Analysis: Four reasons why it is difficult to give up Russian energy altogether

Demands for full isolation of Russia have increased following the executions of unarmed civilians in Ukraine. EU countries are now “urgently” preparing additional sanctions against Russia.

The Commission and the Finance Ministers are currently finalizing a new list of sanctions, which will be discussed by Member States’ ambassadors at their Wednesday meeting. The ideal list is to close loopholes in existing sanctions and strengthen existing measures.

The most “tough” appeal from European countries would be to ban gas and oil imports from Russia. The decision is difficult because its consequences are uncertain. It is most likely that the EU will start imposing sanctions on Russia in the energy sector coal (you switch to another service).

We have compiled the reasons that are holding back EU countries from starting a full oil and gas boycott. At the end of the story you will find a list of sanctions that are already in place.

EU countries’ dependence on Russia varies. All the Baltic countries, ie Estonia, Latvia and Lithuania, have already stopped importing Russian natural gas. The President of Lithuania Gitan Nauseda urged other countries to follow suit.

– If we can, other EU countries can, Nausėda said.

Poland has also called on the EU to completely stop importing energy from Russia. France supports a ban on imports of Russian coal and oil. Italy, on the other hand, would “not vote against” if the EU also decided on a gas embargo.

About half of Russia’s natural gas supplies to Germany go to industry and business. Minister of Economic Affairs Robert Habeck said last week that the German government will put households and hospitals ahead of the industry if the gas pipelines are closed.

This would mean that some of the factories would close. It would be a tough place for German leaders in an industrialized country to take responsibility for the downsizing of the industry.

The pharmaceutical and chemical industries in particular would suffer. It, in turn, could have multiplier effects through increased unemployment and general insecurity.

When abandoning gas dependency, policymakers need to consider the mechanisms by which to keep citizens’ homes warm. Tens of millions of homes in Central Europe are heating up with gas.

Summer is ahead, but if liquefied gas stocks aren’t full by next fall, winter could become cold without emergency stocks.

The number of “energy poor” households is in danger of growing, as there are already millions of them in Europe.

– It must be calculated whether the effects of the Russian energy embargo will mean that some households will no longer be able to afford heating, research professor Paula Kivimaa Says about the Finnish Environment Institute (Syke).

The effects would be similar to those of a climate crisis shifting from fossil fuels to cleaner electricity. Some people are unable or unwilling to pay any more for energy.

There is likely to be more solidarity for Ukrainians than for the climate.

– There are people who can afford to pay and who consider it important to give up Russia’s energy despite rising prices, Kivimaa says.

The heating systems in the houses will not be changed overnight or even in a few months. Neither installers nor new technology will be enough for millions of buildings at short notice.

In Germany alone, more than 20 million gas boilers operate every day. Replacing them with air source heat pumps, for example, takes years.

The EU therefore intends to replenish its liquefied natural gas (LNG) reserves vigorously until October to secure the heating of houses next winter. This would not be as dependent on Russian gas coming through the pipelines.

Competition for LNG is already raising its price. Closing gas taps in Russia would further increase the prices paid by households.

On the other hand, the good thing about rising prices is that it is driving energy savings and the introduction of renewable forms of production. Austerity measures can make a large part of Russia’s gas unnecessary.

Inflation is already galloping due to the combined effect of the corona pandemic and the Russian invasion.

If energy prices rise sharply, it will pass on to consumer prices. The rise in consumer prices in the euro area accelerated to over 7% in March. If and when wages do not rise at the same pace as prices, the purchasing power of citizens will weaken.

In France, for example, purchasing power is a major concern for voters in the April presidential election. Candidate on the far right Marine Le Pen has taken the improvement of purchasing power as one of its slogans and has quickly overthrown the president sitting in the polls Emmanuel Macronia.

The situation is difficult for policy makers because the political implications of the Russia-umbilical cord severance are uncertain. Populism could gain more ground in a recession.

To avoid political unrest, states could support citizens through, for example, social benefits or taxation.

Finland is also ready for severe sanctions in the energy sector as well. This is partly due to the increase in energy self-sufficiency in recent years.

For example, according to experts, there are no significant risks with regard to electricity, as the Olkiluoto 3 nuclear power plant and new wind power plants will compensate for Russian imports. Supply would disappear, which would increase prices in Finland as well, but there would be no shortage of electricity, mainly through the Nordic electricity market.

Neste has already decided to get rid of Russian oil, as have cities from coal.

Even in Finland, the biggest headache is caused by gas. Although our homes are not heated by gas, it is difficult for industry to replace it. For example, many bakeries have to source gas from new sources. The chemical, forestry and oil refining industries also use a lot of gas.

EU sanctions already in place:

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