During this first week of the new year, as social unrest erupted in Kazakhstan, Russian giant Gazprom—50% directly or indirectly owned by the Russian government—announced a record dividend payment. The common denominator of both is the skyhigh price of natural gas. While the large oligopolies that control extraction and distribution of this fossil-fuel resource are making record profits, the rise in energy prices is wreaking havoc on the cost of living, and in some cases, such as in Kazakhstan, it is the spark that has set off a social explosion, which has been ruthlessly repressed.
Many factors come into play in shaping the price of energy, among which geopolitics is prominent. Much of the rocketing electricity prices in recent months is due to the mismatch between supply and demand of natural gas—which in the European energy market means that when renewables are not enough, it is gas that ends up marking the final price of electricity. It is in the supply chain that geopolitical factors come into play. Fossil-fuel rich countries have at their disposal two very powerful instruments to influence others’ strategic decisions. The first is to play with the stopcock, or threaten to shut it, to restrict gas exports. The second is the routing of the pipelines.
For example, the Nord Stream 2 gas pipeline which connects Russia directly with Germany via the Baltic Sea—completed but pending authorization to operate—will not only increase dependence of much of central Europe on Russian gas, but will also harm Ukraine both economically and politically, since much of that gas now flowing into the EU at present passes through it, while it feels Putin’s expansionist breath at its neck, in its own territory in the Donbas and in Crimea, and with the deployment of 100,000 Russian troops at its border. But as well as supply, demand is also a geopolitical weapon. The price of natural gas has also rocketed because China wants to top up its reserves to avoid the deficit it suffered last winter, when it was caught short with less than it needed.
In the face of the vicissitudes of geopolitics, the EU needs to move forward on energy sovereignty. The deployment of renewables, especially factoring in proximity, should allow progress towards this goal, while blunting the electricity bill. In fact, the so-called European goal of “strategic autonomy” would be greatly buttressed if we stopped relying so heavily on fossil fuels, which in addition to causing global warming, bind Europe to the authoritarian regimes that are all around us, in the ex-Soviet states and in North Africa. This makes all the more surprising the announcement that the European Commission plans to classify natural gas as green energy—along with nuclear—so that it can continue to receive public subsidies. A determined and uncompromising European commitment to the energy transition is an indispensable commitment, not only in terms of sustainability but also in terms of geopolitics.