Matthew Sussex, of the Australian National University, told nine.com.au that shutting down gas supplies to Europe and the US is the Kremlin’s most potent countermeasure.
The Ukraine tensions show the risk of Europe’s reliance on Russia for energy, which supplies about a third of the continent’s natural gas, he says.
Russia is a major LNG supplier and could cut supplies to Europe in retaliation for economic sanctions.
“Germany gets about 30 per cent to 40 per cent of its gas from Russia. France and Italy are less dependent but still get some,” Associate Professor Sussex said.
And Europe’s stockpile is already low. While the US has pledged to help by boosting exports of liquefied natural gas, or LNG, there’s only so much it can produce at once.
It leaves Europe in a potential crisis, with its gas already sapped by a cold winter last year, a summer with little renewable energy generation and Russia delivering less than usual. Prices have skyrocketed, squeezing households and businesses.
Germany’s dependence on Russian gas supplies also partly explains why Berlin has taken a softer line with the Kremlin over its threats to attack Ukraine, Associate Professor Sussex said.
“Germany has been pressing for a diplomatic solution to the crisis – a softer approach than other western powers such as the US and Britain,” he said.
Here’s what to know about Europe’s energy supply if tensions boil over into war and Russia is hit with sanctions.
Will Russia cut off gas supplies to Europe?
No one knows for sure, but a complete shut-off is seen as unlikely, because it would be mutually destructive.
Russian officials have not signaled they would consider cutting supplies in the case of new sanctions. Moscow relies on energy exports, and though it just signed a gas deal with China, Europe is a key source of revenue.
Europe is likewise dependent on Russia, so any Western sanctions would likely avoid directly targeting Russian energy supplies.
More likely, experts say, would be Russia withholding gas sent through pipelines crossing Ukraine. Russia pumped 175 billion cubic metres of gas into Europe last year, nearly a quarter of it through those pipelines, according to S&P Global Platts. That would leave pipelines under the Baltic Sea and through Poland still operating.
Russia could then offer to make up the lost gas if Germany approves the contentious new Nord Stream 2 pipeline, whose operators could face potential US sanctions even though a recent vote to that effect failed.
US National Security Adviser Jake Sullivan said on Sunday on NBC’s ‘Meet the Press’ that the Biden administration has coordinated with its allies and that “if Russia invades Ukraine, one way or another, Nord Stream 2 will not move forward.”
What can Australia and the west do?
Australia and the US are major gas producers and send liquefied natural gas, or LNG, by ship worldwide.
Trade Minister Dan Tehan said Australian producers were well-placed to meet any rise in global demand.
But the federal government has no direct control over Australian LNG exports or where gas is sold, with most under contract and the rest being sold on the spot market to whoever will pay the most.
The Biden administration has been talking with gas producers worldwide about whether they can boost output and ship to Europe, and it has been working to identify supplies of natural gas from North Africa, the Middle East, Asia and the US.
But the US could only help Europe a little.
“We’re talking about small increases to the size of U.S. exports, whereas the hole that Europe would need to fill if Russia backed away or if Europe cut Russia off would be much larger than that,” said Ross Wyeno, lead analyst for Americas LNG at S&P.
Over the past month, two-thirds of American LNG exports went to Europe. Some ships filled with LNG were heading to Asia but turned around to go to Europe because buyers there offered to pay higher prices, S&P said.
Is there enough LNG worldwide to solve the problem?
Not in the event of a full cutoff, and it can’t be increased overnight. Export terminals cost billions of dollars to build and are working at capacity in the US.
Even if all Europe’s LNG import facilities were operating at capacity, the amount of gas would only be about two-thirds of what Russia sends via pipelines.
And there could be challenges distributing the LNG to parts of Europe that have fewer pipeline connections.
If Russia stopped sending just the gas that goes through Ukraine, it would take the equivalent of about 1.27 shiploads of additional LNG per day to replace that supply, said Luke Cottell, senior LNG analyst at S&P. Russia also could reroute some of that gas through other pipelines, reducing the need for additional LNG to about a half-shipload per day, he said.
Is Russia already supplying less gas?
Russia has been fulfilling its long-term contracts to supply gas to Europe, but it’s been selling less on the spot market and hasn’t been filling the storage containers it owns in Europe, experts say.
Russian cutbacks to spot gas supplies have contributed to sharply higher natural gas prices in Europe. They went as high as 166 euros ($268) per megawatt hour in December, more than eight times their level at the start of 2021. Prices have fallen to under 80 euros per kilowatt hour as more LNG arrives.
But consumers are feeling the crunch in higher electric and gas bills. European governments are rolling out subsidies and tax breaks to ease the financial stress on households.
– Reported with Associated Press