Ever-greater failure: EU energy policy

Part I: Useful idiots

Gazprom-sponsored anti-shale hysteria has been upgraded into Kremlin-backed climate alarmism. And the EU has fallen for both. In a two-part article, we look at how this has happened, rocking natural gas and energy markets.

I have been following Russian politics for decades: right up close, during my posting as Ambassador to Russia (2000-2006), but in some detail too both before and after. And I’ve never ceased to wonder at how the Kremlin, using the same old tricks, always manages to lure new generations of Western politicians into acting as what Bolshevik leader Vladimir Lenin used to call ‘useful idiots’.

A century on, the idiots don’t seem to have become any less useful or less idiotic. Nor are the Vladimirs any less adept at using them.

The incumbent Vladimir – former KGB officer (and current Russian president) Vladimir Vladimirovich Putin – laid on a sophisticated campaign of psychological operations (psyops) and Gazprom actions more than a decade ago, that managed to discredit fracking and shale gas in Europe and elsewhere. This eventually shifted up a gear, vilifying all onshore exploration and any drilling for oil and gas. Fracking alarmism has over time evolved into climate alarmism, disgracing the use and importing of fossil fuels altogether.

Against a backdrop of rising prices for emission permits, post-Covid energy consumption and coal-to-gas transition, the stigma surrounding oil and gas have led to a dramatic drop in global investments in exploration and production (E&P), which have fallen 40% since the record year of 2014. Moreover, the share of the European Union (EU) has dropped dramatically since Brexit, as the UK had accounted for a good chunk of EU E&P spending (along with Norway, which never had been an EU member, it had accounted for over 80% of E&P spending in the EU+EFTA area). Thus, the Union became more dependent on pipeline imports from Russia, while Gazprom’s share of the EU gas market, according to the latest long-term European gas outlook from S&P Global Platts Analytics, is set to increase to 38% in 2035 and 40% in 2040.

Climate-change exasperation, combined with an obsessive emission-cutting agenda embodying ever more challenging targets, has dangerous consequences. It instils a sense of uncertainty and unpredictability in a high-risk sector such as energy – one in which investments require a clear long-term horizon and a reasonable expectation that capital will yield a good return, or at least be recovered.  And, obviously, Russia isn’t a disinterested observer: according to a 2017 assessment of the US Office of the Director of National Intelligence, Moscow’s abuse of anti-fracking rhetoric was ‘likely reflective of the Russian government’s concern about the impact of fracking and US natural gas production on the global energy market and the potential challenges to Gazprom’s profitability.’

Two faces of Vladimir

More recently, Russia has started tacitly co-opting climate alarmism – aware of the energy shortages that would inevitably result from it – and bombarding the EU public with promises of endless gas and hydrogen flows once the Nord Stream and Turk Stream pipelines are in place.

Mr Putin’s declared views on climate change are, well, just a little erratic. When talking about Russia’s contribution to it, his reading seems pretty straightforward and remarkably calm: Russia emits 1.6 billion tonnes of greenhouse gases, but her ecosystems absorb 2.5 billion tonnes, so the country’s performance is pretty virtuous and all is well. And virtue presumably must have its reward, for Mr Putin has vehemently opposed an EU carbon tax on Russian energy imports, including natural gas, that could exceed €1.1 billion per annum. Which is sort of logical: why share burdens when the problem isn’t your fault?

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However, when it comes to fuelling the radicalism based on the idea of a global climate emergency the Russian president is second to none in his apocalyptice hysteria:

“As some believe when the climate […] reaches a threshold on the entire planet, as humanity contributes to global warming, irreversible processes that can bring our planet to the state of Venus, [temperature] on the surface of which, as we know, reach 500 degrees Celsius”.

Again, right after rejecting that carbon tax, he returns to the role of Disinterested Observer and alarms the public with talk on the disastrous effects of methane. Yes, methane, which is the prime component of his main energy export to the EU, natural gas! And, perhaps not coincidentally, he does so just before the topic of methane leaks takes centre-stage in climate activists’ demands…

Falling for it

Susceptibility to Mr Putin’s psyops varies. One or two countries – notably Poland – have shown a scepticism instilled by centuries of being up close and personal with Russia. At the other end of the spectrum, Bulgaria has been one of the easiest victims, mainly because of the ruling elite’s capture in a web of corruption-fed dependencies on Gazprom. The local leftists and ecoactivists scared the public and spread panic with stories of fracking-induced earthquakes and poisoned water, killing in its infancy the drive for energy independence and the billions of dollars in investments promised by US energy major Chevron. Alarmism-fed fears found a safe haven in the Soviet-era mantra that Bulgaria is poor in resources, but that its Big Brother in the East will cover essential needs. For which, read, in suitably Orwellian style:

  • Developing indigenous resources – Bad!
  • Paying for imports from Russia – Good!

On a wider stage, a similar bunch of leftists and ecoactivists – joined by a mostly self-interested group of renewables and green-energy lobbyists and businessmen – are currently the main protagonists of both EU and global climate policies, lambasting fossil fuels and coal-based energy. Any time a sensible debate starts on the cost of green transition and the need for more balanced alternatives, climate alarmism kicks in to horrify the public with a fresh dose of doomsaying. Calculations? Balance? Debate? No time, no time! How dare you?

And there’s a perfect overlay of interests between climate alarmists and Moscow’s psyops.

Of interests, notice, not arguments. Of course, one crucial argument of the climate activists is that renewable energy sources (RES) will replace energy imports from Russia. But the Kremlin isn’t at all bothered about that prospect. Rightly so. Nothing of the sort is going to happen – nothing even close, anytime soon. The effect of RES on energy independence is negligible for the foreseeable future and, at best, such a replacement would take decades to accomplish. Consequently, in modern climate politics RES are of no practical value, as an antidote to Moscow’s imperial outreach in the energy sphere.

No, forget the idea of replacing Russian hydrocarbons. Taking Bulgaria as an example – a rather extreme one, unfortunately for Bulgarians – here’s what would happen if the EU adopted drastic climate-change policies and banned fossil fuels – first coal, than natural gas, Bulgarians would have no option but to go more nuclear. That would mean spending 10 billion euros more for new nuclear reactors. It would also mean paying various ‘nuke taxes’ to Russia – for nuclear fuel and nuclear waste management. And, of course, billions more to the Kremlin for gas – at sky-high prices because everyone else had cut back on E&P.

Admittedly, these are only Bulgarians, so maybe Brussels wouldn’t be too worried. But you see the point. Frankly you’d have to be either dim or incorrigibly pro Kremlin not to see it. Or a climate alarmist. But there are plenty of people in all these categories around. And, setting aside the dim – who, perhaps, are always with us – the other two work together really flawlessly. In two dimensions:

The Devil and the Deep Blue Fuel

On the one hand, by demonising fossil fuels – and treating E&P spending on them as the work of the Devil – climate alarmists in effect work to kill any competition faced by Gazprom and Russian oil companies on the European market. It’s enough to spread panic and depict worst-case disaster scenarios involving leaks of methane (natural gas) as an even greater evil than CO2. From then on the scare just takes on its own momentum – though somehow it’s only the natural gas that is produced out of Russia poses a risk.

On the other hand, the rhetoric of ‘climate emergency’ justifies actions without calculating their impact or cost, while escalating emission targets. This leads to demand for lower-emission alternatives in power and heat generation. Which – surprise, surprise – means use of natural gas.

Rising energy demand leads to fuel shortage. And high prices benefit non-EU producers with exclusive access to member states’ power and gas grids. But, again, Russia tops the list and is best-placed to profit, as EU emissions and climate ambitions are of little concern to Russia. Moreover, EU consumers of goods with limited alternatives, like natural gas, will bear their cost, not the Kremlin, even if Brussels decides to impose a carbon border tax on irreplaceable energy resources.

The legacy of a succession of Kremlin proxy warriors – from the anti-shale revolutionaries, through the Occupy movement, to today’s Extinction Rebellion (XR) – is still with us. For their activities have drastically narrowed options for a smoother transition from an energy-intensive to an energy-saving world.

Radical climate groups like XR and their analogues elsewhere in the EU play a critical role as a Russian psyops breeding ground.

On the one hand, climate extremists like XR call for zero emissions by 2025 and, more important, for the total replacement of due democratic process by “the decisions of a Citizens’ Assembly on climate and ecological justice”. Should such a curious body (reminiscent in some ways of Russia’s Soviets in 1917 – dictatorship of the new ‘proletariat’, All power to the climate Soviets) actually emerge, it would amount to a Dictatorship of the Environmentally Woke. And it would also, incidentally, create a permanent mechanism for Russian command and control of EU and US internal affairs. In fact, the process of trying to get there would be more likely to result in confusion, conflict, unrest, recrimination and – in policy terms – some mixture of paralysis, incoherence and ludicrously inept concessions. But those would be quite useful too, for the psyops manager.

On the other hand, this price and supply shock therapy – though it would do little to save the planet – would undoubtedly lead to the disintegration of the EU and NATO, as institutions are overwhelmed with the process of securing the basic needs of their citizens, such as energy, essential goods and services. Moreover, EU governments are clearly out of market options, since LNG producers – like the US and Qatar – seem slow to react. So sooner or later they will have to turn to the Kremlin for affordable and physically accessible gas.

Baby, it’s cold outside

Alexander Rahr, a member of the Kremlin’s brain trust, the Valdai Club, puts it bluntly: “As soon as the cold winter comes – and it is always cold – Europeans quickly forget about directives. So it happened with the Nord Stream-2 when there was a need for gas in the absence of other options… So it is better to receive gas from Russia, violating EU directives and making an exception, than to freeze”.

Which applies even more than usual just now. Gas prices are sky-rocketing, beyond the control of regulators and governments. Gas-storage figures tell a sad story of depletion. There are (manipulated) upstream problems in Russia. All of which saps both the self-confidence of EU consumers and the self-confidence of EU oil and gas companies that they can meet their energy needs without help from the indispensable Gazprom.

Russian psyops that pivot on energy follow an invariable pattern. They target critical weak spots in the EU’s political, social and economic fabric. And they amplify weaknesses via grey and black propaganda. There’s chaos, but controlled chaos, underlining the message that you must behave if you are to have gas. And there are convenient crises: just now, the one prompted by a ‘threat’ by a Russian expert, close the Kremlin, that Gazprom could deny Poland Russian gas for obstructing OPAL, an NS-2 extension on German soil.

Russia’s NS-2 endgame will include:

  • An initial propaganda coup, with the pipeline’s completion date announcement by Gazprom’s CEO Alexei Miller, on the highly significant date of September 12th (Alexander Nevski day);
  • Violent energy price protests, discrediting EU political leaderships and triggering disorder and panic;
  • Driven by this, an undignified race among EU members – obligingly led by Germany and Austria – to strike bilateral deals with Mr Putin and access scarce energy resources.

A depressing prospect? Certainly. And in the second part of this article we’ll start by deepening the depression somewhat, by dealing with a few details and some possible objections – and showing that we’re not being too gloomy, too cynical or too unkind in our analysis. However, don’t reach for the opiods just yet. For we will conclude with a few remarks on the subject of how – with good luck, good judgement and some good old-fashioned determination – we might just get out of this mess.

(Source: Analyses & Alternatives)

Ilian Vassilev

Diplomat, political analyst, energy expert (Bulgaria)

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