Russia has called the European Union’s bluff. Since the Russian invasion of Ukraine on Thursday, February 24, the EU and the West have been threatening to slap Russia with crushing sanctions, but have stopped shy of hitting the Kremlin where it really hurts – energy exports. In truth, the European Union was – and is – far too dependent on Russian energy to cut off the supply. In order to avoid a devastatingly pyrrhic energy war with Russia, the EU has been working up to cutting out Russian energy imports in phases – but the Kremlin has pulled the plug early, leaving Europe scrambling. After the EU’s 6th round of sanctions against Russia, adopted on June 3, the European Union had announced a partial ban of Russian Crude oil, a total ban on Russian coal slated to start in mid-August, and still no sanctions against Russian natural gas. These piecemeal sanctions measures are a result of the continent’s enormous reliance on Russia to keep the lights on. As of last year, the European Union depended on Russian gas for 45% of its imports and around 40% of its consumption, accounting for about one-third of the entire world’s liquefied natural gas trade.
Now, Russia is using that leverage to retaliate by putting a major squeeze on Europe’s natural gas supply. Earlier this month Russian state energy firm Gazprom slashed the capacity of the Nord Stream 1 pipeline that transfers natural gas from Russia to Germany by way of the Baltic Sea. Russia has also warned that the squeeze may not stop there. “Our product, our rules. We don’t play by rules we didn’t create,” Gazprom CEO Alexei Miller said earlier this month at the St. Petersburg International Economic Forum.
Due to the fear that Russia may cut off natural gas supply going into the harsh winter months, Europe has begun what is being referred to as a “bitter and reluctant return to coal.” But even before this turn of events, the EU had already been ramping up coal imports from other countries to prepare for an exit from Russian energy markets. In fact, EU countries have been importing coal in record numbers from South Africa.
“As soon as the Ukraine war started in February,” Quartz Africa writes, “EU countries—including the Netherlands, Italy, and Denmark—started ramping up coal imports from South Africa. The bloc has accounted for nearly 15% of RBCT’s 24 million tons of coal exports so far this year, compared with 4% in all of 2021.” Richards Bay Coal Terminal (RBCT) is the largest coal export terminal on the African Continent. For climate activists who have been pushing for rich countries such as those in the EU to help the poorest nations, such as South Africa, off of coal, this is a bitter pill to swallow.
In fact, at last year’s COP26 global climate conference, rich nations pledged $8.5 billion in climate financing specifically allocated to help South Africa cut emissions from coal. Instead, the EU is helping South Africa’s coal industry expand. While the nation has agreed to work toward ending coal production, it’s not in an economic position to do so – hence the need for $27.6 billion in climate financing. And with European demand for coal skyrocketing, the carrot far outweighs the stick. South Africa’s current unemployment rate is 34%, and the current spike in coal demand, as well as coal prices, will likely grow the 200,000 jobs presently offered by the domestic coal industry.
According to the Columbia Climate School, entirely replacing Russian energy imports to Europe with other sources of gas or renewable energy would be a heroic, if not impossible effort. It would require 275 bcm of non-Russian LNG imports, representing more than 53 percent of the global LNG trade, or an additional 370 gigawatts (GW) of wind power, when the average annual installation rate is 14 GW. “Alternatively,” Columbia writes, “Europe would need to add another 105 GW of nuclear capacity, close to the existing capacity installed in 2021 (115 GW).” Looking at these numbers, some degree of increased coal consumption seems like an inevitability – and South Africa will almost certainly continue to step up to the plate.
By Haley Zaremba for Oilprice.com
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