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Europe is winning the energy war against Russia

by SuperiorInvest

According to the Kremlin, the invasion of Ukraine should have been long overdue. After the first three days, Russia’s “short victorious war” would end with Quisling’s reign and a parade through Kiev, cementing the legacy of Russian President Vladimir Putin and the Russian Empire redux of the Eastern Orthodox Slavs: Russia, Ukraine and Belarus, or as it was called in Tsarist jargon, “Big, Little and White Russian”.

Instead, the Russian invasion floundered in the biggest display of military incompetence since the fall of Saddam’s Iraqi army in 2003, but here it was not a superpower defeating a sanctions-starved regional military. It was a regional army defeating “the second strongest army in the world”.

All of Russia’s geostrategic and economic failures are huge: mass emigration (about 1,000,000 of the most skilled and enterprising Russians; economic dislocation and sanctions; diplomatic isolation; and a resurgent West. This is all Russia has to show for its war and its rulers, as Nikita Khrushchev in 1964, were removed for much less.

Russia has also weaponized its energy resources to pressure Europe. The hope: high energy prices for Europe and discounted prices for anti-Western rivals will force Europe to abandon Ukraine and force Kyiv to capitulate to its own convenience.

Russia hoped, especially as winter approached, that increasing demands for domestic heating and industrial energy from the West would give Russia political leverage. General Winter fought Russia this time as Europe enjoyed one of their own the warmest winters on record. This warm weather, combined with a pragmatic energy-based diplomatic and economic offensive, has helped Europe a lot.

Before the war, there was Russia head supplier of energy, including oil, uranium reactor fuel, natural gas and coal to the continent, as 40 percent of the gas used to heat homes and energy businesses across the EU came from Russia. This has made Russia a major trading partner for some of the world’s richest countries, giving Moscow considerable importance influence. However, the European response to Russian aggression and war crimes, such as the invasion, occupation and annexation of Georgian territory in 2008, the annexation of Crimea in 2014 or the occupation of Donbass and the downing of the civilian airliner MH-17, was inexcusable failure which encouraged Putin to invade Ukraine.

Even before the war began, Europe and the US prepared emergency sanctions that would damage Russian energy exports and allow the West to wean itself off Russian gas. Russia responded in kind, curtailing its exports and leading the way Schadenfreude subtitles such as “German ‘green’ minister admits coal plants will have to return to production”or “Spanish Prime Minister Suggests Getting Rid of Ties to Save Energy”. Many missed the deeper meaning of these headlines: Europe was rapidly replacing the bedrock of its economic architecture, not allowing ideological purity or optics to get in the way of saving itself from the Russian custom, despite decades of Ostpolitik, and especially the efforts of Angela Merkel.

The speed with which Europe was able to find alternative sources of energy a succeed the weaning off of Russian imports surprised many, most of all Russian leaders. This will increasingly leave Moscow with significantly fewer resources to finance the war. Falling incomes will hurt average Russians and expose them to the economic pain of Western sanctions. There is also little hope that Europe’s partnership with Russia could be renewed after the end of the war unless there is a regime change in Moscow. European leaders are unlikely to repeat the mistake of relying on Russia; with inflation falling in the West and as Europe adjusts its energy policy, the sanctions imposed on Russia will only get tougher and more damaging.

Russia has found the usual cabal of anti-Western or neutral actors to be a poor substitute for European energy markets. China promised “friendship without borders” turned into a reluctance to even finance new energy partnerships. Beijing buys Russian oil at a 30-40 percent discount.

India, the Kremlin’s supposed panacea, has also changed its position as Russia’s only bulk importer by pulling for deep discounts. Even buying India thirty three times as much Russian oil in 2022 as in 2021 will not save Russian finances, especially as the Sino-Indian rivalry traps Moscow between a dragon and an elephant.

Former Russian economic partners in Central Asia they are now absorbing the fleeing Russian youth and competes with him in energy market. Even former Soviet republics and Russian allies such as Armenia trying to escape Moscow’s orbit. In any case, Europe pursued its own energy diplomacy to compound Russia’s strategic mistakes. Now Russia is left with only the most insignificant or the most prominent: Belarus, the Central African Republic, Eritrea, Iran, Nicaragua, Tajikistan and Venezuela.

Predictable economic results show the extent of this failure. The recent ban on seafood imports from Russia costs Moscow about 160 million euros per day. Two weeks before EU sanctions and the G-7 price cap on Russian oil took effect, Russia lost 90% its market in the northern bloc countries. In December 2022, Russia saw its fossil fuel export revenue fall to its lowest level since the February invasion. Its annualized inflation in 2022 was almost double (11.9%) of the West (6.5% in the US), with its overall economy shrinkage as its deficit balloons. At least the army takes care of unemployment.

It is especially ironic that the real beneficiary of Putin’s failed geostrategic gamble is the United States. In 2022 the US overtook Russia as a supplier of gas to Europe. Most European leaders rushed to provide LNG offers with the US, which leads to another 1 trillion dollars in the earnings of U.S. energy companies such as Cheniere Energy ( LNG.A. ) and TotalEnergies ( TTEF.PA ). The energy crisis deepened cooperation between Washington and Brussels, leaving Europe almost disconnected from Russia and more dependent on the US. Synergistically, this new energy cooperation will strengthen the transatlantic alliance, which bodes well for Ukraine’s war effort as well.

Putin’s actions were not worse than criminal, they were unprecedented strategic mistakes. The enormity of this disaster cannot escape even supporters of the Russian nationalist invasion. Many thought that Putin would not make such a monumental mistake. Unfortunately, it reflected the consensus whipped up by Kremlin TV and talking heads – and the Tsar swallowed his own bait and believed his own propaganda. Like many before him, he bought invincibility and destiny and fell victim to the illusion of a “short victorious war” – a phrase that condemned Nicholas II. This is not over yet as Russia is determined to increase its military to 1.5 million and send more half a million to the battlefield.

While the war is not over, Russia – and Putin – have already lost. However it turns out, Russia has lost the European energy market and a major source of revenue, and Europe is better off free of its dependence on Russian energy.

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