Commentary on Political Economy

Tuesday 4 January 2022

 Europe’s climate daftness weaponises Russian gas

Demonising fossil fuel production may have adverse strategic consequences - as Vladimir Putin’s power plays over the Ukraine and the European energy crisis shows.

Matthew Warren


Jan 5, 2022 – 11.12am



Climate change is not the only global energy megatrend of the 21st century. As nations move to cut emissions their decisions are affected by other strategic forces: national security, the democratisation of energy and poverty.

When these heavyweights misalign, you get heavyweight problems. Or, more currently, you get the escalating European energy crisis.

Russia’s gas is not just a business, it’s a geopolitical strategic weapon. AP

Europe has started 2022 gripped by its worst energy shortage in decades triggering record-breaking prices and impacting industrial output. What started as a head-slapping lack of risk planning for unseasonal, low wind generation has now escalated into an economy-shrinking crisis laced with the threat of war.

Russia has seized this unforeseen moment of European energy daftness to escalate its campaign to weaken Ukraine, marginalise US influence and seduce European economies to become more dependent on Russia’s energy exports.

US governments have been screaming at their NATO allies to halt Nord Stream 2, fearing the very strategic mess Europe now finds itself in.

Ukraine was a foundation member of the Soviet Union but has been drifting away from Russia’s sphere of influence since the end of the Cold War. Now it wants to defect to NATO, a bridge too far for Russian President Vladimir Putin.

Energy is one of Putin’s few remaining levers of strategic influence. Selling Russia’s gas is not just a business, it’s a geopolitical strategic weapon.


The Russian pipe-laying ship “Akademik Tscherski” is moored off Germany’s north coast. Russia’s natural gas pipeline to Europe is built and ready to flow, but is not yet operational. AP

When European energy companies and government started to realise how gas-short they were in September, Russia, the biggest energy exporter into Europe, was the obvious saviour.

Selling extra gas into an increasingly hot European market would have been highly lucrative and the rational response.

But Putin decided to act strategically and did not help. The resulting energy shortage was designed to reinforce to risk-averse European governments the realpolitik importance of Russian gas reliability over any principled views they may hold on Ukrainian sovereignty.

This tactic is not new.

Withholding gas at critical times has been an effective Russian negotiating strategy (2006, 2009, 2014), typically involving gas supposed to come through the Ukrainian gas pipeline to the west, and typically in the dead of winter, under the pretext of disputing some contractual disagreement.

Successfully softened up by a couple of these strategic gas shutdowns, in 2011 European energy companies and governments backed the building of Nord Stream, a direct gas pipeline from Russia into Germany under the Baltic Sea. A second $US11 billion ($15.1 billion) gas pipeline was commissioned in 2018 and completed in 2021.

Nord Stream gas helped firm Germany’s aggressive scale up of renewables, then helped replace energy supply from Germany’s decision to close all nuclear generators by 2022, a political decision following the Fukushima disaster in 2011.

Shutting down Germany’s nuclear generators was popular but undermined emissions and compromised energy security. Coal was used to replace nuclear generation, muting emissions cuts. It also narrowed German energy options, increasing reliance on Russian gas.

This politicisation of energy has been so pervasive that at the end of 2021 Germany continued to close three of its six remaining nuclear generators as promised, despite the critical state of energy supply.

Here in Australia the rise of energy populism has resulted in the almost unregulated expansion of rooftop solar PV. Minimum-demand events caused by big rooftop solar are now rated the biggest reliability risk facing our grid today.

Since 2017, US governments have been screaming at their NATO allies to halt Nord Stream 2, fearing the very strategic mess Europe now finds itself in. When it became clear Russia was amassing troops on the Ukraine border, German regulators eventually suspended approval of the second pipeline. The process is expected to resume later this year.

US hawks and conservatives have been equally critical about the UN climate negotiations in Glasgow, arguing they ignore the broader strategic implications of climate policy. Pressuring OECD economies (like Australia) to cut fossil fuel supply doesn’t reduce demand, it just transfers increased revenue and strategic power to potentially more malevolent producers.

Demonising domestic coal

The UN, meanwhile, has its challenges, trying to reconcile the need for developing economies to access cheap, coal-based energy to power their way out of poverty, while pushing the developed world to both cut emissions and help fund cleaner energy in poorer countries.

The World Bank and other agencies have invested millions of dollars in India over the past decade to deliver more than 100GW of renewable generation. Yet, this barely touches the sides. India’s emissions continue to increase as increased use of cheap coal, like the industrial revolution two centuries earlier, powers most of the economy out of poverty.

The Fortescue chairman’s position on energy subsidies appears to be a work in progress


Forrest’s fossil fuel subsidy illogic

An end-to-end renewable energy system could be more strategically secure. It may also just shift spheres of influence, from over-reliance on Russian gas to Chinese solar panels and rare earths.

Energy abundance has immunised Australia from these non-climate shocks and pressures. They should still inform national climate and energy policy, should we ever get any.

Demonising domestic coal and gas production may have adverse strategic consequences.

Experts should design energy systems, not opinion polls. The most useful contribution Australia can make is to pioneer big renewables-based energy systems, not at any cost, but the lowest cost. Because efficiency, not wasteful urgency, will be the biggest global driver of low carbon energy systems.

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