With the introduction of the embargo on oil and oil products from Russia due to the war in Ukraine, the European Union is facing the issue of finding new sources capable of replacing Russian oil supplies. A potential solution could be to increase purchases of oil from Africa. However, experts note that we should not expect a significant growth in oil supplies from Africa in the near future.
Economy
Last year the European Union took a number of serious steps towards reducing dependence on Russian energy and diversifying its suppliers of gas and oil. In particular, in July 2022, Brussels signed a memorandum of understanding with Baku on strategic partnership in the energy sector. The document envisages that supplies of gas from Azerbaijan will double in the next five years and by 2027 Baku will supply Europe with at least 20 billion cubic metres (bcm) of gas per year.
The European Union is one of the leading producers of steel and the bloc has big ambitions to offer the market a decarbonized product. At the same time, growing costs, the energy crisis and fierce competition in the steel market could result in partial deindustrialization for the EU. But the urgent introduction of green methods of production and a bet on poorly developed hydrogen technologies threaten to accelerate this process.
Before the Russian invasion of Ukraine, the explosion in European gas prices and the energy paradigm shift in the minds of European elites, Russia had historically been the largest supplier of natural gas to Europe. Back in January 2021 Russia supplied around 40% of the gas consumed in Europe. As Spain’s Energy Transition Minister Teresa Ribera recently stated, this proportion is now less than 10%.
The global economic situation is pushing industrially developed countries – primarily EU countries, but also India – to look for alternative sources of oil. The situation is aggravated by the fact that in the short term, the US is concentrating its efforts on holding down domestic hydrocarbon prices and will not increase gas supplies to global markets until at least December 2022, and possibly later.
In July 2022, the European Union took a serious new step towards building a strategic partnership with Azerbaijan in the energy sector by signing a memorandum of understanding. This agreement was aimed at reducing its gas dependence on Russia: Baku is promising to double gas supplies to Europe over the next five years.
The cruel romance between Russian gas suppliers and European consumers reached its peak this year. In early September, just ahead of the winter, Russia’s state-owned Gazprom shut down the Nord Stream 1 pipeline, which carries around a third of all Russian gas exports to the EU (almost 15% of the EU’s total gas imports).
“We have decided, as a European Union: We will end our reliance on Russian fossil fuels,” announced EU President Ursula von der Leyen at Princeton University in September 2022. But it seems the EU leader is moving too fast with this statement.
The evolving energy crisis in Europe – brought about in large part by the need to introduce tough sanctions against Russia, which has unleashed war in Ukraine – is beginning to acquire a more persistent nature. Moreover, this is having extremely negative long-term consequences – first and foremost for Germany, Europe’s largest economy.
Former German Chancellor Angela Merkel has called the Russia–Ukraine war that flared up at the end of February “a profound turning point in the history of Europe.” This is largely linked to the fact that the conflict has triggered a swift U-turn in the energy policy of Germany, which had been building close and interdependent relations with Russia in the energy supply field for several decades. It appears that Germany is ready to bid goodbye to Russian piped gas and replace it with liquefied gas (LNG) from overseas by building its own LNG infrastructure.
Renewed discussion of removing sanctions from Iran’s oil industry is becoming one of the most important issues on the current agenda. The subject reflects a strategy whereby the United States and the EU are looking for solutions to the problem of an oil shortage in the here and now: they are under time pressure given the possibility of a full-scale oil embargo against Russia.