Of course that would be a hit to their income. But it would seem that the economic impact of that would be more endurable then the sudden choking off of a significant fraction of a nation’s energy supply.
Is this a point of leverage that Putin just hasn’t yet seen the need to deploy, or is Putin actually wary of the consequences of cutting off that income?
Sale of fuel is something like 40% of Russian government’s income. And they’re already hit by sanctions that are crippling their economy. I don’t think Russia can afford it.
So if those European countries stopped buying (or paying for) that fuel, who would be hurt worse? Who could endure the hurt the longest?
that’s actually the problem: Germany got 80% of its gas from Russia, Hungary 100% by gas pipeline… if they cut it, where are they going to find it? how are they going to transport it? no more house heating, cooking, no more industry, even some buses use gas. You can’t substitute for oil, coal or electricity. It will take months for the other producers to gear up and replace the Russian imports,and to create new means of transportation.
Winter is over, that weakens Putin’s hand considerably until october. In politics and in war six months is a very long time. We’ll see sooner than that who acts and who reacts, and who keeps the upper hand.
You can burn a lot more things for energy and heat than just gas. But for spending, there’s just cash and debt. Putin needs to sell gas a lot more than Europe needs to buy it.
The Clinton administration recognized that Europe’s dependence on Russian energy was a future friction point and tried really hard to get Europe to diversify its supply, but it was never really a priority forM the continent until now.
But not 80% of its energy. Natural gas is 25% of Germany’s energy supply. And there is great seasonality to the demand.
The other risk to Russia in this is the possible loss of customers – now and for the foreseeable future.
This would force their customers to either find other suppliers to buy from, or invest money in switching to alternative forms of energy (or both). Once they buy from others, they might find they prefer them. At the very least, Russia would always have a competitor in the future. And if the customers make the investment in alternative forms of energy, like solar or wind power, they might not be a customer at all – they’ll generate their own.
Both outcomes that Russia would regret greatly.
And where would Russia go to find replacement customers? Mostly to China – and they are very tough negotiators, would probably force a lower price from Russian sellers.
Isn’t this result already a fair accompli?
The EU was already on track for increasing renewable use and less natural gas. No matter what decreased reliance on Russia going forward will be a goal.
The pipeline between Russia and China has 38bcm per year capacity.
The pipelines from the Russia to Western Europe shipped 140bcm per year and 15bcm from LPG tankers.
They are also extracted from different locations within Russia.
It will require a lot more pipeline building for Russia to divert its resources from Europe to China and such projects typically take many years and cost billions. Gas can also be transported via LPG tankers, but the capacity is much lower than a pipeline.
The EU plan is to reduce gas imports from Russia by two-thirds by the end of 2022.
This is an ambitious target and it depends on alternative supplying countries (not least the US) being able to increase their LPG exports and gas by pipeline from Norway.
Russia will have to find other customers for its Oil and Gas and there will be political pressure to discourage buyers and the tankers that would be necessary to transport it.
This will result in a steep decline in revenues to Russia. If they cut supplies off immediately, they cut off the money supply they need to support their economy, which is already under a lot of pressure.
If they cut off the fuel sales suddenly, it would probably lead to a complete economic collapse in Russia. In Europe, there is some gas storage capacity, so the effect would not be immediate.
At the moment it is in the interest of both sides to keep trading. Despite the invasion it is noticeable that none of the pipelines that pass through Ukraine have been hit. The gas still flows to Europe and the money still flows to Russia.
I am sure both sides are carefully weighing up their options. Gas demand for heating will decline in the warmer months in Europe. The difficult time will be next winter. A bit of global warming would help. There are also many ways to reduce demand, not least price hikes. I predict a boom in sales of home insulation.
Russia and Ukraine are also major grain and edible oil exporters and there is another set of dependent countries that will be seriously affected.
If this is true, why don’t the buying countries stop buying, as a part (and a big one it would seem) of the efforts to put pressure on Putin and weaken his support in Russia?
It is a max-min equation.
How to maximize the pressure on Russia while minimizing the pain to your own economies and people.
It takes co-ordination between a lot of different countries. Not all their storage tanks are full, it is about at 75% at the moment and there is a dash to put in place a EU strategic gas reserve. This is not something that happens quickly. Reducing dependency on Russian gas by two thirds by the end of this year is a very ambitious target.
The opportunities for Russia exporting Oil and Gas by other means to alternative customers will be very restricted. The pressure on the Russian economy will be steadily increased, pushing it towards the edge of a cliff.
This ‘diplomacy by other means’ does not necessarily involve blowing stuff up. There are an awful lot of moving parts to align, but a huge motivation to get things in place in time for next winter.
At the moment, the price of domestic gas and electricity bills are due to double or triple. This is concentrating the attention of finance ministers across Europe. It is going to hit the poorest households the most and they will need support.
Coming straight after Covid and the huge debts that has caused, an energy crisis is the last thing the world needs. I hurts both sides and this drama is far from over.
short answer:
russia is party to this war, Germany, Poland, Hungary are not…
cutting them off, would worsen your country’s situation in the war, but not the other party’s (Ukr.) situation.
“Sticking it” to the french, does not get you into Kiev, but losing the money associated with it will hurt the russians