If the bloc cannot take serious action in a crisis, it would be legitimate to ask what is the use of
Vladimir Putin has crossed the Rubicon. By cutting off gas to Poland and Bulgaria, he is forcing others to choose between giving in to his demands or accepting a damaging energy embargo. This pushes the EU towards a critical test of its unity.
Since the Ukraine invasion, Russia has continued to export the annual equivalent of some 100 billion cubic meters (100 bcm) of gas to Europe, while the West has avoided sanctioning energy imports. It’s obvious why. Russian gas sales amounted to 54 billion dollars (51 billion euros) in 2021. The EU depends on Russia for more than a third of its supply.
In a way, the next step should be obvious. Bulgaria relies on Russia for 100% of its gas, and Putin’s decision to cut supplies to those who don’t pay in rubles suggests others could be next. If the EU were to respond by rejecting the demands, it would end an absurd situation where it is financing the war. It has already charted a path to cut imports by two-thirds this year.
Putin knows that things are not that simple. Poland is less than 50% dependent on Russian gas, with storage facilities 75% full, and its contract expires soon, anyway. But the equivalent storage in the EU is only 32%, according to AGSI. Reaching the 80% needed by autumn, we estimate, would cost $50bn and require 50bcm of US LNG. According to Rystad Energy, Europeans would need to cut their gas consumption by more than 15%.
EU bigwigs like Olaf Scholz, whose country relies on Moscow for more than half of its gas, may be tempted to muddle through. uniper, one utilities Germana believes the ruble edict can be negotiated without breaking sanctions, and some big firms are already paying in the Russian currency, says Bloomberg. Much more difficult would be to coordinate a response at the European level, with energy rationing and a common fund to help the most affected countries. But if the EU cannot take this kind of action in a crisis, it would be legitimate to ask what it is for.
