Oil, gas revenue-reliant Russia will not forgo European market

Europe can survive without Russian gas, but may do so with much higher energy prices, says expert

Russia, whose economy is highly dependent on oil and gas revenue from the European market and globally, should not in principle want its revenue flow cut off, according to Jonathan Elkind, a senior research scholar at Columbia University’s Center for Global Energy Policy and a former energy official in the Clinton and Obama administrations.

Elkind said the justifications for the recent incursions into Ukraine by the Russian authorities were found to be misleading, and a situation is he described as unfortunate.

He lamented such confrontation and questioned why any diplomatic engagement was not invoked.

In light of Russia’s incursion into Ukraine, worldwide condemnation ensued and Germany halted the certification of the controversial Nord Stream 2 pipeline, which is owned by a subsidiary of Russia’s state-owned Gazprom to bring natural gas directly from Russia to northern Germany.

This was followed on Wednesday with a statement from US President Joe Biden, who directed his administration to impose sanctions on Nord Stream 2 AG,the company that built the Nord Stream gas pipeline, and its corporate officers.

The Nord Stream 2 project was set to double the volume of gas via the Nord Stream pipeline to Europe, the bloc which is highly dependent on Russian gas, and which has seen months-long energy insecurity and sky-rocketing energy prices.

However, Elkind said that although he acknowledges the suspension of the certification process by the German authorities, he said it is not yet clear if the Nord Stream 2 has been canceled.

He argued that it is in the mutual interest of both the supplier and off-takers to see the completion and operation of the pipeline or any piece of energy infrastructure.

The suspension will complicate European energy security and could raise energy prices even further.

Elkind described these energy security matters as “very sensitive, very intricate and multi-layered issues.”

“You have politics and commercial interests and economic considerations all in a mix together. This is not a simple issue. But going forward, whether the project [Nord Stream 2] goes forward or not, is something that today is very hard to foresee with any clarity,’ he explained.

Nonetheless, Elkind stressed that Europe could survive without Russian gas, but it would be surviving with much higher energy prices.

‘So those price rises are painful for anybody who is using energy, whether one is a fertilizer plant operator who relies very heavily on natural gas, or a household decision-maker, or a company operator. So elevated prices, and particularly prices that have risen rapidly, create economic impact. But can Europe survive? Yes, in fact, Europe can survive with higher prices,’ he said.

In the face of potential energy supply cuts resulting from Russia’s actions in Ukraine, Elkind said the situation has given many European leaders a stronger impetus to significantly reduce reliance on natural gas in their energy resources.

‘Now, that’s not something that you can do overnight. But it is something that one can do on an accelerated basis and with cost, let’s be clear. But that would be detrimental to Russia, and certainly would have a very negative impact on Russia’s national revenues,’ he said.

Referring to Turkiye’s reliance on Russian gas, Elkind said the country has other alternative supplies aside from Russia, citing Azerbaijan and Iran as suppliers of piped gas or LNG.

‘I know from personal experience, having spent a good deal of time working in relation to the Baku-Ceyhan-Tbilisi oil pipeline and the South Caucasus gas pipeline, for example, that natural gas supply relations with Azerbaijan are another very important piece of the puzzle for Turkey [Turkiye],” he said.

He also recommended that Turkiye avail of the opportunity to implement more energy efficiency improvements in the short to medium term, particularly in gas-hungry heavy industries.


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