Europe is in an energy crisis. Will it buy oil and gas from Russia again?

Illustrative photo. Photo: Dmitry Lovetsky / AP

During the first 44 days of the war, rising prices already cost the EU 22 billion euros in additional fuel import expenditures — an average of half a billion per day. The aviation fuel deficit forces airlines to cut schedules, electricity and heating prices are skyrocketing, and increasing gasoline and diesel prices threaten a drop in household, company, and budget incomes, promising a new round of inflation and a slowdown in economic growth.

Europe has no money to fight the new crisis — it already incurred exorbitant expenses first during the COVID era, and then during the first energy crisis caused by the Kremlin's gas war before and after the invasion of Ukraine.

The EU is preparing another anti-crisis plan (to be presented next week) and fiercely debating — what went wrong, why didn't Europe's energy security defense plan, implemented after the previous crisis, protect it from the new onslaught?

Some say the blame lies with Germany's abandonment of nuclear energy. Others — that the economy should have been electrified more actively. But there are also those who argue that they should not have broken with Russia so quickly and decisively.

Before the Ukrainian war, Russia was the largest supplier of energy resources to the European Union — its closest and wealthiest sales market.

Now it plays a secondary role. The EU immediately refused to import Russian coal, will ban gas from late 2027, and planned to announce a total oil embargo in mid-April — but postponed it due to the new crisis.

Is Europe ready to buy oil and gas from Russia again?

No, it's not ready, officials and politicians say in unison.

"In the conditions of the new crisis, some are proposing to return to purchasing fossil fuels from Russia. This would be a strategic mistake," Ursula von der Leyen, effectively the EU Prime Minister, said after the start of the Iranian war. "Of course, we can be more pragmatic and smarter in implementing our long-term strategy, but the direction chosen is correct."

The head of Italy's largest energy company Eni, Claudio Descalzi, spoke in favor of easing sanctions against Russia. He urged the European Union to postpone the full rejection of Russian gas, scheduled for 2027.

You won't get it, Italian Prime Minister Giorgia Meloni responded to the oilmen.

"Descalzi's position is understandable, but we should not forget that economic pressure on Russia in recent years has been the most effective weapon for achieving peace in Ukraine," she said.

New crisis — how serious is it?

Due to the blockade of the Strait of Hormuz in the Persian Gulf, at least 12% of global oil supplies and approximately 17% of all gas supply on the world market were blocked for at least a month and a half.

There is nothing to replace them with, but the deficit can be partially compensated by increasing supplies from the USA — the world's largest producer of oil and gas — and by selling oil from strategic reserves. However, this is a temporary measure; it will replace no more than 10-20% of what was lost and will mainly apply to oil, not gas.

These are bad news for Europe, as it depends on imports of gas and petroleum products, especially aviation fuel.

Europe buys approximately a third of its aviation fuel abroad, and 75% of these imports came from the Middle East. Airlines have already faced a physical shortage of fuel and are forced to revise their schedules. German Lufthansa and Dutch KLM have already announced future flight cancellations.

"If the war drags on, there is a real danger that tickets will become more expensive and flights will be canceled in the summer," said European Commissioner for Energy Dan Jørgensen to the Financial Times.

And this is despite the fact that Europe is less dependent on oil and gas supplies from the Middle East than Asia, where the crisis is already in full swing.

The main gas suppliers to the EU currently are Norway (30%) and the USA (26%), according to data from the Bruegel research center.

Russia provides 12% of European needs in imported gas. Half is supplied via a pipeline through Turkey, the other half is chilled liquefied natural gas, transported from the Arctic by gas tankers.

The rest comes from Algeria (10%), Great Britain and Azerbaijan (4% each). The Middle East, represented by Qatar, holds a modest 4% share in the EU's gas balance, and 8% in liquefied gas imports.

"Therefore, unlike the 2022 energy crisis caused by Russia's invasion of Ukraine, the current war does not pose a direct threat to the EU's gas supply," Bruegel experts note. At that time, Russia accounted for more than 40% of European gas imports.

However, Europe buys gas at world prices, and they are rising, as there is less gas in the world after the Iranian attacks on the Qatari plant and the closure of the Strait of Hormuz. So even in the absence of a deficit, the energy crisis in Europe is fully felt.

Can Russia increase supplies to Europe?

Oil — yes, but under two conditions.

First, the EU must again allow all 27 member countries to buy it, not just Hungary and Slovakia, which until now continued to receive Russian oil via the "Druzhba" pipeline through Ukraine as an exception. However, it has been under repair for a long time after a Russian strike, and Ukraine is not rushing to fix it, despite the demands of the European Union.

And second, to increase oil exports, Russia will have to somehow deal with the daily raids by Ukrainian drones on its export terminals in the Baltic and Black Sea.

Both conditions currently seem impossible to fulfill. And with gas — it's even more complicated.

"It is unlikely that the Iranian war will turn into a strategic victory for Russia. It may earn a little from rising prices and scarcity. But Russia has lost the mechanism for profiting from disruptions in the global market," note Russian energy experts Tatyana Mitrova and Fyodor Dmitrenko.

This mechanism was destroyed by the war against Ukraine. Before it, the Kremlin kept Europe on a short leash as the main supplier of energy resources. After the invasion, Russia permanently lost this leverage, Mitrova and Dmitrenko are convinced.

"The question of Russian gas returning to Europe is still regularly raised," they write in an article for the American publication National Interest. "And although the resumption of supplies in limited volumes is possible, it is not at all the same as the revival of the former system."

There is no going back to the 2000s-2010s, they say.

"If Russian gas does return to Europe, it will only be in limited volumes and as a supplement, dependent on the political situation, rather than forming the overall basis of the continent's gas balance."

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