Turn down the heat to stop Putin? Europe wrestles with its Russian gas addiction

The content originally appeared on: CNN

London (CNN Business)When you turn on the heating in your home, you may not think much about where your energy comes from, let alone where the money you pay for it goes. For millions of people living in Europe, there’s a good chance that money is flowing to the Russian state — much of it into President Vladimir Putin’s war chest.

Russia has been building a network of natural gas pipelines throughout Europe since the 1960s. Washington has been warning its Western allies ever since that more Russian gas will only make Europeans more vulnerable to Moscow.
There are fears now that the Kremlin may turn off the supply of natural gas to the European Union, in retaliation for its support for Ukraine — Europe, among other allies, has been sending weapons and aid to Ukraine to help it defend itself against Russia’s invasion.
It’s only been just over a week, but so far, Russia has let the gas flow. But that presents another problem.
Russia is earning hundreds of millions of dollars a day from its oil and gas exports, undermining the financial sanctions Western powers have introduced to choke off financing for Putin’s war effort. The European Union, Russia’s biggest gas customer, is now grappling with the reality that its energy spending has helped empower Putin to carry out a bloody war on its borders.
According to the European think thank Bruegel, with prices at record highs, the value of Russian natural gas exports to the European Union has soared to about EUR500 million ($545 million) every day. That’s up from about EUR200 million ($220 million) in February. Before the invasion, Russia was also exporting oil worth hundreds of millions a day to Europe.
EU leaders have been talking about reducing reliance on Russian gas for years. Polish Prime Minister Mateusz Morawiecki put it plainly last week. “We are buying, as [the] European Union, lots of Russian gas, lots of Russian oil. And President Putin is taking the money from us, from the Europeans. And he is turning this into aggression, invasion,” he told an EU summit, according to reports.
For gas alone, the 27-country bloc relies on Russia for 40% of its needs. By country, Germany is Russia’s biggest customer, relying on the nation for more than half of its gas, according to Bruegel.
In turn, Russia needs Europe’s money. Russian oil and gas revenues in 2021 were worth 9.1 trillion rubles, which in January this year converted to $119 billion, Reuters reports. That made up 36% of the country’s budget.
Moscow’s international reserves now stand at $630 billion, its highest ever, making for a huge war fund. But its financial firepower has been severely constrained by Western sanctions that analysts estimate have frozen about half of those assets.
Those sanctions are battering the Russian economy, but they haven’t yet targeted fossil fuel exports directly, so concerned are Western governments about soaring energy prices and the cost of living. Ultimately, they want Russian gas, at least, to keep flowing.
Oil is another story. While the price of benchmark Brent crude soared this week, trading at around $115 a barrel on Friday, Russia’s flagship Urals crude was offered at a discount of $18 a barrel, a sign that some buyers are shunning it.
Banks and traders fear getting caught up in financial sanctions, and shipping companies and insurers are worried about the risk to tankers in the Black Sea.
Besides, Europe can buy oil from elsewhere. Replacing Russia natural gas is more difficult.

Turning the heat down can save huge amounts of gas

Proponents of climate action have for years pushed for a plan to wean the world off natural gas, which is a potent planet-warming fossil fuel. It has taken an energy crisis and bloodshed in Ukraine to finally kick EU institutions into gear.
EU energy chief Kadri Simson said Thursday that the bloc will release its plan next week for reducing its reliance on Russian gas, and for speeding up the adoption of more renewable energy.
“Beyond the short term, ultimately … the only lasting solution is the Green Deal, boosting renewables and energy efficiency as fast as technically possible. So we are still far too dependent on fossil fuel imports,” she said at a press conference with the International Energy Agency.
Germany, which had aimed to transition to 100% renewables by 2040, has already brought its target forward by five years, since Russia invaded Ukraine last week.
The Ukraine crisis has also injected new urgency into conversations about whether the world can go on using as much energy as it does. Europe should be able to replace some of Russia’s gas supply, but cutting it out altogether simply isn’t an option for this heating season, experts told CNN previously. Even down the line, replacing Russian gas in full will be difficult.
IEA Executive Director Fatih Birol suggested that Europeans could turn down their thermostats as part of the solution.
According to a 10-point plan aimed at reducing reliance on Russian gas, the IEA says that if all buildings in the European Union turned down the heat by just 1 degree Celsius, the bloc would save 10 billion cubic meters of gas. That’s roughly the same amount of natural gas New York City consumes in three months, or what Hungary consumes over a year.
Actually asking people to do this would be something of a last resort, said Ben McWilliams, a climate and energy analyst at Bruegel.
“But who knows? It’s an unprecedented situation. I could imagine a kind of political campaign, a real push by European leaders saying, look, if you can help us by turning down 1 degree on your thermostat, it’s going to help. And you can see people uniting behind this, against Russian gas,” he told CNN. “But ultimately, you’ll need much more than this in response.”
One approach would be to replace around half the gas from other sources, McWilliams said. The United States is already shipping Iiquefied natural gas (LNG) to Europe, and EU officials are also looking to countries like Azerbaijan and Qatar.
The other half will need to come from cutting demand, McWilliams said, especially as Europe prepares for next winter.
Heavy industries, like steelmaking and chemical production, will need to reduce their operations. Homeowners investing in solar panels and heat pumps could help take some pressure off heating systems.
Tara Connolly, a campaigner with the international NGO Global Witness who specializes in gas, says that Europe must launch an emergency program to insulate homes, replace gas boilers with heat pumps and accelerate the transition to renewable energy.
“It is abundantly clear that Europe’s gas dependence has provided Putin with the resources to engage in his bloody venture in Ukraine, whilst hampering Europe’s response,” she said. “This moment has shown that not only are fossil fuels wrecking the climate, they are contributing to a more volatile and dangerous world.”