Russia-Ukraine conflict and the future of energy transaction - Hindustan Times
close_game
close_game

Russia-Ukraine conflict and the future of energy transaction

ByHindustan Times
Jul 25, 2022 09:00 AM IST

The article has been authored by Ananya Raj Kakoti, associate with Indian-Political Action Committee (I-PAC) and a scholar of international relations, Gunwant Singh, scholar of international relations from Jawaharlal Nehru University.

Russia's invasion of Ukraine has displaced millions of people and killed thousands on both sides since the conflict began. At the same time, the war has caused historic shifts in the energy world. Many countries have long relied on Russian oil and gas, which is one of the world's largest exporters of fossil fuels. However, because those exports are now politically unpalatable, they are frantically searching for alternative energy sources. For decades, the world's energy systems have been slowly transitioning to lower-carbon fuels. But, the Ukraine conflict has changed everything, and energy security is now the top priority.

Many countries have long relied on Russian oil and gas, which is one of the world's largest exporters of fossil fuels. However, because those exports are now politically unpalatable, they are frantically searching for alternative energy sources.(Bloomberg)
Many countries have long relied on Russian oil and gas, which is one of the world's largest exporters of fossil fuels. However, because those exports are now politically unpalatable, they are frantically searching for alternative energy sources.(Bloomberg)

Russia is the world's largest gas exporter, and Europe is its largest customer. As coal and nuclear power plants closed across the European Union (EU) in recent years, some countries became more dependent on the massive pipelines carrying gas from Siberia. Since both sides benefited and pipeline-delivered gas was more often cheaper (and cleaner) than other energy sources, little action was taken despite years of EU officials' discussions about the need to wean off of Russian supplies. About 25% of the EU's energy needs were met by gas, with Russia providing more than a third of the supply in 2021, up from 26% in 2001. When the conflict in Ukraine started, it became suddenly impossible for Europe to continue paying up to $1 billion a day on coal, gas, and oil imported from Russia since it was fueling the war machine.

Hindustan Times - your fastest source for breaking news! Read now.

Financial sanctions were imposed on Moscow in response to Russia's military incursion in February. Natural gas flows to his neighbours were weaponised as retaliation by President Vladimir Putin. He increased his threats and cut off the natural gas supply to Poland and Bulgaria in late April, albeit the impact on these two nations was minimal.

The EU claims that its most recent sanctions may have a 90% impact on the amount of oil it purchases from Russia. But even if the sanctions are fully implemented, Russia will still be able to export its oil to other parts of the world.

According to David Fyfe, chief economist at energy data company Argus Media, countries in Asia may purchase up to one million additional barrels of crude oil from Russia per day than they do at the moment. "As a result of all the sanctions announced so far, Russia may lose between one-third and a half of its total oil revenues, but not all of them, "the report stated.

The use of less clean fuels was initially resumed. As decommissioned plants were reevaluated, the use of hard coal and lignite to produce electricity in the EU increased by 12% in the first quarter of 2022 compared to the previous year. For an energy mix that also includes around 35% oil, 13% nuclear, and 12% coal, there are no simple trade-offs over the long run. Due to infrastructure issues and a lack of available supplies worldwide, efforts to import more liquefied natural gas—which is roughly four times more expensive than Russian pipeline gas—by ship have been hampered.

The United States (US) and Europe should keep a careful eye on how China and India respond to Russia's persistent energy disruption. One must note that for future international climate development, all roads now lead to China. China is by far the world's largest energy consumer and emitter of greenhouse gases (GHGs), while the third-largest emitter of GHGs is India. China and India's emissions are both increasing, in contrast to those of the US and Europe. Their desire for inexpensive energy is also growing. As Putin searches for new energy markets, they stand to gain from the energy disruption that the West is experiencing.

The conflict between Russia and Ukraine serves as yet another sombre warning that China and India's shift to renewable energy will be increasingly crucial for the advancement of global climate change. Undoubtedly, China and India cannot be coerced into switching to sustainable energy by North Atlantic Treaty Organization (NATO) members. Nevertheless, they can pave the way for the advancement of cost-effective sustainable energy solutions. This can help China, India, and the developing nations make a global clean energy transition. As we go closer to COP27 in Sharm El-Sheikh, Egypt later this year, all eyes will be on China and India's energy decisions. Even though the Code Red report should instill a greater sense of urgency in climate negotiations, Russia's aggression and relative isolation will certainly have an impact on the next climate negotiations.

While the rest of the world is still trying to understand the full ramifications of Russia's invasion of Ukraine, which continues to be a cataclysmic global event, it is for sure that the conflict in Ukraine has very serious ramifications for the world's energy markets, which might have a domino effect on other countries economy and security. One outcome of this is that some major countries will try to find a solution to their energy dependency, and to do so will escalate their pace of pursuing the goal of a greener source of energy more aggressively. Whereas some are still waiting for a nudge whilst taking advantage of the vulnerability of the energy market, others have already started moving in that direction.

Although, we will surely see some major changes to the energy market and its security soon. One can only hope that the changes are towards a greener, more sustainable future.

(The article has been authored by Ananya Raj Kakoti, associate with Indian-Political Action Committee (I-PAC) and a scholar of international relations, Gunwant Singh, scholar of international relations from Jawaharlal Nehru University.)

SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On