Europe Braces for Prospects of Gas Rationing

Energy security has been Europe’s top concern amid the Ukraine crisis. Photo: E. Gerden / Hydrocarbon Processing

One month into the war in Ukraine, European countries started facing some of the harshest effects of the conflict – and showed a slight faltering in resolve on continuing facing off against Russia after initially mounting an expectation-exceeding round of united efforts. As rounds after rounds of negotiations stalled and the conflict only appeared to intensify, Russia started tapping into some of its most significant strategic maneuvers in reserve, in effort to salvage its economy as hopes of a swift victory were thwarted by fierce Ukrainian resistance. 

Earlier, the Kremlin announced its intention to demand all Russian gas export transactions be conducted in Russian rubles, a clear attempt to further insulate the currency from the impacts of Western sanctions. Western European governments were quick to push back, as the question of energy security continues to loom over political discourse in Europe.

One of the biggest leverages President Putin's government has over the economic conflict with the West is Russia's status as one the largest suppliers of energy to Western Europe. European countries’ reservations on taking the harshest stance possible on the Russian invasion of Ukraine stem from this fact. In part due to the concerns over energy security, Western sanctions on Russian financial institutions have not been as sweeping as many would have liked. 

Energy export has become Russia’s most important source of revenue as well as a strategic weapon. Photo: Premier.gov.ru / Wikimedia Commons

Gazprombank, one of Russia’s largest state-owned banks, has been spared some of the harshest sanctions in part due to its critical role in facilitating transactions of gas exports from Russia to Europe. After rounds of negotiations European countries secured a settlement with Russia that gas payments could continue to be denominated in euros, but the need for making certain concessions to Russia to preserve European energy security certainly further exposes Europe’s biggest weakness in front of mounting Russia aggression. 

Germany’s economy minister Robert Habeck announced that Germany would be triggering its national gas emergency plan in response to the increasingly challenging energy environment. Mr. Habeck’s ministry announced that Germany has taken steps to reduce its dependence on Russian energy, but even so Chancellor Olaf Scholz admitted that cutting off Russian energy too quickly would have severely adverse effects on the economy, potentially, “plunging our country and all of Europe into recession.” 

Even before Russia’s invasion of Ukraine, Germany and the rest of Europe were already in a tight energy market. European governments are standing steadfastly behind their vows of weaning their economies from dependence on Russian energy while bracing themselves for the prospects of energy rations both now and into the future.

It has widely been predicted that industry will be first in line to have its gas supply restricted should there be a gas shortage in Germany, while governments try to prioritize energy demand of households and critical public infrastructures. This would mean huge recessionary pressures on the economy. Other European countries including the Netherlands and Austria have prepared for the potential need to urge private businesses and households to conserve energy as well.