a very cold winter if Russia turns off the tap.

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Driving the news: Putin recently dismissed accusations that Moscow is exploiting the crisis as "utter nonsense, drivel and politically motivated tittle-tattle."

  • The Kremlin has noted that high prices are actually a risk for Russia because countries could turn to other fuels like coal.

  • But Putin is no stranger to using gas to serve geopolitical purposes, notes Anna Mikulska of Rice University’s Baker Institute, including to increase the dependence of neighboring countries on Russia or to punish countries that move toward the West.

Putin’s envoy to the EU, Vladimir Chizhov, hinted earlier this month that geopolitics were indeed a factor. "Change adversary to partner and things get resolved easier," Chizhov said, referring to the way the bloc treats Russia.

  • Putin has pushed EU countries to agree to longer-term contracts that will keep them reliant on Russian gas but, he contends, guarantee consistent supply.

  • And he has claimed that one way to ease the supply crunch would be for Germany and the EU to expedite approval of the controversial Nord Stream 2 pipeline, which circumvents Ukraine (Russian gas giant Gazprom has already been shipping less gas via Ukrainian pipelines).

  • The other side: Amos Hochstein, the U.S. special envoy for energy security, dismissed that suggestion, telling reporters on Monday that if Russia has the ability to increase supply, it can do so using existing pipelines.

Between the lines: It's not clear that Russia could actually ramp up supply enough to "decrease the pain in any significant manner," says Mikulska. "But Russia has at the very least been trying to exploit these conditions to push their own objectives."

  • Asked if Russia was using energy as a weapon, Hochstein said: "I think we are getting close to that line, if Russia indeed has the gas to supply and it chooses not to, and it will only do so if Europe accedes to other demands that are completely unrelated."

  • He added: "The only supplier that can really make a big difference for European energy security for this winter is Russia."

The big picture: Russian gas remains a major part of the energy mix in many European countries.

  • In Germany, for example, two-thirds of natural gas imports came from Russia as of 2018, and Russian gas accounted for 16% of all energy consumption.

  • In several countries in Eastern Europe, 100% of natural gas supplies come from Russia.

No country is feeling the pinch more acutely than Moldova.

  • The former Soviet republic has a new government that is seeking to turn away from Moscow and toward the West — but has until now been entirely reliant on Russian gas.

  • Moldova’s contract expired at the end of September, at which point Gazprom raised the price and reduced supply when Moldova refused to pay it.

  • The government has declared a state of emergency, said it will negotiate a new contract only if Gazprom lowers its price, and searched frantically for other suppliers — including by sealing a relatively small-scale deal with a Polish firm this week.

Zoom out: The energy crisis has a medley of causes that have little to do with Russia.

  • Supply tightened due to a cold winter followed by a hot summer.

  • Gas production in the EU has long been in decline, and renewables have taken a hit in part due to low winds.

  • Asian demand has sucked up much of the global supply of liquefied natural gas, limiting the potential suppliers for EU countries.

The bottom line: Europe will continue to rely more on Russia for gas than any other source, the Baker Institute's Mikulska says, for reasons of capacity, proximity and existing infrastructure.

  • But rather than locking in long-term contracts with Russia, several EU countries like Poland have sought to diversify their supply or sign shorter-term agreements, Mikulska says.

  • She says Putin is in danger of overplaying his hand and undermining any claim that Russia is a reliable partner.

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