Written by 7:00 pm Europe Economy

Vladimir Putin is fighting a war on two fronts

Other major European nations maintained a better spread in their domestic sources of energy supply. France kept its nuclear power generation capacity, while developing renewables. The UK developed its renewables sector even more aggressively, in particular with offshore wind farms, while also having access to North Sea oil. Germany, however, although growing its renewables sector, substituted nuclear energy primarily with Russian hydrocarbons.

Loading

Merkel cannot have been unaware of the strategic dependency upon Russia that this created. She was all too familiar with Putin’s vision of reclaiming for “Greater Russia” the territories which had been “lost” with the collapse of the Soviet Union – Ukraine foremost among them. When Merkel visited Australia in 2014 for the G20 summit, I remember her describing Putin’s ambitions during the cabinet dinner Tony Abbott hosted for her at Admiralty House.

Merkel’s willingness to make Germany a Russian energy hostage assumed two things: first, that Russia would never again turn against it; secondly, that Putin’s imperial dreams would remain just that, so that Germany and other European nations would never face being punished by the loss of Russian energy supply as the price for solidarity with a victim of Russian invasion. The first assumption was right (at least so far). The second was catastrophically wrong. The historic recasting of German foreign and defence policy announced by her successor Olaf Scholz in his speech to the Bundestag three days after the invasion – Zeitenwende (turning point) – is the clearest possible admission of the failure of Merkel’s policy.

The problem is not only a German one. Most of the nations of Europe rely, to a greater or lesser degree, on Russian hydrocarbons. For some of the smaller nations, such as Bulgaria, the Czech Republic and Slovakia, the dependency approaches 100 per cent. The European Union is scrambling to finalise an arrangement whereby the shortages are levelled out among member states, upon a loose “equality of sacrifice” principle. Countries such as Spain and Portugal, which are in the fortunate position of not having been reliant on Russia, are – out of EU solidarity – committed to limiting domestic supply to support exposed EU members. So all the European populations will suffer.

Expect Putin to take maximum advantage of this situation. He has three goals. First, he will use his ability to restrict the flow of gas to Europe for diplomatic leverage, to weaken the solidarity of European governments in support of Ukraine. Secondly, he will seek to use the hardship of winter energy shortages to foster civil discord, both in furtherance of the first aim, and to unsettle unstable governments. His tactics will not stop with driving up energy prices. Intelligence agencies are already reporting a sharp increase in Russian-sourced cyber intrusions into European health systems. They assess that will escalate over the winter, as hospitals struggling to cope with the triple-whammy of freezing homes, winter flu, and the seasonal spike in COVID cases, are struck by cyberattacks.

Loading

Putin’s third objective is fiscal. The expectation of unaffordable increases in fuel bills – a recent forecast predicted that average British households could face £5300 ($8700) annual fuel costs by January – leaves governments with no choice but to provide subsidies.

UK Prime Minister Liz Truss has already announced that her government will protect the public from the eye-watering increase in energy bills for the next two years. With an election due in 2024, she knows that failure to do so would be political suicide. The additional heavy burden on budgets already sagging under the massive blowout in public debt arising from the pandemic, will further weaken European economies – already facing recession – for years to come.

The courage of the people of Ukraine has led to increasing confidence that they will ultimately succeed in defending their homeland. But beyond Ukraine’s western border, the social, economic and political impact of energy shortages over coming months will be dramatic. It remains to be seen how much sacrifice other Europeans are willing to endure, and how much political pain their sometimes fragile governments are prepared to take, as they suffer the effects of Putin’s energy war through the bitter winter ahead.

Source link

Close