(East-West Question) Cui Shoujun: How much will the Russia-Ukraine conflict affect the global energy geopolitical pattern?

  China News Agency, Beijing, April 10th: What is the impact of the Russian-Ukrainian conflict on the global energy geopolitical pattern?

  Author Cui Shoujun, Professor of the School of International Relations, Renmin University of China, and Deputy Dean of the School of International Organizations

  Since Russia launched a special military operation against Ukraine on February 24, the conflict has lasted for more than a month and is still fermenting.

The conflict between Russia and Ukraine has not only profoundly changed the geopolitical pattern of Eurasia, but also reshaped the global energy geopolitical map.

Russia is the world's third largest oil producer and second largest natural gas producer.

About 40% of the EU's natural gas and 25% of its oil imports come from Russia.

  The new round of sanctions against Russia by the United States and Europe has intensified the confrontation between Russia and Europe, bringing huge risks to the security of European energy supply.

The United States, the world's leading exporter of liquefied natural gas (LNG), is aggressively seeking to replace Russia's lost market share.

At the same time, Sino-Russian energy cooperation will further enhance Sino-Russian strategic coordination and policy interaction, and hedge against the strategic squeeze from the United States.

  In the short term, the conflict between Russia and Ukraine will inevitably lead to tight supply and demand in the European and global energy markets, reshaping the energy policies of the world's major powers.

In the medium and long term, the conflict will accelerate the process of global energy transformation and promote the replacement of traditional fossil energy by new energy.

Russia-Ukraine conflict raises oil price supply-demand imbalance

  Affected by the conflict between Russia and Ukraine, international crude oil prices continued to rise.

On March 8, the price of Brent crude oil once exceeded $130 a barrel, hitting an eight-year high.

However, the rise in oil prices brought about by sudden geopolitical events will eventually return to equilibrium.

In the past, conflicts between Russia and its neighboring countries often boosted international oil prices to peak. After the conflict ended, oil prices slumped sharply immediately.

A car owner refuels a vehicle in San Mateo County, California, U.S., March 2022.

Photo by China News Agency reporter Liu Guanguan

  From the perspective of short-term supply, the high oil price this time has been hovering for a longer time or longer.

On the one hand, Russia has significantly increased its gold reserves since 2014, making it more resilient to economic sanctions, and will not easily compromise with the West until it achieves its political goals.

On the other hand, "OPEC+" did not move, and only increased production by 400,000 barrels per day in April on the basis of the original plan.

Although the International Energy Agency called for the release of 60 million barrels of strategic oil reserves, there has been no substantive response from member states.

In addition, U.S. shale oil and gas companies have not responded to the Biden administration’s request to increase production opportunistically, so as not to be forced to cut production when oil prices fall.

It can be seen that the global market is not very willing to release oil reserves, and the phenomenon of "short supply" in the oil market will continue to exist in the short term.

  In terms of medium and long-term demand, energy transition is still a global consensus, and a fall in international oil prices is an inevitable trend.

The International Energy Agency will release the "Net Zero Emissions Scenario" (NetZero) in 2021, striving to increase the proportion of global clean energy in the total energy supply from nearly one-third in 2020 to nearly half in 2030, and the proportion of clean energy power generation in total power generation 17% increase over 10 years.

  With the large-scale development and utilization of new energy, the global demand for fossil energy will gradually decrease, and the international oil price will also decline. The long-term trend of new energy replacing fossil energy has not changed.

Hongqiling Wind Farm in Dongzhi County, Chizhou City, Anhui Province.

Photo by Chen Chen issued by China News Agency

Europe accelerates energy independence and seeks to get rid of dependence on Russia

  The EU is an economic "giant" and an energy "dwarf", and is highly dependent on Russia for energy imports.

About 60% of Russia's crude oil exports are supplied to EU countries.

Germany, Europe's largest economy, is the biggest buyer of Russian gas exports, with more than a third of oil and gas imports coming from Russia in 2021.

  Therefore, the EU's sanctions against Russia can be described as "killing a thousand enemies and self-destructing eight hundred".

The dependence of Russia and Europe on energy has put the EU sanctions on Russia into a contradictory situation of "advance and retreat".

On the one hand, the European Union announced to follow the United States to exclude some Russian banks from the SWIFT international settlement system.

On the other hand, the sanctions list announced by the European Commission did not include Sberbank and Gazprom, which are the main payment channels for Russian-European oil and gas trade.

  As a countermeasure, Russia on March 31 launched a plan to settle in rubles when supplying natural gas to some "unfriendly countries" in Europe. European countries rejected it, and the two sides fell into a payment deadlock.

The Russia-Ukraine conflict has alienated Russia-EU energy relations, and Europe's vulnerability to over-reliance on Russian energy urgently requires it to increase its autonomy in energy supply.

  In the short term, the EU will accelerate the diversification of natural gas import sources and reduce its dependence on Russian pipeline gas.

On March 1, the European Parliament passed a resolution restricting the import of Russian oil and gas resources.

The Industry Committee of the European Parliament stated that it will seek more LNG supply channels to replace Russia on a global scale, including deepening US-EU LNG trade cooperation and opening the southern European natural gas corridor.

Germany has also adopted a multi-supply strategy, suspending the approval process for the "North Stream 2", ordering German oil and gas companies to withdraw their capital, and accelerating the construction of natural gas receiving stations in ports along the North Sea, preparing to import natural gas from Norway, the United States and other countries.

  In the medium and long term, the EU will accelerate the development of new energy sources to achieve energy independence.

In 2021, the EU promulgated the "European Climate Law", which stipulates that the coordination and supervision of the European Commission should be combined with the submission of emission reduction paths by member states, in order to achieve the EU's 2050 carbon neutrality goal.

Germany accelerated the passage of the Renewable Energy Law in Parliament in March 2022. It is planned that renewable energy will account for 80% of the total power generation in 2030, and renewable energy will meet all power generation needs in 2035.

France released the "France 2030" plan, which will invest 1 billion euros to develop nuclear energy, vigorously develop solar energy and wind energy, and restart the construction of civilian nuclear power plants.

On March 10, the EU summit hosted by France, the current EU rotating presidency, opened at the Palace of Versailles on the outskirts of Paris.

The summit focused on the situation in Ukraine.

Photo by China News Agency reporter Li Yang

The United States actively promotes energy exports to seize European market share

  According to data from the International Energy Agency, U.S. LNG exports lead the growth of global natural gas trade in the first nine months of 2021.

However, due to the fact that the transportation cost of natural gas liquefaction is higher than that of pipeline transportation, and Russia and Europe are close to each other, the US natural gas market share in Europe has lagged behind Russia for a long time.

To this end, the United States is happy to create contradictions, taking advantage of the contradictions between Russia and Europe to seize the European natural gas market share economically, and binding the US-EU alliance in terms of politics and security through the eastward expansion of NATO.

U.S. natural gas exports to Europe surpassed Russia for the first time in January 2022.

  In response to the demand for diversified energy supply in Europe, the Biden administration took the opportunity to promote US energy exports and leverage the European energy map.

The United States has continued to increase LNG exports to Europe, created a "US-EU Energy Committee" mechanism to coordinate energy trade affairs, actively coordinated the export of natural gas to the EU by its Middle East allies, Japan, and South Korea, and reduced the geopolitical influence of Russia's "discontinued supply".

At the same time, the United States has weakened Russia’s status as an energy power through unilateral sanctions, coerced Germany to close the Nord Stream 2 pipeline, excluded Russia from SWIFT, blocked Russia’s access to cutting-edge technologies, and curbed the development of Russia’s new energy industry chain.

Pipeline facilities of "North Stream II" in Russia.

Photo courtesy of China News Agency issued by Beixi No. 2 Company

  In essence, the U.S. financial sanctions directly target Russia’s national capabilities such as capital and technology needed to develop new energy. Its purpose is to seize the European market economically and to curb Russia’s development politically.

  In general, the conflict between Russia and Ukraine has reshaped the global energy geopolitical map and triggered the adjustment and transformation of the energy policies of the world's major powers. It will push up international oil prices in the short term, but it is difficult to reverse the long-term process of new energy replacing traditional fossil energy.

In order to reduce over-reliance on Russian energy, the EU's new energy development planning schedule has been significantly advanced, and Europe's energy self-sufficiency has increased.

Taking advantage of the intensifying conflict between Russia and Europe, the United States has greatly increased its European energy market share, and the strategic coordination between the United States and Europe will be closer.

(End) (Cai Yu, a postgraduate student at the School of International Relations, Renmin University of China also contributed to this article)

About the Author:

  Cui Shoujun, professor and doctoral supervisor of the School of International Relations, Renmin University of China, vice president of the School of International Organization and director of the Institute of International Development, Renmin University of China.

He is a visiting scholar of the "International Visitor Leaders Program" of the US State Department and a visiting scholar of the "Marie Curie International Exchange Program" of the European Commission.

The main research directions are Chinese diplomacy, energy issues, developing countries, international organizations, etc., and presided over and participated in a number of national, provincial and ministerial projects.