Cutting Off Putin’s Pipelines to Europe

Vladimir Putin’s ongoing invasion of Ukraine has pushed Europe to levy sanctions on Russia at a rate that would have seemed unthinkable even in 2014, after Putin ordered the annexation of Crimea. These sanctions have fallen short of full embargoes on Russian oil and natural gas. In the past several weeks, however, the European Union proposed to completely ban oil imports from Russia. The plan still needs unanimous approval from its member states, many of which rely heavily on Russian oil. Natural-gas imports appear even less likely to be banned. (America has embargoed both oil and natural gas from Russia during the past two months.)

To discuss the energy situation in Russia and Europe, I recently spoke by phone with Helen Thompson, a professor of political economy at Cambridge University, and the author of the new book “Disorder: Hard Times in the 21st Century.” An account of how politics has gone off the rails in many countries since 2016, Thompson’s book seeks in part to connect these fissures to the energy crisis of the nineteen-seventies, when a combination of factors—such as declining oil production in the United States and turbulence in the Middle East following the Yom Kippur War, in 1973—led to supply shortfalls and price spikes. During our conversation, which has been edited for length and clarity, we discussed the structural and political impediments to full European bans on Russian oil and gas, what the rise in energy prices could mean for the fight against climate change, and the potential societal shocks that may accompany high consumer costs.

What’s the status of Europe’s potential embargo on Russian oil? I know Hungary and Slovakia and a couple of other countries are questioning it. Where do you think this is headed?

It’s hard to tell where it’s headed at the moment. But I think it’s not going very far, very quickly. The issues with Hungary are pretty serious, because Hungary is a landlocked country. We could see this through the lens of Hungary trying to use energy sanctions to get concessions on other issues, including rule-of-law issues. But I think Hungary really does have a serious problem. It is not easy for it to replace Russian fuels with seaborne oil and seaborne gas.

If there was an easy fix for this—something that could be offered to Hungary to make Orbán change his mind—it probably would’ve happened. There isn’t any evidence of that. It gets at a deeper problem, perhaps, which is the loss of Russia’s refining capacity, which will affect not just Europe but the United States, too.

Is this in part because Orbán and Putin have a close relationship, despite the historical conflicts between Hungary and Russia? Or is it because Hungary gets much of its oil and basically all of its gas from Russia? Or is there actually less of a distinction to be drawn between those two things?

It’s a mixture of things, but ultimately the energy explanation is more important than the other explanations. If you look at the very beginning of the war, Orbán actually reacted much more critically toward Russia than many expected. I don’t think, from what we’re hearing anyway, that he’s opposed in principle to energy sanctions. Though it’s quite likely that he has a less confrontational view of Putin than the Baltic leaders or the Polish prime minister does.

The core of the issue is Hungary’s difficult energy situation. It’s dependent on pipeline oil and gas from Russia. Its oil refineries can principally only deal with Russian exports of crude, so finding alternatives for Hungary over any short period of time, or perhaps even a year or so, is going to be very difficult. And that’s leaving aside the impact on the broader world market. For other E.U. countries, i.e., not just for Hungary and the ones that have been clearly resistant to the energy sanctions that the European Commission had proposed, this is becoming a more general issue.

My sense is that oil sanctions against Russia would be serious but not completely crippling for them, but that natural-gas sanctions or a natural-gas cutoff could really be crippling. Can you describe why that is?

The main reason natural gas is such a bigger deal is that so much natural gas comes from Russia into the European Union via pipelines, rather than coming by sea. This is a particular issue for Germany, which has no capacity at the moment to take liquid natural-gas imports. It remains absolutely committed to its relationship with Russia and to pipeline gas. Europe is also more dependent in terms of the absolute volume of gas imports that they take from Russia.

Before the war started, in the last few months of 2021, there was already a very serious gas shock under way for European countries. Gas prices reached a very, very high level by the turn of the year. The war, where gas is concerned, came into a preëxisting crisis. There were some difficulties with oil in the latter part of last year, but they weren’t comparable to the situation that European countries faced with gas.

So I imagine that if it will be tough for the E.U. to make this oil cutoff work, a natural-gas cutoff would be an even taller order.

Yeah. I think that even the strongest proponents of the oil embargo realize that gas is a whole other level of difficulty.

I read a quote from a former economics adviser to Putin who said that natural gas is much more important to Russia, too, and that the war really could end if natural gas were cut off. Why is natural gas so much more important to Russia, if you agree?

I think that’s a trickier question, actually, from Russia’s point of view, because in terms of the actual revenues that are earned from oil and gas exports, oil revenues are significantly higher than gas revenues. I think the reason why it would be a bigger blow is that European countries are more dependent on Russian gas than on its oil. In part, that is a reflection of the pipeline issue and being bound into these pipelines. If you look at Putin’s behavior over the twenty or so years preceding the war, you can see that he was using gas as his geopolitical weapon. He was using gas as the principal means with which to tie European countries into this energy relationship with Russia. But, financially, oil is a bigger deal for Russia.

In your book, you trace some of the political problems today to energy issues. Why do you think this connection is important?

There are several theses in the book, but, in terms of energy, I wanted to show the ongoing story of geopolitical disruption around energy taking a particular turn in the nineteen-seventies, when we moved away from the European imperial world and the United States for a while became the world’s largest importer.

I wanted to look, at the same time, at the ways in which those energy shocks played out in the world economy, and particularly for the Western democracies in the forty or fifty years since the nineteen-seventies. A number of the disruptions that manifested in the twenty-tens have got history in these longer disruptions, both economically and geopolitically, with some of them having fallouts in terms of democratic politics.

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