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What if Moscow turns off the gas as the Ukraine conflict deepens?

By Julia Horowitz, CNN Business

Updated: Mon, 28 Feb 2022 18:51:40 GMT

Source: CNN Business

If Russia halts its supply of gas to Europe to retaliate against the punishing sanctions for its invasion of Ukraine, the region should still be able to make it through next winter. But it won't be easy or cheap.

That's the conclusion from a report published Monday by Bruegel. The Brussels-based think tank warned that preparations "must be made for a complete termination of all Russian gas flows to Europe."

"If the EU is forced or willing to bear the cost, it should be possible to replace Russian gas already for next winter without economic activity being devastated, people freezing, or electricity supply being disrupted," Bruegel's researchers said. "But on the ground, dozens of regulations will have to be revised, usual procedures and operations revisited, a lot of money quickly spent and hard decisions taken."

Thanks to record imports of liquified natural gas from countries such as the United States in recent months, Europe should be able to last through the summer without severe energy shortages even if Russia intentionally cuts off its supplies of gas -— or if key infrastructure is damaged amid fighting in Ukraine.

However, Bruegel said the bloc needs to start thinking about how to replenish its inventories, which countries across Europe rely on to keep the lights on and heat homes.

Europe imports about 40% of its natural gas from Russia. Germany, the bloc's biggest economy, is particularly exposed: Russia supplies about half of its natural gas.

Austria, Hungary, Slovenia and Slovakia get about 60% of their natural gas from Russia, while Poland sources 80%.

Coal and the climate

If Russian imports cease, Europe will need to reduce demand for gas by at least 400 terawatt-hours, or about 10% to 15% of annual demand, according to Bruegel. The group said this is "possible," but would require policy shifts. Some options include ramping up the use of alternative fuels such as coal, delaying the phase-out of nuclear plants or reducing demand from industrial players.

This scenario also assumes that the EU "can procure unprecedented amounts of LNG, that market players have sufficient incentives to purchase and store gas at high prices and that gas is then distributed seamlessly across countries."

Greater use of coal, in particular, would have major consequences for the climate. A major UN-backed report published Monday found that global warming is on course to transform life on Earth as we know it, with effects that are more disruptive and widespread than scientists expected 20 years ago.

Europe is starting to plan ahead. On Sunday, German Chancellor Olaf Scholz, who made the decision to halt certification of the Nord Stream 2 gas pipeline from Russia last week, said the country will construct two new LNG terminals.

"We need to do more in order to protect [the] energy supply of our country," Scholz said.

Germany is also reportedly considering whether to extend the life of its three remaining nuclear power plants, which are due to be shuttered this year.

Bruegel said that managing costs, as well as coordinating between governments and companies, will prove challenging as Europe tries to replenish its gas supply. Prices in Europe are below record highs hit in December but remain elevated.

Adding about 70 terawatt-hours of gas to EU storage in advance of next winter would cost at least €70 billion ($79 billion), compared to €12 billion ($13.5 billion) in previous years, according to Bruegel.


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