Impact of Russian Gas Exports
Muhammed Rayhaan | August 2nd 2022
Source: Fortune
Introduction
Natural Gas is the third largest traded commodity in the entire world. It has various commercial uses that include heating for buildings and water, used as fuel in heat and power systems, and can be used to run vehicles (mostly liquified).
Despite these many uses, the supply of Natural Gas is indeed limited. Being a fossil fuel, only 7250 trillion cubic feet of Natural Gas remains, as of 2020. Therefore, with a not very optimistic supply to demand proportion, parts of the world depend on countries with a monopoly on Gas for their supply, one of which we will be talking about today.
Source: see.news
Pre-Invasion Situation
The Russian Federation has the largest Natural Gas Reserves in the world accounting to approximately 1700 trillion cubic feet, or 23% of the global reserves. It is also the second largest producer and consumer of Natural Gas. Although having a decent population, it exports about 26% of its production, about 5 billion cubic feet.
The main importers of Russian Natural Gas are China, Netherlands, Germany and Italy. Approximately 90% of all of Russia’s exports are to the EU alone, owing to the extremely high demand and lack of commercially usable gas in the region. Russia made just under $12 Billion through Gas exports in 2020.
Source: Oil Price
Post-Invasion Situation
Russia, in early 2022, conducted its so called ‘Special Military Operation’, an Invasion on Ukraine, with which the world was not very happy about. USA and its allies, including many countries placed sanctions on Russia with attempts to isolate it from the External Economic World.
Most of the world faced serious problems because of these sanctions. Prices of everyday commodities skyrocketed, triggering several economic problems like increasing inflation. However, most of these issues were simply short-term and could be fixed to normal over the years. But there was one instance which caused a bigger impact, and that was in Europe.
Arguably the EU was hardest hit by the sanctions they placed themselves. Over 40% of EU’s natural gas comes from Russia. Russia began cuttings its gas exports by 60% which has already caused massive stirs in the region.
The EU does not talk about a total gas cut anytime soon, seeing as how heavily they are dependent on it. They expect a 2/3rd cut within a year. This has caused many European countries to lower their usage by as much as 15%.
With the crashing Russian Ruble, Russia demanded that its importers start paying in said currency, which would help it thrive in the global market. For countries that declined, like Finland and Poland, all exports have come to a standstill.
The situation in Europe becomes dire as time passes. Germany, the biggest importer, has tried the alternative, more-expensive LNG, which comes from Qatar, but LNG reserved are comparatively wat lesser and not sustainable. Coal power has taken a forward stance, however, running the entire country is not a viable option for the near future.
Conclusion
The massive footprint of Russian Gas on Europe is something that cannot be replaced and will leave a lasting void in the Energy Environment. Although it is unlikely that people will freeze in winters and power shortages will occur in the coming few years, over time, reduced import will definitely deal its fair share of damage, which will take a while to heal.