Not so long ago, “the game of energy poker being played by Europe and Russia, though dangerous”, seemed under control, said The Economist. Despite having imposed sanctions in most sectors, Europe carried on buying energy from Russia, which provides over 40% of its gas and 25% of its oil, while Russia raked in billions in revenues.
Yes, the rhetoric was escalating – and Moscow had demanded that all payments be made in roubles, in contravention of EU sanctions, to prop up its currency – but “each side thought the other lacked the guts to go all in”. Then, on 27 April, Russia “upped the ante”. When Poland and Bulgaria missed the deadline for paying in roubles, the Russian state-owned energy giant Gazprom cut off their gas supply.
This week, Europe also took a momentous step, said Andrew Gray on Politico. The European Commission proposed a total ban on Russian oil. Subject to approval by member states, crude oil would be phased out over six months, and refined products stopped by the end of the year. “Let’s be clear: it will not be easy,” said Commission President Ursula von der Leyen.
The energy war will hurt Europe much more than Russia, said Philip Pilkington on UnHerd – particularly the countries that are “on the front line”. Neither Bulgaria nor Poland are rich, and both have their own currencies. If their energy markets collapse, they will face price hikes and rolling blackouts, a recipe for ultra-high inflation. The real crunch point will come in mid-May, said Daniel Boffey in The Guardian, the next major date for payments for gas by European energy companies.
There is “no alternative” that could fully compensate for the loss of Russian gas. If Moscow cuts it off altogether, it is widely predicted that Europe as a whole will face recession. The oil embargo should be easier to handle, said the FT. Europe has the rest of 2022 to “engage in intensive diplomacy to secure alternative supplies”, and the pain for Moscow will be considerable. Oil is its biggest earner, and 70% of it goes west. It will struggle to find new markets, and tankers willing to carry its oil.
Nevertheless, there’s a definite risk that higher prices could “crash the world economy”. Europe has to face up to hard choices, said The Daily Telegraph. Either its economies take a hit, or Ukraine’s suffering increases. “The most perverse response” to the invasion has been to target individual Russians, while still topping up the Kremlin’s war chest by buying its oil and gas. But there are clear signs that even the nations most dependent on Russian energy, such as Germany, are willing to grasp the nettle.
The price of defying Putin is a rocketing cost of living, said Martin Sandbu in the FT. Western politicians will have to tell their people that we’re now in “something like a wartime economy”. We must both protect democracy, and create an energy system that is cleaner, and not reliant on our enemies. “This is a task our generation must carry out for the sake of the next.”