Europe is highly vulnerable to Putin’s gas blackmail.
European leaders believe they are part of the rich world, with the power to determine their future. After they return from their sacrosanct holidays in late August, they may begin to realize that is no longer true. Russia is pulling the plug. And nobody, including America, is coming to their rescue at the last minute.
World financial markets have been attempting to put a price on their dread of some disastrous event. I think that event will come in July, with a near-complete Russian shutdown of energy exports to Europe. Ukrainian solidarity flags are cheap. War is expensive.
Of course, the European Union has a plan for the coming crisis. Or, rather, many plans. To start, there is the expectation that American or Qatari LNG can come quickly to replace Russian gas. Climate goals (supposedly frozen into law) can be temporarily set aside so coal powered electric plants can be restarted. Gas storage facilities will be filled in time for winter.
Rationing will be imposed on European industry’s use of natural gas. Renewable energy, grid upgrades, and EVs will take over, eventually. Any necessary sacrifices will be shared in a fair manner.
No. This is all a day late and a euro short. Europe was saved from energy disaster this year thanks to China’s lockdowns (which released some LNG supplies) and unusually warm weather. Without that compounded good luck, Europe would have already suffered major power blackouts and industrial shutdowns.
But China’s LNG import terminals have re-opened with the end of its Covid lockdowns. And now that Europe has abandoned its climate goals to revive coal fired power plants, there is little, if any, non-Russian coal left to buy on international markets.
And Europe’s natural gas rationing plans are based on giving priority to household consumption, along with hospitals and other emergency services. The political leadership has yet to understand, for example, that if the EU’s fertilizer producers are not assigned priority access to available gas supplies then a cold, dark winter will be followed by food shortages next year.
